A multi-family is a building or group of buildings with multiple housing units, such as an apartment complex or condominium building. Residential units in a multi-family are often attached as with townhouses or stacked on top of each other like an apartment building.
What Is DiversyFund?
DiversyFund is a real estate investment company that acquires and develops multi-family properties in the major metro areas and nearby suburbs in two states: Texas and California. Its investing strategy is a value-add. DiversyFund doesn't buy land and develop new multi-family properties. Instead, it acquires an existing multi-family and makes changes, such as significant renovations, to increase the net rental income the property produces.
Unlike publicly-traded REITs that allow you to buy and sell shares on the market exchanges, DiversyFund's REIT is a private fund. The minimum investment is just $500, and both accredited and non-accredited investors can participate.
DiversyFund's singular focus seems to be a strength, allowing the company to narrow in — and potentially realize some economies of scale — on one commercial real estate niche.
How Does DiversyFund Choose Properties?
When acquiring properties, DiversyFund looks for multi-family properties that fit three specific criteria. The property must be:
- Located in a metro area that's growing economically – market growth
- Already cash-flowing – stable income producer
- A good candidate for value-add investing strategy – strategic improvements will increase cash flow, making the property more valuable
One of the significant differences between residential and commercial real estate investing is that, while residential properties have a value that's based on supply and demand for the property itself, commercial properties are valued by the amount of revenue they produce. Multi-family properties are commercial, with their market value being derived by the annual income the rents deliver to owners.
In a multi-family property, cash flow (i.e., rental income) can be improved by increasing income or decreasing costs, or any combination of the two. A strategic yet inexpensive improvement can have a significant impact on the resale value of a multi-family if it increases the revenue generated each month.
DiversyFund looks for multi-family properties where the rental income produced could be increased with some improvements. Perhaps, the units are producing below-market rent because they need updating. Or there's an opportunity to add units to an existing building economically. By making strategic improvements to an existing multi-family, DiversyFund pushes up the property value by increasing the cash flow from rental income.
|Account Fees||No Platform Fees|
|Time Commitment||60 Months|
|Offering Types||Debt, Equity, Preferred Equity, Direct Ownership|
|Property Types||Commerical, Residential, Single Family, Foreign Investors|
|Regions Served||Texas, California|
- No Investor Choices – Investors can't pick and choose which multi-family properties they want to invest in. The REIT holds a mixed bag of pooled properties chosen by DiversyFund management, so investors cannot opt-out of particular properties.
- Prefunded – DiversyFund acquires and manages all the multi-family properties. The company's due diligence weeds out any deals DiversyFund doesn't want to own alongside investors.
- Not Liquid Investments – Real estate investments in private funds are long-term investments, and your money is not liquid. The investment term is typically between five and seven years and up to 10 years. You should plan to be in it for the long haul.
- Performance – Being SEC-qualified requires DiversyFund to disclose important financial and management information, including annual audits conducted by a third-party CPA. Published returns indicate that investors saw average annualized returns of 18% in 2017, and 17.3% in 2018 (2019 annualized returns not released at the time of this writing.)
- Passive Investing – DiversyFund manages the entire process in-house from start to finish. The company is both the developer and the sponsor on every deal. DiversyFund is also the REIT manager and the platform owner.
- Fee Structure – Investors pay no fees to invest. The expenses are already factored in on the deal level. DiversyFund doesn't take profits from a deal until investors take profits.
- No Monthly or Quarterly Investor Payouts – DiversyFund's profit distributions are automatically reinvested, rather than paid out monthly. Investors get paid at the end of the investment term, which is typically five to seven years.
How Does DiversyFund Work?
Anyone can set up an account on DiversyFund's platform. Once your account is set up, you can link your brokerage or bank account and invest immediately into the platform's public, non-listed REITs with a minimum of $500. All the investments have already been underwritten using SEC guidelines and are pre-packaged into a diversified portfolio of commercial real estate.
If you're an accredited investor, DiversyFund also offers the opportunity to invest in the DiversyFund platform itself before its upcoming IPO. With a minimum investment of $25,000 in a Series A round, you can become a co-owner of this real estate fintech platform.
|Account Fees||None||1.25%/year||1-1.25%/year asset management fee|
DiversyFund Pros & Cons[table “proscons” not found /]
In a nutshell, the DiversyFund Growth REIT is an SEC-regulated real estate investment trust (REIT) that focuses on long-term capital appreciation from renovating and repositioning multi-family properties.
When you invest in the DiversyFund Growth REIT, you become a co-owner of an investment comprised of multiple multi-family properties that are purchased, renovated, and rented. As an investor, you benefit in two ways: from compounding interest from the platform's dividend reinvestment and from overall growth from the value appreciation of the properties when they are sold.
The key differentiating characteristics of DiversyFund from similar real estate crowdfunding platforms that offer REITS is the low minimum investment of just $500 with no platform fees and the singular focus on wholly-owned multi-family properties.