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Diversyfund is a commercial real estate crowdfunding platform for both accredited and unaccredited investors, providing investment opportunities in multifamily real estate properties with zero fees. The site is one of only a few asset-based platforms to offer non-accredited access while charging no investment fees – others being Rally Rd. Mythic Markets and Compound (now part of Republic). Coupled with a low minimum investment, DiversyFund simplifies diversification for ordinary investors, a capability that stands out in a space that continues to enforce barriers that restrict access.
Real estate has functioned as one of the first pillars in the alternative investment landscape, with an abundance of sites providing a useful alternative to real estate investment trusts (REITs). Whereas REITs represent a pool of investments in real estate, most of these investment sites have attracted capital by letting investors invest on a deal-by-deal basis. This feature allows investors to self-diversify or to concentrate capital on opportunities in which they have high conviction. The shortcoming of these sites to date, however, has been their limits on access. Sites such as Cadre, EquityMultiple, and ArborCrowd only permit accredited investors, while also imposing high minimum investments ($50K, $5K, and $25K, respectively).
DiversyFund is part of a small group of platforms making private market real estate accessible to non-accredited investors. Recognizing that real estate can offer returns that are not correlated to the market, these sites are betting on there being interest from retail investors who look to the space as a means for diversification. Some of these sites have kept relatively high minimums (e.g. Roofstock and Upside Avenue have minimums of $5K and $2K, respectively), while others have differentiated themselves in lowering this threshold (e.g. Groundfloor’s minimum of $10). DiversyFund is unique in that it has differentiated itself on both cost and fees. Charging a minimum of $500 and no upfront fees on individual investments, the site employs a model intended to erase the most burdensome policies prevalent in its industry.
Wondering how DiversyFund makes money? A full explanation requires a cursory look at the pre-investment process that most sites follow. Typically an originator identifies a deal and developers initiate the actual construction of a given project. These players help prepare a property for investment on a platform and charge a fee for doing so. Some sites have cut out originators, charging their own origination fee, while others service properties themselves. DiversyFund has gone a step further, cutting out all other parties. The site removes the need for middlemen by buying, constructing, and servicing the properties it lists on its site. This “vertical integration” means that the site makes money on everything leading up to investment, eschewing the standard fee model used by competitors. This may sound great in theory, but it is important to note the danger at play here: an investment in DiversyFund is as much a sign of faith in the site as it is in the investment itself.
Along with the fact that investments with DiversyFund constitute a considerable amount of faith in the site, the site does not disclose sponsor fees, which can account for up to 15 or 20% of the cost in commercial real estate deals. That said, the site’s high-access model, absence of third-parties, and 10%+ advertised returns make it a solid option for average investors that are new to the space.