DiversyFund is a niche Reg D real estate platform offering equity and debt investments in residential and commercial projects in California. Investment selection is limited and the website could use some updating, but may be worth a look for investors familiar with and looking for investments in the Souther California market.
- Established regional industry pedigree
- "Skin in the game" as developer and equity investor
- Mix of debt, equity, and preferred equity offerings
- Only open to accredited investors
- Relatively short track record (9 completed investments)
- Website could use some love (slow, lots of "coming soon" sections, frequent typos)
- Sparse investment offering details compared to other platforms
- Low number of open offerings and narrow geographic niche
DiversyFund is a among the crop of real estate investment crowdfunding sites to emerge from regional operators looking to grow their investor base (they are using SEC Reg D, so are limited to accredited investors). DiversyFund is based in San Diego, and most of their investments are in Southern California.
Types of investments DiversyFund offers
DiversyFund offers debt, equity, and preferred equity real estate investments in California, including single-family rentals, new construction (especially of upmarket luxury homes -- one open investment at the time of this writing is advertised as being from the "same designer whose property was sold to Minecraft Founder for $70M"), as well as some commercial properties. Most investments are for relatively short terms (9-18 months).
In many cases DiversyFund also acts as the project developer (or "sponsor").
What do you get when investing with DiversyFund?
When you invest through DiversyFund, as with many crowdfunding investment platforms, what you actually receive is a membership interest in an LLC created specifically for the investment. The LLC in turn is what actually holds the equity, preferred equity, or debt interest in the property. For each investment you make with DiversyFund, you'll receive a separate K1 at tax time to report your share of the income received by the LLC.
Prospective investors should be sure to review the offering documents, including the LLC operating agreement, to be sure they understand their rights (and those of DiversyFund, which typically acts as the LLC manager). For example, in one open investment, DiversyFund has broad discretion to restructure the management of the LLC, to sell the property at any time, and to distribute some of their shares to various affiliates.
DiversyFund fee structure
There are no transaction or ongoing (AUM) fees charged to investors, though prospective investors should be sure to review the offering documents to be sure they understand how DiversyFund is compensated. In most investments they act as the developer, and are paid a sizable "development fee".
Potential returns and cashflow
The projected return varies based on the type of investment (for example, debt investments offer lower returns but also lower risk as compared with equity or preferred equity), but DiversyFund advertises returns in the 10-18% range, with the potential for additional upside on equity deals when the property is sold or refinanced.
Some investments offer regular cashflow, while others (in particular the preferred equity investments) defer the investor return until the property is sold or refinanced. The amount and frequency of any cash payments will vary depending on the particular investment, though are usually monthly or quarterly.
Breadth of offerings on DiversyFund
There are two open investments at the time of this writing (one debt and one preferred equity), along with one new "fund" investment listed as "coming soon" but without any details. There are 9 investments listed as closed. All investments are located in California.
Regulatory framework and due diligence expectations
DiversyFund does not list any affiliation with a broker-dealer. Projects to date have been offered under SEC Reg D, and so are limited to accredited investors. It would be nice to see more detail regarding their specific due diligence process and criteria beyond "Our team of real estate experts works hard to bring you only the best available real estate investment opportunities."