Updated: January 19, 2021 by FinPins
Fundrise vs. DiversyFund
Before we get to the comparison of the two private real estate income trust (REIT) funds to invest in real estate – Diversyfund vs Fundrise, let’s fully understand a few things:
- Why should you invest in real estate at all?
- How to invest in real estate? (different methods)
- How to invest in real estate with little money, as low as $500 only?
Why Invest in Real Estate?
Alternative Investing in important to diversify the portfolio outside of the stock and bond market. Real Estate investments are lucrative because they offer the following advantages to investors.
- Rental income from residential and commercial properties provides regular cash flow on a monthly basis.
- Property price appreciation i.e. increase in market value of the property helps the investor sell the property at a higher price in the future.
- Real Estate has potential to renovate and upgrade the properties to increase the rental income as well as the market price of the property- hence benefitting from increase regular cash flow and more profits on selling it in future.
- Real Estate provides investors diversification outside of the stock market, with relatively less short term volatility.
- Tangible assets, such as property, that have intrinsic value that will not go down to zero (unlike stocks that can go to $0 if the company goes bankrupt).
- Investors gain leverage on real estate investing. For example, if you buy a house, you can pay a small down payment (3-20%) and borrow the remaining amount at cheap interest rates (2.8% interest for a 30-year mortgage as of writing this article).
Invest in Real Estate: Quotes from Entrepreneurs and Businessmen
“The best investment on earth is earth”Louis Glickman
Louis J. Glickman, was a widely known real estate investor and philanthropist. Mr. Glickman was active in real estate investments in North America (US and Canada)
“Ninety percent of all millionaires become so through owning real estate.”-Andrew Carnegie
Andrew Carnegie was one of the wealthiest American businessmen, who made his fortune in the steel industry.
“Real estate investing, even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth.”-Robert Kiyosaki
Robert Kiyosaki is an American businessman and author of the famous book ‘Rich Dad, Poor Dad’.
“Buy land, they are not making it anymore”Mark Twain
Mark Twain was an American writer, humorist, entrepreneur, publisher, and lecturer.
How to Invest in Real Estate?
There are multiple ways in which you can start investing in real estate. Here are the three most popular options:
Physical Real Estate
Actual physical purchase of house, apartments, piece of land. This requires capital upfront for downpayment, maintenance etc.
Real Estate Investment Trust Stocks – some REITs are publicly traded on stock market, therefore easy to buy and sell.
Private Real Estate Investment Trust Funds– some REITs are private such as DiversyFund and Fundrise. They are crowdfunded real estate investments and have reasonable threshold for investor entry. DiversyFund and Fundrise aim to provide good returns through active management (renovation, marketing etc.) of properties to increase rental income (for cash flow) and increase property value through market price appreciation.
How to Invest in Real Estate with Little Money?
A REIT traded publicly on the stock market can cost as low as $1 when purchasing fractional share on Robinhood. One such example is Vanguard US REIT Fund (VNQ).
DiversyFund or Fundrise
$500 is all that is required to get started with investments in real estate investment trust (REIT) options such as Fundrise and DiversyFund. Below, we will take a look at how the two popular Crowdfunded Real Estate Investment platforms compare against each other.
Crowdfunding Real Estate Investment: Fundrise vs DiversyFund
Fundrise and DiversyFund have minimum investment requirement starting at $500, hence being accessible to more investors. Here we compare these two real estate investment platforms.
Fundrise vs DiversyFund Snapshot
DiversyFund Growth REIT Overview
DiversyFund Growth REIT is a Real Estate Investment Trust (REIT). It aims to create wealth for investors by investing in multi-family residential apartment buildings (with 100 or more units). The Growth REIT has a mid to long term investment horizon (5+ years). DiversyFund screens and selectively invests in buildings across the United States that have positive cash flows. DiversyFund then renovates them to further increase the market value of the properties.
Where does DiversyFund invest?
We could find three projects featured on the DiversyFund website, as of writing this article. The target return on the three projects range from 15.5% to 21% per year.
- Summerlyn (Killeen, TX): 200 unit apartment complex with potential return of 18% per year.
- Park Blvd (San Diego, CA): 59 unit mixed use development (residential + commercial) with potential return of 21% per year.
- McArthur Landing (Fayetteville, NC): 211 unit apartment complex with potential return of 15.5% per year.
Is DiversyFund Growth REIT Regulated?
I quote the following from DiversyFund website itself.
The U.S. Securities and Exchange Commission (SEC) qualified the DiversyFund Growth REIT under Regulation A in November 2018. What this means is that we go through rigorous vetting, which includes strict reporting requirements and annual audits similar to the standards for public companies listed on the stock market.DiversyFund
Does DiversyFund charge management fees?
DiversyFund does not charge any platform fees or broker fees, hence passing on that extra benefit to the investor. Here’s a screenshot below from the DiversyFund website explaining the no management or broker fee charged at the fund level by DiversyFund.
Fundrise offers a variety of investment options such as Starter Portfolio (minimum $500), Core Investment Plans (minimum $1,000), Advanced (minimum $10,000), and Premium (minimum $100,000). For a like to like comparison with Diversyfund, here we will focus on Starter Portfolio and Core Investment Plans.
Fundrise: Starter Portfolio
As the name suggests, the Fundrise Starter portfolio is a great option for new investors starting out investing in private REITs, with a minimum investment of $500 only. Fundrise is currently offering investors a free upgrade to the Core Investment Plans that offer choice of investment that suits the investors’ style of investing. It is to be noted that for this upgrade the investor must have $1,000 invested in started portfolio (because the minimum investment required for Core is $1,000).
Fundrise: Core Investment Plans
Core offers investors three different Investment plans – Supplemental Income, Balanced Investing, and Long Term Growth – based on the investor goals of regular income or long term growth or a little bit of both.
Supplemental Income Plan
Supplemental Income aims to create a consistent income stream by focusing more on dividends. Understandably, due to the regular dividend payouts, the potential return over the life of the investment is lower (as compared to the other two Core Investment plans). Supplemental Income plan invests 70-80% in income focused assets and 20-30% in growth-focused assets.
Fundrise Core Investment Plan: Supplemental Income (source: fundrise.com)
Long Term Growth Plan
Long Term Growth investment plan is for investors who are more focussed on the overall growth of portfolio rather than a consistent income stream early on (as expected in Supplemental Income plan). LTG plan is biased toward price appreciation rather than dividends and invests 70-80% in growth focused assets and 20-30% in income focused assets.
Fundrise Core Investment Plan: Long Term Growth (source: fundrise.com)
Balanced Investing Plan
Balanced Investing fund tries to meet the two other plans (Supplemental Income and Long Term Growth) in the middle. It offers some returns early on, while preserving the potential for higher returns later in the investment’s life. Balanced Investing plan invests 40-60% in income focused assets and 40-60% in growth focused assets.
Fundrise Core Investment Plan: Balanced Investing (source: fundrise.com)
Where does Fundrise invest?
As of writing this article, there are 217 active projects and 77 completed projects listed on the Fundrise website.
Does Fundrise charge management fees?
Yes, Fundrise charges a low 0.15% annual advisory fees + 0.85% fund management fees + discretionary 0 – 2% fees for activities such as acquisition, liquidation etc.
Fundrise vs DiversyFund: Comparison
The fee at Fundrise is structured in the following manner:
- 0.15% annual advisory fee
- 0.85% annual management fee
- Additionally, Fundrise can charge 0-2% as initiation fee, acquisition fee, liquidation fee etc.
DiversyFund does not charge investors fund management fee or broker fee or any other platform fees. In comparison to Fundrise, the investor benefits more from having no fees.
Fundrise Investment Strategy
Fundrise invests in a broad spectrum of real estate assets – residential as well as commercial. It uses both debt and equity investments in its portfolio.
Diversyfund Investment Strategy
Diversyfund invests primarily in multifamily residential apartment buildings.
Fundrise Minimum Investment Required
Fundrise has multiple investment options, the starter portfolio has a minimum requirement of $500, and the Core investment plans have a minimum investment requirement of $1000.
DiversyFund Minimum Investment Required
DiveryFund’s Growth REIT has a minimum investment requirement of $500.
Fundrise Investment Horizon
Fundrise aims to keep the investors investment for mid-to-long term with an investment horizon of 5+ years.
DiversyFund Investment Horizon
DiverysFund also aims to keep an investment horizon of 5+ years.
Fundrise Liquidity and Redemption Options
Fundrise recommends that investors stay for the long term, but it offers investors the option to redeem quarterly and even monthly subject to certain conditions.
DiversyFund Liquidity and Redemption Options
DiversyFund also recommends that investors stay for the long term to benefit fully, but it offers redemption options quarterly.
Fundrise Key Statistics
- Date started: 2012, HQ in Washington DC
- Investors: 130,000+ active investors
- Assets transaction value: $4.9B
Diversyfund Key Statistics
- Date started: SEC qualified in 2018
- Investors: 15,000+ active investors
- Total Investment: $30M
Fundrise Target Returns
Fundrise mentions the target returns are in the range of 7 – 10% per year on its Core Long Term Growth plan.
DiversyFund Target Returns
DiversyFund provides a broader range of target returns, 10 – 20% per year.
Fundrise vs DiversyFund Comparison Table
|Fees||Fee varies from 1-3% per year||ZERO Platform Fees|
|Debt and Equity Investment in Residential and Commercial Real Estate||Private Multi-family Apartment Buildings (100+ units)|
|$500 for STARTER|
$1,000 for CORE
$10,000 for ADVANCED
$100,000 for PREMIUM
|$500 for Growth REIT|
|5+ years||5+ years|
|Monthly or Quarterly, subject to limitations.||Quarterly, subject to limitations.|
|7-10% per year (CORE Long Term Growth)||10-20% per year|
DiversyFund vs Fundrise – which is better?
We like both Fundrise and DiversyFund as investment platforms. Fundrise offers more investment options to suit the investor requirements whereas DiversyFund’s lower (0) fees can bring better returns for investors in the longer term. Why not give both a try?
Disclosure: We may earn commission (at no extra cost to you) if you use links on the page to open an account or make an investment. Promotion terms and validity maintained by respective platforms.
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