What is crowdfunding real estate?
To start, crowdfunding is a new tool, which is utilized to raise money for businesses via the power of the crowd. By offering lower entry fees to a larger number of investors, these businesses are successfully launching their next big project.
Furthermore, until recently real estate investments were only available to those with the necessary private equity. This in itself made investing in real estate seem impossible for many individuals.
However, once the Jumpstart Our Business Startups Act of 2012 changed some rules under Regulation D, many doors opened for the real estate industry. Most notably, the ability to utilize crowdfunding to gathering funding for investments. Today, investors of all kinds can easily start investing in real estate with as little as $5,000 via crowdfunding real estate platforms.
How is this different from an eREIT?
Well to start with, an eREIT stands for Real Estate investment Trusts, which can be invested in through a mutual fund. Furthermore, eREITs’ regulations and distributions differ from those of crowdfunding real estate investments.
To compare the two, eREITs generally hold high maintenance fees, as well as other costs. While crowdfunding real estate through DiversyFund allows complete control with minimal fees/no fees.
What are the differences between debt and equity investments?
When investing in crowdfunding real estate, the two types of investments available will be equity or debt investments. Here are what both types of investment can be defined as:
- Debt investments: When investing this way, the investor becomes the lender to the entity sponsoring the real estate deal. The loan is secured by the property. Furthermore, each investor receives a fixed rate of return. This is calculated via the interest rate on the loan and how much the investor has invested in the project. Overall, this type of investment leaves the investor with priority when it comes to obtaining a payout from the deal.
- Equity investments: With an equity investment, the investor is considered a shareholder in the property. Thus, their stake is directly proportionate to what they invest in the deal. Finally, when it comes to returns, investors can be distributed their shares in a variety of ways including rental income generated or appreciation value should the property sell. Of course, you will need to ensure the crowdfunding real estate platform does not have any fees as well.
What are the terms? When can I expect to get my money back?
For each investment opportunity, the terms may vary. Please view our investment opportunities to see specific project details.
What are the investment strategies of crowdfunding real estate investments?
Just as traditional real estate investors analyze the market, as do crowdfunding real estate platforms. DiversyFund carefully qualifies each investment opportunity that is brought to them to ensure that specific criteria are met. By ensuring the market is right, as well as a number of other factors, our team of experts can hand-select the opportunities that show the best return on investment for you.
Where are your projects located?
DiversyFund’s previous and current real estate investment opportunities are located in California.
How can I ask a question regarding a specific investment?
In order to inquire about a specific investment, please become an investor with DiversyFund here. After signing up for your investor account (it’s free!) and completing your investor profile, you may reach out for support from our Investor Relations team.
What tax documents will I receive?
The tax form distributed at the end of the year by DiversyFund is a Schedule K-1, which will need to be filed with your annual tax return.
What is DiversyFund?
DiversyFund is a crowdfunding real estate investment platform, which connects accredited investors to exclusive investment opportunities. By connecting investors to borrowers on in-house pre-qualified investments, our platform provides a simplified way to invest in real estate.
Even more so, our team of experts in real estate and finance professionals has over twenty years of experience to assist you with further diversifying your portfolio. Through their expertise, our real estate crowdfunding platform is able to deliver access to investments that previously were considered unavailable to the general public.
What types of investments does DiversyFund offer?
DiversyFund’s available investment opportunities include a wide array of exclusive opportunities. Some of our most recent opportunities include:
- Renovating SFR’s
- New Construction on Spec. Homes
- Small, Mixed-Use Commercial Development Projects
- Income generating Commercial Properties
Our team of real estate experts works hard to bring you only the best available real estate investment opportunities.
How do I start investing on DiversyFund?
To become an investor with DiversyFund, you will first need to be an accredited investor. In short, the Securities and Exchange Commission (SEC) defines an accredited investor as an individual, who has a previous, current or expected year of income that is approximate $200K or $300K with a spouse. Additionally, one can be considered an accredited investor if their net worth is $1MM, not including their residence.
After ensuring you meet the SEC’s accredited investor standards, you simply need to create an investor profile on DiversyFund’s website, complete your profile and select the opportunity you would like to invest in.
Of course, if you need any assistance along they way our Investor Relations team is happy to help.
What documents can I expect to provide to become an investor with DiversyFund?
In order to become an investor with DiversyFund, we will need the following documents from you:
- Completed & Signed W-9
- Verification of Accreditation
What are the terms on a DiversyFund investment?
When investing with DiversyFund, each real estate investment opportunity’s terms will vary. Please navigate to the specific investment you would like to know more about to find the terms for that opportunity.
How do I stay up to date on the progress of my investment?
Once you’ve made an investment with DiversyFund, you will receive monthly updates via email regarding your investment. These updates will include images, videos and more to ensure you are always up to date on how your investment is progressing.
Furthermore, you will have 24/7 access to your investor portal, which allows you to gain easy access to updates about your investment(s). If you happen to need further assistance or would like more information, please reach out to your investor relations representative.
When can I expect to see a return on my investment?
Each investment opportunity available through DiversyFund has varying terms and distribution periods. Please check your Welcome Package or contact your investment representative for complete details on when your returns will be disbursed to you.
How is my return distributed?
Generally, your returns will be disbursed to you after the sale of the property. However, DiversyFund offers a wide variety of investment options, so please be sure to check your investment documents for specific disbursement terms.
If I live outside of the US, can I still invest with DiversyFund?
No matter where you live in the world, you can start investing with DiversyFund. However, you will be required to completed United States tax forms, such as a W-9. Even more so, you will need to file a United States tax return with the Schedule K-1 we disperse annually.
Who is eligible to invest?
Once you are ready to invest with DiversyFund, you will need to ensure you qualify as an accredited investor. Currently, this is the only prerequisite to start investing on DiversyFund’s crowdfunding real estate platform.
Is there a minimum investment requirement?
Currently, the minimum investment requirement for DiversyFund is $5,000.
How often should I expect to receive distributions?
Once you invest with DiversyFund, you will begin to interact with our in-house investment servicing team. This team manages investor distributions on a monthly and quarterly basis. Even more so, once the investment closes, you will receive a Welcome Package. From that point forward, this representative will be your point of contact throughout the life of your investment, including pay-offs.
What documents can I expect to receive as an investor?
As an investor with DiversyFund, you can expect to receive a Welcome Package once the investment(s) close. Additionally, you will receive a Schedule K-1 from us annually.
What is preferred equity?
Preferred Equity is a type of equity investment in real estate that combines the best of both debt and equity worlds.
While Preferred Equity is subordinate to the debt, it is senior to the common equity and developer’s profit share. Additionally, in the LLC’s Operating Agreement, the terms of the Preferred Equity are spelled out. Even more so, credit risk is generally lower than common equity.
How does preferred equity work?
Preferred Equity pays out a deferred return at the time the property sells, which means the 18% preferred return is similar to accrued interest. Thus, there are no monthly cash flow payments to investors.
What kind of properties are available through preferred equity investments?
When investing in preferred equity investments, the properties available to you, include, but are not limited to:
- Single-Family Residential Homes
- Commercial Office Buildings
- Apartment Complexes
- New Construction
- Luxurious Residential Homes
What is the structure of preferred equity investments?
For each property, DiversyFund forms a new single asset LLC. Within the LLC, preferred equity investors receive direct ownership.
For example, our current project started construction this week. It is a ground-up construction of a luxury single-family residence in a gated community in Monterey, California. During the 10-month construction period, Preferred Equity investors will not receive any monthly cash flow payments. Once the property is finished and sells, proceeds from the sale will be distributed as follows:
- First, to pay off the construction loan
- Second, to pay the Preferred Equity investors their capital plus their 18% accrued return
- Last, to pay off common equity and any developer profit
So at time of sale, a Preferred Equity Investor who initially invested $100K would receive $118K (assuming the property sold at the end of one year).
It should be noted, that as the developer, DiversyFund does not receive any profits from the sale of the property until the Preferred Equity investors are paid their 18% return in full. Thus, we only take on projects that we are extremely confident in. Because of our financing capabilities, we have brokers constantly bringing us attractive off-market deals. And of those deals we review, we develop less than five percent.
What are the advantages of preferred equity over other investment options?
The key advantages to preferred equity include:
- Higher returns,
- more control through direct ownership,
- more information and transparency,
- higher quality investments institutionally underwritten,
- no foreclosure expense, etc.
When I invest in preferred equity investments with DiversyFund, what do I own?
When investing in preferred equity investments, investors are generally a limited member within the LLC and purchasing shares. The LLC owns the single investment property alongside the other investors or developers.
For example, a specific new construction home would be owned by the LLC and it’s sponsors.
Furthermore, by forming an LLC, you are given added liability protection, thus protecting your personal assets.
Who can make decisions within an LLC?
For each LLC formed, an Operating Agreement is formed, which will vary for each investment available on our platform.
Generally, each will designate a manager and limited members. Once these roles are designated, the manager typically handles the day-to-day decision making, while the limited members act as passive investors. Although, there are certain actions which may require a vote by the limited members.
In the case of DiversyFund, we are typically the manager of the LLC, while you act as the passive investor. This allows you to enjoy the benefits of investing in real estate without needing to deal with mortgage brokers, insurance agents and more.
Within the LLC setup by DiversyFund, which investors contribute to, who are the decision makers?
DiversyFund, Inc. is generally the Managing Member of the LLC formed. With over two decades of experience in the real estate and finance industry, our team of experts is here to simplify the process of investing in real estate for you.
By acting as the Managing Member, our team is able to make the necessary decisions at the right moments.
When can I expect distributions to be made?
For each investment opportunity available through our platform, the distribution rates will vary. While some distributions are not made until the property sells, other investments provide quarterly distributions.
Please review your investment documents for specific distribution information.
How do you safeguard my personal information?
When it comes to your personal information, DiversyFund takes many precautions to ensure your information is always secure.
Why do you need my Social Security number and date of birth?
As an investor, the Securities and Exchange Commission (SEC) require that we collect this information, so we can properly report your earnings. Additionally, you will receive forms at the end of each year, which should be filed with your annual tax return.
How does DiversyFund pre-vet investments?
Each investment that is presented to DiversyFund undergoes a rigorous pre-vetting process. During this process, our team thoroughly analyzes the area’s market to ensure the opportunity is the right choice for our investors.
How are funds transferred to DiversyFund?
Generally, you transfer funds via ACH to DiversyFund when investing. This can be done via your investor portal on our website or with your investment advisor via telephone.
Why is DiversyFund limited to Accredited Investors?
Generally, the U.S. Securities and Exchange Commission mandates the registration of securities that are issued by private companies. However, it also allows for specific exemptions to the registration process. More specifically, Rule 506 under Regulation D exempts investment offerings, which are made to accredited investors.
Why is a Form W-9 required?
One of the forms you will complete annually for DiversyFund is a form W-9. This form is needed to properly report payments made to investors over the course of the tax year.
What is Form K-1?
When investing with DiversyFund, you will receive a Schedule K-1 annually. A schedule K-1 form is used by partnerships, such as an LLC, to report your shares of the income, deductions, and credits within that partnership even if they weren’t distributed in that calendar year.
When will my Form K-1 be available?
Our team estimates K-1’s to be available to investors by the 1st of April each year. Once your K-1 becomes available, you will be immediately notified.
Due to needing tax information from other parties at times, there may be delays in receiving your K-1. Therefore, we cannot promise you that your K-1 will be available by April 15th. Please understand, that we all efforts will be made to get your K-1 Form to you in a timely manner.
When my Form K-1 shows income, how is it taxed?
The income shown on your Schedule K-1 may relate to one of the following:
- Interest Income
- Rental Income
- Gains from property sale
To further understand the differentiations between the various categories of income, we strongly recommend contacting your tax advisor or accountant.
When my Form K-1 shows a loss, how is it taxed?
The loss shown on your Schedule K-1 should be more than that of which you claim on your tax return. For further information, please contact your tax advisor or accountant.
What if there is a problem with my personal information on my K-1?
If for some reason your K-1 form has incorrect information within it, please reach out to our Investor Relations team via email at [email protected].