What is DiversyFund?
DiversyFund is a crowdfunding real estate investment platform which connects accredited investors to exclusive investment opportunities, providing a simplified way to invest in real estate.
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 delivers access to investments that previously
What is crowdfunding real estate?
Crowdfunding allows businesses to raise money from a large number of investors, with each investor able to commit a relatively small amount of money compared to traditional private equity.
The Jumpstart Our Business Startups (JOBS) Act of 2012 changed some rules under Regulation D, allowing the real estate industry to utilize crowdfunding to fund investments.
How is this different from an eREIT?
An eREIT, or electronic Real Estate Investment Trust, is an investment vehicle similar to a mutual fund that invests solely in real estate. While there are legal and tax reporting differences between eREITs and DiversyFund’s platform, there are some important similarities as well. The primary advantage of any REIT is that by paying out at least 90% of their earnings as dividends to investors, they avoid corporate-level taxation. DiversyFund’s deals work similarly in that they are also pass-through entities for tax purposes and, unlike most eREITs, we offer the advantage of no-fee investments, allowing all of your money to work for you.
What are the investment strategies of crowdfunding real estate investments?
DiversyFund offers three types of investment strategies: growth, passive income and a diversified debt fund.
Our growth products accrue a double digit preferred return for the life of the investment and pay at maturity. These investments do not pay out quarterly distributions and are designed for investors seeking long-term capital growth, not current income.
Passive income products accrue an attractive return and pay quarterly distributions to investors for the investment term.
Our diversified debt fund offers debt investments secured by a portfolio of properties on the DiversyFund platform. It pays quarterly distributions and is expected to be an evergreen fund.
How do I know which strategy is right for me?
While we can’t offer advice on your individual financial situation, there are some general guidelines to help you select the right offering for you. Investors who want long term capital appreciation and don’t need current income should consider our growth investments, which accrue high returns paid at maturity, typically 18-24 months from investment. If you’re looking for quarterly cash distributions without a long-term commitment, our passive income investments might be right for you. They pay high quarterly distributions for the life of the investment, typically 12 months, with principal repayment at maturity. Individuals seeking quarterly cash distributions over a longer timeframe might like our diversified debt fund.
What are the differences between debt and equity investments?
- Debt investments: When investing this way, the investor becomes the lender to the entity developing or purchasing the real estate. Investor return is generated when the property makes payments on the loan. Since the loan is secured by the real estate, investors have priority in receiving payments from the deal.
- Equity investments: With an equity investment, the investor is an owner in the property in proportion to what they invest in the deal. Investor returns can be distributed from rental income or appreciation value when the property sells, depending on the terms of the deal.
Where are your projects located?
DiversyFund’s current real estate investment opportunities are located in California. Our San Diego-based team has deep knowledge of the California real estate markets, allowing us to make more informed investment decisions.
How can I ask a question regarding a specific investment?
In order to inquire about a specific investment, contact us via our website.
What types of properties does DiversyFund invest in?
DiversyFund offers vary but may include multifamily properties, commercial properties and single-family homes.
How do I start investing on DiversyFund?
To start, open an account with us so you can review the offerings. If you see one you’re interested in, you can invest on our website.
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?
Each real estate investment opportunity’s terms will vary. Please navigate to the investment you would like to know more about to find the specific terms.
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 our Investor Relations team.
When can I expect to see a return on my investment?
Each investment opportunity available through DiversyFund has varying terms and distribution periods. Please review the terms carefully before investing to make sure you choose an investment that is suitable to you.
How is my return distributed?
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 complete some United States tax forms, such as a W-9, and may be required to file a US tax return. International investors should consult their tax advisor prior to investing.
Who is eligible to invest?
At this time, only accredited investors can invest with DiversyFund. Federal securities law defines an accredited investor as someone with either (i) annual income of at least $200,000 (or $300,000 together with spouse) for each of the last 2 years with reasonable expectation that it will continue or (ii) net worth over $1 million, either alone or combined with spouse, excluding the value of their primary residence.
DiversyFund expects to launch an investment fund for investors who are not accredited in early 2018. Please check back soon for more information.
Is there a minimum investment requirement?
Currently, the minimum investment requirement for DiversyFund is $10,000.
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. You will receive (monthly or quarterly?) investment updates and a Schedule K-1 from us annually. Of course, our Investor Relations team is always available to answer any questions you might have regarding your investment with us.
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.
How does preferred equity work?
Preferred Equity accrues from the date of investment but pays out the deferred return at the time the property sells. There are no monthly cash flow payments to investors and all payments are received at investment maturity.
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?
DiversyFund forms a new single asset LLC for each property. Preferred equity investors purchase ownership in the LLC.
For example, recent project 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
At the 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 information and transparency,
- higher quality investments institutionally underwritten,
When I invest in preferred equity investments with DiversyFund, what do I own?
When investing in preferred equity investments, investors become limited members within the LLC. The LLC owns a single investment property alongside the other investors or developers. LLCs offer greater protection to the investor because your only financial exposure is the amount of your investment. Your personal assets are not at risk
Who manages the LLC I invest in?
DiversyFund, Inc. is the managing member of each LLC formed. With over two decades of experience in real estate and finance, our team of experts is here to simplify the process of investing in real estate for you, allowing you to enjoy the benefits of investing in real estate while leaving the operations to seasoned professionals. The managing member handles the day-to-day decision making, while the limited members act as passive investors, although occasionally there are certain actions which could require a vote by the limited members.
When can I expect distributions to be made?
Distribution timing varies by investment. Our growth investments make no cash distributions until the investment matures, while our passive income and diversified fund pay distributions quarterly.
Please review your investment documents carefully before investing to make sure you select an investment that meets your needs.
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?
Federal regulations require that we collect this information from all our investors so we can properly report your earnings for tax purposes.
How does DiversyFund select investments?
Each investment presented to DiversyFund undergoes a rigorous underwriting process. Our experienced real estate team analyzes market demand, construction plans and financial projections to ensure we select only the best opportunities for our investors.
How are funds transferred to DiversyFund?
You can transfer funds to DiversyFund via ACH on the investor portal. Just log in to your account and enter your bank information.
Why are funds held in escrow?
Investor funds are held by a third-party escrow company for approximately 10 business days due to mandatory compliance checks, accreditation and ACH clearance. Once funds are released from escrow, you will receive an email titled “Offering Escrow Successful” notifying you that your investment is now official and your return has started to accrue.
What is the accreditation process?
At the present time, DiversyFund’s investment offerings are registered for sale only to accredited investors. When you choose to invest on our platform, you will be directed to a third-party site that will handle your accreditation process. To verify accredited status, you will be asked to provide either proof of income or proof of assets. Using a third party keeps your information confidential and DiversyFund does not have access to your personal financial records.
What is an accredited investor?
Federal securities law defines an accredited investor as someone with either (i) annual income of at least $200,000 (or $300,000 together with spouse) for each of the last 2 years with reasonable expectation that it will continue or (ii) net worth over $1 million, either alone or combined with spouse, excluding the value of their primary residence.
Why is DiversyFund limited to Accredited Investors?
Generally, the U.S. Securities and Exchange Commission mandates the registration of securities issued by private companies. However, Rule 506 of Regulation D allows for specific exemptions to the registration process for investment offerings made to accredited investors. At present, DiversyFund’s investment offerings are registered for sale only to accredited investors. We plan to introduce offerings for unaccredited investors in 2018. Please continue to check our website for the latest offerings.
Why is a Form W-9 required?
Federal law requires DiversyFund to collect a W-9 from all investors so that we can properly report your share of income, losses, etc. to the IRS at year end.
What is Form K-1?
DiversyFund’s investments are treated as partnerships for tax purposes. Partnerships are pass-through entities, meaning they do not pay taxes, but instead allocate all income, losses, etc. pro rata to the partners. Form K-1 is used to report this information to the partners, who must include it on their tax returns.
When will my Form K-1 be available?
Our team makes every effort to issue investor K-1s by April 1st each year, however because we rely on information from outside parties to prepare them, we cannot guarantee they will be released prior to April 15.
When my Form K-1 shows income, how is it taxed?
The income shown on your Schedule K-1 may include interest income, rental income or gains from sale of property. Please consult your tax advisor to discuss the appropriate tax treatment for each type of income.
When my Form K-1 shows a loss, how is it taxed?
IRS rules governing tax reporting of partnership losses are complex. Please consult your tax advisor to discuss your individual situation.