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How to Get In on Real Estate Investing Even If You Don’t Have Much Money

·5 min read

Have you been looking for a new way to invest — an alternative to the stocks-and-bonds portfolios that most of us have in our 401(k) plans and IRAs? Especially with the recent volatility on the stock market (nauseated anyone?) you may be looking for some alternatives. So, here’s an idea:

Real estate deals that have long been the province of the rich are now open to anyone with as little as $500 to invest, thanks to DiversyFund a pioneering financial technology company.

This company’s no-fee, crowdfunded platform allows you to expand your investment portfolio to real estate, mainly apartment complexes — alternative investments that typically double in just five years, according to DiversyFund. It is a type of asset investment that used to be out of reach for most people.

“We are leveling the playing field for people to invest,” says Craig Cecilio, Diversyfund co-founder and CEO.

“We purchase the real estate, develop it, manage it, collect the cash flow and divide up the profits to you,” Cecilio says.

The company emphasizes its roots in investing and real estate development: DiversyFund is real estate guys leveraging tech, not tech guys trying to learn real estate, the company says.

How it works

DiversyFund uses a three-step strategy to boost your returns.

When you invest, you buy shares of DiversyFund’s Growth REIT, a real estate investment trust. Using the money you and others invest, DiversyFund buys apartment buildings that are already generating revenue but are in need of improvements.

The DiversyFund team of real estate professionals chooses properties based on an area’s population growth, job growth, trends, new construction, market comps and other factors, it says.

DiversyFund oversees renovations, allowing it to raise rents and increase the property’s cash flow. Upgrades may include everything from new flooring to putting in a dog park, DiversyFund says. The renovations also boost the apartment building’s value. After the building value appreciates, DiversyFund sells it at a profit.

Your share of dividends from cash flow is reinvested monthly until the building is sold. The final return is divided up among the investors. With that return, you can choose to reinvest into DiversyFund’s next project or take a full payout. If you are not in the fund for its entire life, your return is prorated based on how long you are invested.

You invest in the company’s portfolio of properties, not one individual building.

DiversyFund says investors get a 7% preferred return, meaning that 100% of returns up to the first 7% goes to investors before DiversyFund receives a share of the profit.

There’s no catch, but you need to be aware that DiversyFund buys properties it expects to turn around in five years. Your money is “illiquid,” or tied up, during the process.

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“There are no premature withdrawals,” DiversyFund notes.

Based on DiversyFund’s 17.6% historical annual gain, an investment of $500 becomes $1,125 in about five years, the company says.

By comparison, the S&P 500, with an annual average return of 9.5%, would take nearly eight years just to double your investment, and for an investment with just a 7% return, more than 10 years.

To get started, you create a free account online and decide how much to invest. You can track your investment’s performance on your DiversifyFund Dashboard. If you have any questions, you can reach out with a live chat online or email.

Democratizing investments

Until recently, investors had to be accredited to jump on real estate deals like those that DiversyFund manages. Accredited investors, according to the Securities and Exchange Commission, are those with annual incomes exceeding $200,000 ($300,000 for joint income with a spouse), with a $1 million net worth beyond the value of their primary home or able to meet other SEC requirements.

Only about 1 in 10 households met the requirements to be accredited, according to Federal Reserve survey results from 2013.

However, changes to the JOBS Act in 2015 made it possible to open up investment opportunities to non-accredited, Main Street investors, DiversyFund says. In 2019, the company received SEC permission to allow investments as low as $500 in its Growth REIT, opening it to all investors and focusing on long-term wealth.

“The days of the old boys club are over,” says Alan Lewis, DiversyFund co-founder and chief investment officer. “We believe everyone should have access to wealth-building opportunities, not just the 1%.”

Real estate is DiversyFund’s first alternative investment offer, but the company says it plans to roll out others. It also offers a learning center full of tools, resources and articles designed to help you invest successfully. Recent topics include how much to allocate to alternative investments, tax benefits of real estate investing and frugal family-living tips.

There is no guarantee that DiversyFund buildings will appreciate as planned, so some risk always is involved. You should research the investments to see if they make sense for your financial situation and risk-tolerance level.

 

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