Even a novice investor knows that diversification is an important part of a healthy portfolio. That’s one of the first things you learn when you start educating yourself on how to invest your money. So, in an effort to diversify, you may begin to consider investing in real estate as one way to bring something new to your portfolio.
Unfortunately, getting into real estate investing can be difficult – and nearly impossible – for many people. The first hurdle, of course, is the cost. Real estate is very expensive, so investing on your own requires significant resources. And that’s just talking about residential real estate. The idea of investing alone in commercial real estate is out of reach for almost everyone.
This is where platforms like DiversyFund and Fundrise come into the picture. By taking a new approach to real estate investing, these platforms make it possible for individuals to put some of their money into the commercial real estate market. In this article, we’d like to get into some of the basics of how these platforms work, and what they have to offer. Whether or not one of these options is right for you is yet to be seen, but taking a closer look is a good place to start.
If you are interested in investing some of your money in private market assets, you may be intrigued by what DiversyFund has to offer. Whereas most people would not have the sums of money required to access these private assets on their own, doing so through DiversyFund becomes very attainable.
The platform prides itself on being accessible to the ‘everyday investor’. It isn’t always easy for the average investor to build meaningful diversity in the way that institutional investors are able to do, so using this kind of platform is an opportunity to place your money in other kinds of investment vehicles.
In addition to lowering the financial requirements to invest in these kinds of assets, DiversyFund also helps by providing you with access to their strategic investments – rather than having to make investment decisions on your own. That means that even those with no experience in these types of investments can diversify their portfolios quickly and easily. It is an automated service that removes nearly all of the barriers to entry.
Fundrise offers a slightly different take on the same concept of opening up real estate investing to more people. There are both commercial and residential real estate assets held in the portfolios that Fundrise offers, and you are able to do your own due diligence to decide which investments are the right match for your goals.
As we mentioned above in the DiversyFund description, it is really the combination of a lower financial barrier to entry and the reduced experience required that makes this such an interesting investment strategy. Rather than spending years learning the ins and outs of the real estate market and trying to bring together the funds to make an investment purchase, you can lean on a platform such as Fundrise to get started right away.
DiversyFund vs Fundrise – Features
The core feature of each of these platforms is the opportunity to invest in a real estate investment trust, or REIT. These funds typically cover a range of actual real estate assets, and their long-term return will depend on the performance of those assets in the real world.
With DiversyFund, the fund available currently is the DiversyFund Growth REIT. This is a fund available to all residents of the United States, and it targets growth over a five-year period. The type of real estate targeted by this fund is apartment buildings throughout the US with more than 100 units.
At Fundrise, you will have a few more options at your disposal. There are four portfolio levels to choose from, depending on your goals and how much you would like to invest. The four portfolios offered are named Basic, Core, Advanced, and Premium. As you might imagine, the minimum investment required for each of these portfolios increases as you move up the ladder.
Whether or not the additional flexibility of Fundrise is a pro or con will depend on your approach to this kind of investing. If you just want a place to put your money that isn’t a stock or bond, you may prefer the simplified approach provided by DiversyFund. However, those who want a little more control and those who’d like to do a little homework on their investments may find that Fundrise is a better fit.
DiversyFund vs Fundrise – Investment Types
We’ve already covered the basics of what types of investments you’ll find with these two platforms. They are opportunities to get involved with a real estate investment trust for a modest upfront commitment.
DiversyFund has clearly laid out its strategy for increasing the value of its properties over a five-year period. The idea is to purchase properties that have strong potential for increased value in the years ahead. At the same time, these properties are already producing some cash flow, and then renovations are completed to increase rents and add to the value of the property as a whole.
When everything goes according to plan, the property is then allowed to appreciate in value over time before it is sold, and the profits distributed. You can see details related to each of the projects in your portfolio, so you will know exactly what kinds of buildings are being invested in, and what kind of work is being done to increase the value of those properties.
Fundrise doesn’t outline a specific plan of attack for property renovation, but it does acquire a range of properties that can be held in your portfolio. More than 200 assets have been acquired by Fundrise in its history, with a total value of over $5 billion. This platform is able to give access to owning real property without many of the typical fees and other costs that come along with buying real estate.
Within the Core portfolio at Fundrise, there are multiple investment plan options to consider, so you can tailor your experience to suit your plans. The three available plans here are Supplemental Income, Balanced Investing, and Long-Term Growth. Each of these three uses a unique allocation to lean in one direction or another. For example, Supplemental Income is designed to favor cash flow, while Long-Term Growth is focused on the appreciation of asset value.
DiversyFund vs Fundrise – Minimum Investment
One of the biggest selling points for either of these investment opportunities is the low cost of getting started. The significant costs of investing in real estate is traditionally what has kept so many people away, but these kinds of platforms bring down those barriers and open up the market to more and more people.
If you choose to invest with DiversyFund, you will be able to get started with as little as $500. In the world of real estate investing, $500 is a very modest number, so this is an appealing option if you don’t wish to put significant resources toward this type of investment just yet. Of course, you’ll always have the opportunity to invest more aggressively in this fund in the future, if you so choose, but you can get started and test it out for a commitment as small as $500.
So, how much money will you need to invest to get started with Fundrise? Well, that depends on which account level you select. At the Basic level, you will have to invest a minimum of $1,000. Moving up to the Core level requires $5,000, and the Advanced level demands a starting investment of at least $10,000. Finally, if you are interested in the Premium account level, $100,000 or more will be required.
While the four levels above include the main Fundrise account options, there is also a Starter Portfolio available if you would like to try out this platform for even less. To open a Starter Portfolio account, you will need to invest the same $500 that is required on DiversyFund. That brings these two platforms on even terms in regard to minimum investment. Once you reach a total of $1,000 invested with Fundrise, you will then be able to upgrade your account to the Basic level with no charge.
DiversyFund vs Fundrise – Fees
Even if you are new to this type of investing, one thing doesn’t really need explaining – fees are a bad thing. Any fees that you have to pay as part of your investment portfolio are going to take away from the bottom line at the end of each year. It’s hard enough to keep your portfolio on the right track for continual growth, and it’s even harder if you are paying high fees for various services.
With that in mind, always consider the fees that are charged by any investment platform or product. You aren’t always able to avoid fees completely, of course, but you can work hard to minimize them.
If you invest with DiversyFund, you will be happy to find that no management fees are charged. Since the real estate projects are actually owned and operated by DiversyFund, no annual fees are present on your account. That’s good news, of course, but it doesn’t quite tell the whole story. On the other side of the investment equation, developer fees may be charged on each project, and those can range in size. So, while those aren’t fees that will be directly charged to you, they do impact the profitability of your investment over time. As you compare DiversyFund to other options, keep the big picture of the fee structure in mind.
There are a couple of fees to be aware of when opting to invest with Fundrise. For starters, there is a 0.15% annual investment advisory fee. This is a very small fee, of course, as it only adds up to $1.50 for every $1,000 that is invested. In addition, any money placed in a standard portfolio will be subject to a 0.85% annual asset management fee. Adding those two fees up leaves you at an even 1% of fees for money that is in a standard portfolio.
In all, the fees charged by these platforms should not cause you to turn away from these possible opportunities, but they are important to understand. Nearly all types of investments come with fees or expenses of some kind – it’s just part of being engaged in this part of the financial world. So, your best plan of action is to understand how fees work and compare them appropriately across any opportunities that you are considering.
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Final Verdict: DiversyFund vs Fundrise
It wouldn’t make sense for us to pick a ‘winner’ to wrap up this article, because that’s not how investing works. It’s not a matter of determining which platform is better than the other, since investment opportunities are such an individual thing. The right method for diversifying your own portfolio may be a completely different approach than what is right for someone else.
With only a single fund to invest in, DiversyFund is an appealing option for someone who wants a streamlined, simple method for getting started in real estate investing. However, if you are looking to real estate investing as a way to build a passive cash flow, this is not the right platform at this time, as there are no dividends offered. And, if you are hoping to learn more about real estate investing and make some of your own choices, you’d be limited here.
Turning to Fundrise is going to change your experience somewhat significantly. While you will have more options to pick from, those options do open up the possibility of developing a passive income stream through dividends. It is worth noting that gaining access to all of the various features and opportunities available through Fundrise will require increasing levels of investment, so be sure that the features you want to use are available at the level you’ll reach given your planned financial commitment.
The idea of being able to invest in real estate without having to deal with some of the many hurdles that face traditional real estate investors is appealing. There are many different ways to create diversity and flexibility within a portfolio, and this is one option worth considering. We encourage you to spend some time on the DiversyFund and Fundrise websites to learn even more about these platforms before getting started with one or both.