DiversyFund vs. Fundrise - Which is Best for You? (2021)
While both Fundrise and DiversyFund are similar on the surface generally only one of them will be suitable for your investment needs as they have very different policies, particularly regarding early redemption and liquidity-needs.
Ultimately both are fine investing choices when it comes to real estate, and perform similarly, arguably a little better, than most publicly traded REIT’s — however this comes with a downside of reduced liquidity.
With Fundrise you can only cash out once a quarter, and there is often a slight penalty to doing so, and DiversyFund currently doesn’t even allow early withdrawals — this is the main deciding factor between them.
If someone wants more liquidity than Fundrise then REIT’s are generally a better choice, but if someone doesn’t care for liquidity but rather just good performence in the long-term then DiversyFund is the best choice short of buying/owning/managing your own real estate.
Which Platform Has Less Fees - DiversyFund or Fundrise?
While fees aren’t the most important thing they’re generally the main deciding factor for most people when it comes to investing — In this case however we believe it’s more important to focus on overall return as well as the features they each have and which is more suitable for you personally.
However to get to the point — DiversyFund claims to be no-fee, and this is somewhat true as they don’t take any active fees every month or year — instead they opt to be a shared-partner in the investment and act as not only the manager but also the property developer — and in return they take an equity stake of around 2% -> 8% in the properties they acquire — meaning in the 5-year vested period (more on this later) their fees are only 2% -> 8% of your invested capital.
On the other hand, Fundrise charges about 1% a year in total in fees — which comes out to about 5% in the same time period as Diversyfund would take their 2% -> 8% which makes us boil this all down to both platforms have similar fees and are quite competitive in this regard, so it’s more important to focus on other features rather than the fees they take when deciding between fundrise and diversyfund.
Which Platform has Better Sign-Up Offers - DiversyFund or Fundrise?
Currently neither DiversyFund or Fundrise offer anything great in terms of sign-up offers — Often you can get a couple months of advisory fees off your investments with Fundrise by signing up and DiversyFund usually they don’t offer any but it never hurts to check their website to see if they have recently came out with one.
Which Platform has Better Transparency & Choice - DiversyFund or Fundrise?
This is something that’s quite hard to say — we’d like to say Fundrise is more transparent than Diversyfund for average users as you get much more information about each property with ease, and in our opinion it’s better presented — not to mention you get ample investment choices depending on what part of the country you think will do better in the coming years or what category of real estate (high end, middle-class apartments, properties in the South-East USA), etc.
Ultimately unless you have a strong opinion on the location or type of real estate you own then the extra transparency Fundrise provides isn’t all too useful — as it’s not extra transparency and choices regarding on-going operations, but rather the properties.
If that type of transparency and choice important to you then Fundrise is a much better choice in our view, as while DiversyFund has a better over-all historic return (covered below) on paper if you believe (as we do) that the heartland, east coast, or west coast will outperform a general basket of value or growth properties.
Which Platform Offers the Best Overall Return - DiversyFund or Fundrise?
On the surface level DiversyFund is the absolute clear winner in this category — as for the last few years they’ve smashed returns out of the park with 15%+ returns, while Fundrise has many many more funds and thus more variance, but generally around 8% -> 12% with a +/- 2% variance on average, but over-all mostly you can expect around 11% with Fundrise if you just do their recommended method of buying a more broad diversified portfolio that has exposure to many funds rather than just a couple of their funds.
A couple percent more per year doesn’t sound like much, but if you invested $10,000 for 10 years and let the dividends compound that’s a difference of $18,000 in gains, or ending with around $60,000 instead of $40,000 — that’s a massive difference.
So ultimately in a total-return perspective, unless you particularly like/require the flexibility to choose specific regions to invest in like Fundrise offers, it’s almost certainly better to go with DiversyFund — however this is only true if you’re willing to have little to no liquidity in the investment, as Diversyfund has a lock-up period of 3-5 years (expected) on each fund in which period no divestment is possible. More on this in the FAQ at the end of the article.
Who is Better Off Investing with Fundrise?
If you are interested in specific regions of the USA rather than it as a whole, or simply don’t want to be locked into the investment for the next 3-5 years, and don’t mind potentially sacrificing a percent or two in returns a year to have the higher liquidity Fundrise offers, or for the ability to restrict your portfolio to a certain region of the country then Fundrise is probably better for you than DiversyFund.
However if you don’t hold beliefs that a certain part of the country has overvalued real estate (for example the west-coast) and prefer to exclude it from your portfolio then the 1-2% lower historic returns probably aren’t worth the slightly more transparency on the specific properties you’re invested in.
Who is Better Off Investing with DiversyFund?
If you don’t care for the ability to ‘cash out’ during quarterly redemption periods and are not only willing to, but intend to hold your investment with DiversyFund for then next 3-5years+ and don’t have a strong negative opinion towards the location of their properties in particular then they’re arguably the better choice if you want to maximize your returns over the long-term.
But if you might need the liquidity and ability to sell early, or simply don’t like the regions certain properties they have are in, such as San Diego, then you may be better off taking the couple percent a year hit in historic returns to go with Fundrise where you have the ability to exclude such properties/markets from your portfolio.
Fundrise & DiversyFund FAQ's:
Below we’ll answer the most popular questions we’ve been asked about the two platforms, or questions we personally had about them before we tried them both out ourselves — if you have any questions that aren’t answered below feel free to either email us or the companies their self to get those questions answered.
Does DiversyFund Pay Dividends?
While they used to not they now do pay dividends and offer a DRIP (Dividend re-investment Program) as well — so now just like Fundrise and other eREIT’s you can expect dividends every single month — assuming nothing catastrophic occurs that causes rent-delinquency’s to explode.
What are the terms for early-redemption (exits before the liquidation period) for DiversyFund and Fundrise?
When it comes to DiversyFund it’s quite simple — there aren’t any. If you want to exit before the fund/property is liquidated after 3-5years+ you’ll have to do a fancy pancy private-equity deal with someone off-market, which just isn’t viable for 95%+ of people — so essentially there is no option to liquidate early on, which is quite problematic if you are in need of quick-cash.
As for Fundrise things are a bit more complicated — You can ‘redeem’ your assets whenever you want and fundrise (or rather newer investors) — however they do have a small waiting period of between a few days and a little over 2 months depending on the product and time of the quarter you choose to redeem your assets.
Does Fundrise or DiversyFund Use Debt/Mortgage’s With Their Properties?
Yes, we met with both of them and discussed this very topic — they both use a fractional debt when purchase deals — meaning that they take a portion of customers invested capital and use it as a ‘downpayment’ for a property, then finance the rest of the deal, generally around 35% -> 60% with debt and the rest of the property is paid for in cash, providing a healthy cash-flow right off the bat while at the same time providing a decent built-in inflation-hedge and low-risk leverage.