DiversyFund Inc. was formed in August 2016 and launched its first Regulation A Growth REIT in 2018, giving non-accredited investors access to a public, non-traded real estate offering without accreditation requirements or massive capital outlays. The company reported $224 million of multifamily assets under management as of March 31, 2023, and its current website states that it has more than 28,000 investors.
But the story has taken a sharp turn. On June 9, 2023, the SEC permanently suspended the Regulation A exemption used by DF Growth REIT II, LLC. Separately, DF Growth REIT I's extended term ended on December 31, 2025, and the fund entered a winding-up period that management estimates may last approximately 12 to 24 months or longer. REIT I reported no newly declared investor distributions in 2025 and roughly $90,000 in cash at year-end 2025. For anyone evaluating fractional real estate investing, understanding what happened at DiversyFund offers useful lessons about platform due diligence, liquidity terms, and the difference between REIT structures and asset-level ownership.
An important framing note before going further: DiversyFund is not one legal entity. The relevant parties are distinct, and the difference matters for nearly every claim below. DiversyFund Inc.: the platform and sponsor; DF Growth REIT, LLC ("REIT I"): the original Regulation A Growth REIT; DF Growth REIT II, LLC ("REIT II"): the second Regulation A Growth REIT and the respondent in the SEC order; and, DF Manager, LLC: the manager.
Disclaimer: The information provided in this guide is for educational purposes only and does not constitute financial, tax, or legal advice. Always consult with a licensed professional before making any financial or investment decisions.
Key Takeaways
- The SEC permanently suspended REIT II's Regulation A exemption in June 2023. Release No. 33-11204 names DF Growth REIT II, LLC as the respondent and suspended that fund's exemption for its Regulation A offering. It did not suspend DiversyFund Inc. or bar every affiliated issuer from conducting exempt offerings.
- Declared distributions have effectively stopped at REIT I. REIT I reported $11,822 in cash payments to investors for dividends during the six months ended June 30, 2025, and its filings show no newly declared distributions in 2024 or 2025.
- REIT I's cash fell roughly 84% in six months, then fell further. Unrestricted cash declined from $1,953,984 at December 31, 2024 to $305,385 at June 30, 2025, and then to approximately $89,920 at December 31, 2025.
- REIT I's term ended and the wind-up is open-ended. December 31, 2025 was the end of REIT I's extended term, not a deadline for completing liquidation. REIT II's dissolution date was separately extended to December 31, 2026.
- The securities class action is over. The Ferry v. DF Growth REIT putative class action survived in part at the pleading stage in June 2025, but the case was dismissed and terminated on March 23, 2026.
- Liquidity is constrained, though transfers are not categorically prohibited. Investors have no redemption right and no public market, but the operating agreement permits certain private transfers subject to substantial restrictions.
- mogul offers a structurally different model. Asset-level fractional ownership through a club built by former Goldman Sachs executives, with professionally vetted and managed properties, monthly dividends, and transparent property selection, presents a fundamentally different profile from a blind pool REIT.
Understanding DiversyFund's Investment Structure
The DiversyFund Growth REITs operated as public, non-traded real estate investment vehicles, pooling investor capital into blind pools that management then deployed primarily into value-add multifamily investments, including apartment acquisitions, renovations, repositioning, and selected development opportunities. This structure differs fundamentally from asset-level fractional ownership, where investors select specific properties and hold interests tied to those individual assets.
Key characteristics of the DiversyFund Growth REIT model:
- Blind pool structure: Investors contributed capital without knowing which specific properties would be purchased, which removes asset-level selection control and increases reliance on the sponsor's underwriting and allocation decisions
- Non-traded REIT: Unlike publicly traded REITs, shares could not be sold on an exchange
- Value-add focus: The funds targeted operating properties requiring renovation and repositioning before stabilization
- Conditional distributions: The offering documents contemplated periodic operating-cash-flow distributions, expected at least annually when conditions permitted, together with distributions from sales or refinancings. No distribution amount or frequency was guaranteed.
The funds used a 7% cumulative, non-compounded preferred return hurdle in their distribution waterfalls. This was not a guaranteed annual return, and it did not prevent the sponsor or its affiliates from receiving separately authorized fees. The sponsor's promoted interest, including a catch-up and profit participation, was subordinated to specified waterfall tiers, but sponsor and affiliate fees were governed separately.
DiversyFund announced a $4 million REIT I distribution dated December 31, 2022, which the company described as an approximately 6.1% annualized return for that disbursement. The announcement expressly cautioned that the calculation was based on asset sales and did not represent the fund's prospective total return. That appears to have been the only material distribution declaration. Subsequent SEC cash-flow statements show smaller cash payments against dividend obligations, including $525,872 in the comparable 2024 period and $11,822 in the first half of 2025, but no additional distributions were declared in 2024 or 2025.
How This Differs from Asset-Level Fractional Ownership
Platforms offering property-level fractional ownership operate differently. Instead of a blind pool, investors choose specific properties. Instead of REIT shares, investors typically purchase fractional membership interests in an LLC or special-purpose entity that owns a designated property. It is worth being precise here: this is asset-specific ownership exposure, but legally it is usually indirect ownership through an entity rather than individual deeded title to a fraction of the parcel.
This approach offers several structural differences worth understanding:
- Property selection control: Investors evaluate individual assets before committing capital
- LLC ownership: A multi-member LLC that defaults to partnership taxation generally issues Schedule K-1s and may allocate income, deductions, and depreciation under the operating and tax agreements. LLC status alone is a state-law form, not a federal tax classification, so it does not by itself determine K-1 reporting or depreciation pass-through.
- Distributions from property cash flow: Rental income distributed on a stated cadence, subject to property performance, expenses, reserves, and offering terms
- Governance rights: Determined by the operating agreement. Some asset-specific LLCs give investors voting rights on defined major decisions, while others remain substantially manager-controlled.
Liquidity Considerations and the Extended Wind-Up
One of the most significant considerations for legacy DiversyFund investors involves liquidity. REIT I is currently in wind-up proceedings with an open-ended timeline, and REIT II operates on a separate schedule.
Current liquidity situation:
- No public secondary market: There is no established trading market for the shares
- No redemption right: Investors have no right to force redemption, and the funds do not offer quarterly or annual redemption windows
- Private transfers are restricted, not prohibited: The offering documents state that investors may generally transfer their Class A shares subject to restrictions. A selling holder must first offer the shares to the manager, and the manager may reject transfers that could jeopardize REIT status. Securities-law requirements and transaction costs impose further practical barriers.
- REIT I wind-up: REIT I's extended term ended December 31, 2025, and management estimates the winding-up period may take approximately 12 to 24 months or longer
- REIT II timeline: The manager extended REIT II's dissolution date to December 31, 2026
Illiquidity is a fundamental feature of non-traded REIT structures. When a fund encounters difficulties, investors have very limited practical means of exiting their positions. mogul takes a different path, building a member secondary market designed to let investors sell shares at fair market value calculated through third-party appraisal-level data, alongside transparent asset-level ownership in each property.
Returns and Performance Reality
The gap between what investors expected and what has been realized is one of the starkest issues for legacy DiversyFund investors. The comparison below should be read carefully, since the offering documents expressed intentions and expectations rather than promises.
Offering-document expectations vs. reported outcomes at REIT I:
| Metric | What the offering documents stated | What REIT I filings report |
|---|---|---|
| Distribution frequency | Periodic distributions, expected at least annually when conditions permitted, with no guarantee | One material distribution declaration, dated December 31, 2022; none declared in 2024 or 2025 |
| Preferred return | 7% cumulative, non-compounded hurdle in the waterfall, not a guaranteed return | The December 2022 disbursement was described by the company as approximately 6.1% annualized for that payment only, expressly not a total-return figure |
| H1 2025 distribution activity | Conditional operating distributions | $11,822 in cash payments to investors for dividends at REIT I, against roughly $1.10 million in dividends payable |
| Exit timeline | Five-year term plus two discretionary one-year extensions | Term ended December 31, 2025; wind-up estimated at 12 to 24 months or longer |
Note the scope of the $11,822 figure. It appears in REIT I's statement of cash flows as payments made to investors for dividends during the first six months of 2025. It is not a figure covering DiversyFund's entire investor base, all DiversyFund funds, or REIT II investors, and the same filing reports roughly $1.10 million in dividends payable, which suggests the payment may relate to an existing dividend liability rather than a newly declared distribution. For investors seeking regular cash flow from real estate, this is a significant departure from expectations.
Understanding the Cash Position Decline
Financial disclosures for REIT I specifically, not for DiversyFund Inc. on a consolidated basis, show a declining cash position:
- December 31, 2024: unrestricted cash of $1,953,984
- June 30, 2025: unrestricted cash of $305,385, an approximately 84.4% decline
- December 31, 2025: unrestricted cash of approximately $89,920
The 1-SA filing attributed the six-month decline primarily to additional investments in several portfolio properties. Total assets were approximately $97.87 million at June 30, 2025. Litigation can create expenses or contingent liabilities in any fund, but the publicly reviewed filings do not provide enough information to attribute REIT I's cash decline specifically to the Ferry case, and earlier filings stated that the sponsor had paid legal costs to date.
Regulatory Issues and SEC Action
DiversyFund's regulatory history is frequently misdescribed, so precision matters. On June 9, 2023, the SEC issued Release No. 33-11204, which named DF Growth REIT II, LLC as the respondent and permanently suspended REIT II's exemption for its Regulation A offering. The order identified failures to comply with Regulation A requirements and inaccurate or incomplete fee representations. REIT II consented to the order without admitting or denying most of the findings. DiversyFund Inc. owned the fund's manager, but it was not itself the respondent whose exemption was suspended.
What the order did and did not do:
- It stopped REIT II from selling securities under that suspended exemption. REIT II could no longer continue that particular Regulation A offering.
- It did not impose a platform-wide Regulation A ban. A separate DiversyFund-sponsored affiliate, Value Add Growth REIT IV, began a Regulation A offering in September 2023 and later terminated it. Its existence demonstrates that the order was not a categorical prohibition on all affiliated exempt offerings.
- It did not end DiversyFund's capital raising. DiversyFund currently advertises a Regulation D, Rule 506(c) promissory-note offering for accredited investors, with stated minimums of $100,000 and $250,000 depending on class.
- Reputational impact: The enforcement action signaled regulatory attention to the offering's compliance and disclosure practices.
It is also worth resisting the temptation to draw a causal line from the 2023 order to REIT I's 2025 cash position. The reviewed filings do not establish that relationship.
As of July 2026, the Better Business Bureau profile for DiversyFund displayed complaint status records covering the standard three-year reporting period. Complaint volume is generally read in relation to company size and response behavior, and a BBB rating is a customer-sentiment measure rather than an investment-performance or regulatory assessment. Private review-site scores are similarly opinion inputs and are not equivalent to SEC filings or court records.
The Ferry Class Action Has Concluded
The Ferry v. DF Growth REIT securities class action is no longer pending. A June 2025 order allowed portions of the plaintiffs' California securities-law case to proceed while dismissing or narrowing other allegations. The federal docket then lists the case as dismissed and terminated on March 23, 2026 following a stipulated dismissal.
The publicly accessible docket does not establish the economic terms of any settlement or dismissal arrangement, so neither a recovery nor a release of liability should be assumed without reviewing the underlying documents.
REITs vs. Asset-Level Fractional Ownership: Understanding the Difference
The DiversyFund experience highlights structural differences between REIT investing and property-level fractional ownership that every real estate investor should understand.
Non-traded REIT structure (the DiversyFund Growth REIT model):
- Blind pool of assets managed by a sponsor
- No investor control over which specific assets are acquired
- 1099-DIV tax reporting for dividends
- Ownership of shares in the REIT entity rather than an interest tied to a designated property
- Liquidity depends on trading (for traded REITs) or sponsor programs (for non-traded funds)
Asset-level fractional ownership:
- Individual property selection
- Membership interests in an LLC or special-purpose entity that owns a designated property
- K-1 reporting where the LLC is taxed as a partnership, with potential depreciation allocations
- Governance rights as defined by the operating agreement
- Sponsor co-investment where offered, which creates shared economic exposure
The tax treatment differs, though not as simply as it is often described. Ordinary REIT dividends are generally reported on Form 1099-DIV and taxed at ordinary-income rates rather than qualified-dividend rates. However, some REIT distributions are capital-gain distributions, some are nondividend returns of capital, and qualified REIT dividends may be eligible for the Section 199A deduction depending on applicable law and investor circumstances.
On the other side, a partnership-taxed property LLC may allocate depreciation deductions to investors through a Schedule K-1, potentially offsetting rental income. Whether an investor can currently use those deductions depends on tax basis, at-risk amounts, activity loss rules, excess-business-loss rules, the allocation provisions in the operating agreement, and personal tax status. Anyone weighing structures on tax grounds should model their own situation with a qualified tax advisor rather than assuming automatic savings.
Property Selection and Due Diligence
One of the key differences between structures involves property selection. The DiversyFund Growth REITs operated as blind pools, meaning investors had no control over which assets management acquired. That removes investor agency and increases reliance on the sponsor's underwriting and allocation decisions. It is worth noting that a blind pool is not inherently concentrated: concentration depends on the number, size, geography, financing, and correlation of the fund's investments, not merely on whether investors chose the assets individually.
Platforms offering property-level selection allow investors to evaluate specific assets, review underwriting assumptions, and choose properties aligned with their investment thesis. Tools like mogul's investment property calculator enable independent analysis before committing capital, providing projected income, ROI, IRR, cash flow, comparable-property information, adjustable assumptions, and base, bear, and bull scenarios for U.S. addresses.
Selectivity in property selection matters. mogul reports that fewer than 1% of reviewed properties pass its diligence process, which reflects institutional underwriting standards built by former Goldman Sachs real estate investors. That approach contrasts with blind pool structures where investors rely entirely on management's discretion.
Entry Points and Accessibility
Investment minimums vary materially by platform, offering, investor class, accreditation status, and jurisdiction, and they change frequently, so any static comparison table goes stale quickly.
What can be documented about DiversyFund specifically:
- REIT I: initially used a higher minimum and reduced its minimum investment to $500 in May 2019
- REIT II: its offering circular also stated a $500 minimum
- Current DiversyFund offering: the advertised Regulation D, Rule 506(c) promissory-note offering states minimums of $100,000 and $250,000 depending on class, and is limited to accredited investors
So it is not accurate to say DiversyFund is closed to new investment. The legacy $500 non-accredited Growth REIT offerings are closed to new subscriptions, while DiversyFund currently markets separate Regulation D opportunities to accredited investors.
Buying an entire investment property generally requires materially more upfront capital than a fractional investment, although the required amount varies substantially by price, location, owner-occupancy, loan product, leverage, borrower qualifications, closing costs, reserves, and rehabilitation needs. The accessibility of fractional platforms creates opportunity for investors with limited capital to build real estate exposure. Headline minimums, however, are not the point. Platform quality, institutional underwriting, fee structures, liquidity provisions, and risk mitigation features matter far more than the entry price, which is one reason the average investment on mogul is roughly $10,000.
Accreditation Requirements
Some fractional real estate platforms use Regulation A or Regulation Crowdfunding and accept non-accredited investors, while others rely on Regulation D and limit participation to accredited investors. DiversyFund's historical Growth REITs accepted non-accredited investors subject to Regulation A investment limitations. Its current advertised Rule 506(c) offering is accredited-only.
The DiversyFund situation demonstrates that accessibility cuts both ways. Offerings available to non-accredited investors still warrant rigorous due diligence. The SEC's suspension of REIT II's Regulation A exemption is a reminder that compliance matters regardless of an investor's accreditation status.
Fees and Cost Considerations
Fee comparisons across real estate investment platforms are difficult to make honestly, because published headline percentages rarely define the fee base, the level at which the fee is charged (platform, fund, issuer, SPV, or property), or which fee categories are included. Rather than present a generic market-wide range, it is more useful to look at what a specific sponsor actually disclosed.
REIT I's 2025 annual report states that the manager waived its approximately 2% company-level asset-management fee since inception. That waiver applies to one fee at one fund. The same report lists other potential or actual sponsor and affiliate compensation, including:
- Acquisition and developer fees, disclosed at levels that could reach 6% to 8% of total project cost
- Property-level asset-management fees
- Construction-management fees
- Financing fees
- Disposition fees
- Other project-level fees
The SEC's REIT II order also found that website descriptions of fees were inaccurate or incomplete, which is itself a useful lesson about relying on marketing pages rather than offering documents.
When comparing platforms, model the actual fee base, timing, reinvestment assumptions, and projected cash flows. A stated "3% upfront versus 1% annually" comparison cannot be resolved without knowing whether the annual fee is calculated on original invested capital, net asset value, gross asset value, equity value, revenue, or invested-but-unreturned capital, and without knowing distributions, additional capital, leverage, and appreciation. Headline percentages alone are not comparable.
Why mogul Offers a Different Approach
For investors seeking alternatives after reviewing the legacy Growth REIT structure, mogul provides a structurally different model. mogul is a fractional real estate platform club founded by former Goldman Sachs executives, with a team whose collective investing experience spans more than $10 billion of real estate transactions. Co-founder Joey Gumataotao grew Goldman Sachs' single family rental platform from $0 to $1 billion in under 12 months, and the founders left Goldman to make the world's largest wealth generator, real estate, accessible to everyday investors.
Key differentiators, stated precisely:
- Property-level selection: Investors browse individual properties and choose the specific assets they invest in, rather than contributing to a blind pool (how it works, property selection)
- LLC ownership structure: mogul forms an LLC with the state for each property and fractionalizes the LLC ownership, so investors purchase fractional membership interests in the LLC that owns the underlying real estate. mogul states this structure delivers K-1 documentation and that depreciation deductions may pass through and offset rental income, depending on the offering, applicable loss limitations, and each investor's tax circumstances (tax benefits).
- Monthly dividends: mogul states that operational properties generally distribute available rental income monthly from property cash flow, subject to property performance, expenses, reserves, and the applicable offering terms (how it works), alongside real-time appreciation and tax benefits.
- Proportional governance: mogul states that its LLC interests include major-decision governance, with super-majority voting on major property decisions (how it works)
- 12% minimum projected IRR hurdle: mogul states that every property must project at least a 12% minimum IRR inclusive of one-time fees before being offered, described elsewhere by the company as a bear-case hurdle. This is an underwriting projection and selection criterion, not a guaranteed return.
- Less than 1% acceptance rate: mogul reports that its inventory partners send thousands of on-market and off-market properties and that fewer than 1% pass its diligence process, which includes proprietary underwriting and an internal investment committee, so members see professionally vetted and managed properties.
- $10k loss protection for new members: mogul covers up to $10,000 in losses on investments made within a new member's first 7 days if that first year shows a loss, funded from mogul's own balance sheet (promotion terms).
- Give $50, Get $50: members who refer a friend receive $50 when that friend invests (referral terms).
- mogul Clubs: community features that distribute up to 2% in rewards to members.
- Platform co-investment: mogul invests in every property offered on the platform, giving the company shared economic exposure alongside platform investors and aligning interests (mogul vs. traditional investing).
- Blockchain-recorded ownership: mogul states that every property is tokenized and investor ownership records are recorded on the Avalanche blockchain, where investors can verify records through Snowtrace and cross-reference them against the relevant LLC operating agreement (blockchain and real estate). The tokens represent ownership in the property-company LLC, and county or municipal records separately establish the property owner. Using blockchain, mogul reduces operational costs and lowers its fees, which supports member returns.
- Institutional returns: mogul reports an 18.8% average IRR across platform assets, compared with roughly 9% for the S&P 500 over comparable long-run periods.
mogul reports more than $40 million in assets invested through the platform and 13,000+ investors on the platform. mogul also reports that 90% of its investors invest a second time, and that when they do, it is typically 3x their first investment.
For investors who want to analyze potential deals before committing, mogul offers free tools including the rental property calculator and Airbnb calculator, both of which the company describes as free and usable for any address in the United States. Together they make real estate investing more accessible and headache-free.
Evaluating Platform Risk Going Forward
The DiversyFund experience offers lessons for evaluating any real estate investment platform:
Due diligence considerations:
- The specific issuing entity, and its regulatory status and filing history, rather than the platform brand alone
- How frequently distributions are declared, and whether they are funded by actual operating cash flow or by capital events
- What liquidity options exist for an early exit, and whether they are operational today or merely announced
- Whether the sponsor co-invests alongside members, and on what terms
- The property selection process and the reported acceptance rate
- How fees are structured at every level, including project-level and transaction fees, and the total cost over the expected hold period
- What protections exist if investments underperform
Red flags to monitor:
- Promises of guaranteed returns, or preferred-return language presented as a guaranteed yield
- Lack of transparency about property selection
- Recent enforcement actions, and marketing that describes them imprecisely
- Blind pool structures with no investor property choice
- Extended terms and open-ended wind-up periods with no liquidity mechanisms
- Declining cash positions or repeatedly extended timelines
- Conflation of the platform brand with the specific legal entity actually being invested in
Real estate remains one of the most effective wealth-building asset classes, but the vehicle matters. The same underlying asset class can produce dramatically different outcomes depending on structure, management quality, and risk protections.
Disclaimer: The information provided in this guide is for educational purposes only and does not constitute financial, tax, or legal advice. Always consult with a licensed professional before making any financial or investment decisions.
Frequently Asked Questions
What happens to my DiversyFund investment now that REIT I's term has ended?
REIT I's extended term ended on December 31, 2025, and the fund entered a winding-up period that management estimates may last approximately 12 to 24 months or longer. That date marked the end of the fund's term, not a deadline by which all properties had to be sold and all capital returned. Investors generally wait for the fund to liquidate its properties and distribute remaining proceeds. REIT II is on a separate schedule, with its dissolution date extended to December 31, 2026. The Ferry litigation was terminated in March 2026 and is no longer a pending source of uncertainty. Public SEC filings remain the record for the specific fund held.
Can I transfer my DiversyFund shares to another platform?
Not in the way brokerage-held public securities are transferred. Private fund interests are not ported between investment platforms. That is a question of asset portability, not absolute legal transferability. The operating agreement does permit certain private transfers of Class A shares, but only subject to substantial restrictions, including the manager's right of first refusal, the manager's ability to reject transfers that could jeopardize REIT status, securities-law requirements, and transaction costs. There is no public trading market and no holder-initiated redemption right, so finding a qualifying buyer is the practical obstacle. This underscores the importance of understanding liquidity terms before investing in any non-traded real estate product.
How do SEC enforcement actions against real estate platforms affect individual investors?
An enforcement action like Release No. 33-11204 primarily affects the named respondent's ability to continue the specific offering at issue. In DiversyFund's case, the order suspended DF Growth REIT II's Regulation A exemption; it did not bar DiversyFund Inc. or every affiliated issuer from conducting exempt offerings, as demonstrated by a later affiliated Regulation A offering and a current Regulation D offering. For existing investors, enforcement actions can signal disclosure or compliance considerations, constrain the specific fund's business plan, and create legal costs. The exact issuing entity, not just the platform name, is what appears in SEC EDGAR.
What's the difference between a non-traded REIT and fractional property ownership through an LLC?
Non-traded REITs pool investor capital into a fund managed by a sponsor, typically investing across multiple properties with limited investor control over asset selection. Investors own shares in the REIT entity and generally receive Form 1099-DIV. Asset-level fractional structures place a designated property in an LLC or special-purpose entity and sell membership interests in that entity, so investors own the entity rather than holding deeded title to a fraction of the parcel. Where the LLC is taxed as a partnership, investors generally receive Schedule K-1s and may be allocated depreciation, subject to basis, at-risk, and activity loss limitations. Governance rights depend entirely on the operating agreement: the DiversyFund Growth REITs were themselves organized as LLCs, yet their documents gave investors almost no management or voting rights. The structural differences affect taxation, control, and alignment.
How should I evaluate the financial health of a real estate investment platform before investing?
Start by identifying the exact issuer. For Regulation A issuers, the offering circular and ongoing Forms 1-K, 1-SA, and 1-U on EDGAR include audited annual financial statements. For Regulation D offerings, EDGAR may contain only a limited Form D notice, which is a brief notice filing rather than an audited annual report, so the private-placement memorandum, financial statements, subscription documents, and sponsor disclosures form the rest of the picture. Track cash position trends across periods rather than a single snapshot, and note pending or recently resolved litigation. Better Business Bureau ratings and private review-site scores are customer-sentiment or opinion inputs, not financial or regulatory assessments. Evaluate whether the sponsor co-invests, assess the management team's real estate track record specifically, and understand every fee at every level, including project-level and transaction fees that sit outside headline management-fee waivers.