We’re investing roughly $29.5 million to acquire a 97-townhome build-for-rent community in Sherrills Ford, North Carolina, about 45 minutes north of downtown Charlotte.

At a strategic level, this investment fits within our affordably-priced Sunbelt rental housing thesis. With real estate markets increasingly under duress, we have begun acquiring properties opportunistically. Shelby Cullom Davis famously said, “You make most of your money in a bear market, you just don’t realize it at the time.” Most individuals who were actively investing in 2021 learned this lesson during the beginning of the pandemic. However, during an extended downturn, it takes courage to invest more aggressively when most investors are on the sidelines.

We believe that build-for-rent housing will become the next major asset class in the real estate industry, with the likelihood to flourish into a new multi-billion dollar sector. From millennials to retirees, a broad group of Americans has been taking part in a migration from northern to southern states over the past decade, driving continued demand for well-priced, well-located real estate and supporting steady returns for disciplined investors. Learn more about our build-for-rent (BFR) strategy here.

Our intent with this and other investments in BFR housing is to capture market growth currently being driven by megatrends in technology, demographics, and affordability, all of which are encouraging more people to seek the single family housing option of a BFR community, especially outside of traditional coastal urban centers, in regions across the Sunbelt. Today, Fundrise is already one of the largest BFR investors and operators in the nation, with institutional-scale financing from Goldman Sachs, Metlife, and Prudential; as the sector grows, we’re delivering our investors one of the most promising new investment classes.

This acquisition was made by a joint venture between two Fundrise sponsored funds, the Fundrise Flagship Fund, which is committing roughly $29.0 million, and the Growth eREIT VII, committing roughly $1.5 million, projected costs included.

Strategy

Value Add

Acquire real estate that needs improvements and / or lease-up

  • Risk-return profile: Moderate to high
  • Expected timing / delay of returns: Several months to a year
  • Expected source of returns: Growth with some income

More about our strategies

Note that this section is intended to provide a general overview of the Value Add strategy for educational purposes only, and is not meant to be representative of the specific details of any individual investment. All investments involve risk and there are no guarantees of any returns.

Business plan

Our investment at Montera at Sherrills Ford is a $29.5 million purchase of a 97-home, finished build-for-rent community. The community consists of various amenities, unit types, and floorplan options designed to capture the benefits of multifamily operations, with spacious three-bedroom townhomes, each with a private garage, backyard, and modern finishings and features. Our purchase contract is for the 97 townhomes over the next year, delivered in tranches as construction is completed.

As we referenced most recently in our 2023 mid-year letter, our investment theses strive to identify factors that are bolstered by strong demand today and have historically performed well, both during past high inflationary periods and during downturns more broadly. Particularly, as interest rates remain high, we expect rental housing to continue to be an attractive option to many people, as the expected monthly mortgage payment for the buyer of a median-priced US home has nearly doubled in the course of just two years. In addition, we’ve weighted toward these types of assets because they generally have better withstood past economic downturns; shelter, like food, is a basic need rather than a discretionary expense.

Accounting for anticipated costs, we expect our investment’s total commitment to be roughly $30.5 million. While we acquired the initial homes in an all-cash transaction, we intend to use portfolio-level financing with the aim of increasing expected returns and freeing up cash to deploy elsewhere.

Why we invested

  • New high growth property type: Build-for-rent communities are emerging as one of the fastest growing new product types in real estate. With rising institutional demand and strong market fundamentals, BFR may be the most attractive asset class in the entire industry.

  • Fast-growing geography: The Charlotte region boasts one of the nation's fastest-growing cities and holds the impressive eighth position among the best places to live in the nation. Since 2010, the area has experienced a remarkable 20% increase in population growth. Renowned for its consistent rankings as a top-growing city, it is also home to over 18 Fortune 1000 companies, which has been a driving force behind the region's growth. As a result, the area is quickly evolving into an epicenter of innovation, driven by its business-friendly climate, exceptional infrastructure, and one of the nation's most connected airports. These factors make Charlotte and its surrounding areas highly attractive to both companies and the growing population of millennials.

As always, if you have any questions or feedback, please visit our help center or reach out to us at investments@fundrise.com.

Additional Information: An investor in the Fundrise Real Estate Interval Fund (the “Flagship Fund”) should consider the investment objectives, risks, and charges and expenses of the Flagship Fund carefully before investing. The Flagship Fund’s prospectus contains this and other information about the Flagship Fund and may be obtained here. Investors should read the prospectus carefully before investing.