We’re pleased to report the sale of our first single-family home investment in Los Angeles, which closed on March 23. We achieved roughly a 25.1% return on investment after only 10 months, which outperformed our initial projection of an approximate 22% profit over a one year duration.
Seeing the hidden value
We acquired this distressed home last May as part of the broader launch of our single-family home investment strategy in LA and DC. This strategy consists of three components:
- Undervalued homes
- Located in core urban neighborhoods
- In major cities with a chronic undersupply of housing
By identifying properties that meet these criteria, we believe we can unlock hidden potential and achieve attractive long-term returns.
This home, located in the heart of LA, represented exactly this opportunity. While its appearance scared off other buyers, we saw that beneath the years of neglect and mounds of trash was a historic home with great character.
Although we initially considered doing a full renovation ourselves, we saw strong interest from local home builders after hauling away the trash and demo-ing the home down to the studs. Ultimately, we determined that simply by creating a “blank canvas” for other home builders to work with, we could achieve the highest value for our investors.
In less than 30 days on the market, we received a handful of offers, and ended up selling the home for $550,000. After closing costs, the investment generated a profit of roughly $105,500 on an investment of roughly $421,000 in less than one year.
Our unique flexible approach
In addition to supporting our initial investment thesis, this project illustrates the value that our agile approach can create. While the original plan was to spend roughly $140,000, our team’s ability to adapt quickly to changing market conditions allowed us to produce an even better result than initially projected.
To be clear, we do NOT expect to achieve this level of return on every investment we make. This was a result of executing well on factors that we can control, combined with being fortunate in the timing of the factors that we cannot.
That said, we do believe that by completing 50-100 similar projects in supply-constrained cities like Los Angeles, Washington, DC, and Atlanta, we can produce very compelling risk-adjusted returns for our investors.
We look forward to providing ongoing progress updates on our urban housing strategy as it fully ramps up. Furthermore, we expect that investors will begin to see the results of our efforts reflected in both dividend distributions and net asset value (NAV) over the coming months.
As always, please don’t hesitate to reach out to investments@fundrise.com with any questions or feedback.
