As part of our broader strategy of investing in the creation of new housing in supply-constrained cities, we’ve invested about $1.7 million in the acquisition of three neighboring lots, totaling 16,000 square feet (0.37 acres), in North Hollywood, Los Angeles as the future site of ten homes.
Business plan
The borrower, Breakform Realty, plans to obtain the entitlements and permits necessary to build ten homes on the property. We anticipate that this process will take 18 to 24 months. After completion of the entitlement and permitting process, they expect to secure a construction loan to pay back our investment.
This type of investment is referred to as bridge loan since it provides a short-term financing solution until the next stage of financing is obtained. The primary advantage of making a bridge loan is the ability to earn an attractive risk-adjusted return without committing our capital for a long period of time.
Why we invested
- Great location: North Hollywood, known by locals as NoHo, is a charming community situated in the southeast portion of the San Fernando Valley. Located just outside the LA city limits, North Hollywood continues to benefit from the metro area’s strong population growth.
- Strong recent growth: Over the five-year period ending March 2019, the Zillow home value index in the 91601 ZIP code has grown from $484,000 to $756,000, an increase of more than 55%. We believe this trend will continue as prospective homebuyers are priced out of more established neighborhoods.
- Local, experienced partner: Breakform Realty Ventures is an LA-based real estate firm that specializes in the development of residential housing within the greater LA area. Since inception, they have invested in over $100 million of real estate.
