We’ve invested $6.65 million in the acquisition of a 27,000 square foot (0.62 acre) lot in the Mid-City neighborhood of Los Angeles, as the future site of a 58-unit apartment building. At a strategic level, we continue to see opportunities to earn attractive risk-adjusted returns by financing the creation of new apartments and homes in supply-constrained urban areas.

Business plan

The property is comprised of four adjacent undeveloped parcels located approximately nine miles west of downtown Los Angeles. The borrower plans to finalize permits to begin construction on the lot. We expect this process will take between 6 and 12 months.

Upon securing the necessary permits, they plan to pay back our investment by either selling the shovel-ready property to a builder or refinancing into a construction loan.

Our investment in the project is structured as debt, where we are entitled to earn a fixed annual return of roughly 8% over the life of the investment before the sponsor can earn a return for themselves. Our goal is to earn consistent cash flow from interest payments through the maturity of the loan.

Why we invested

  • Major tech boom in South LA: The property is located less than three miles east of Culver City, where Amazon Studios, Apple, and HBO are in the process of opening major offices. We expect that a substantial number of the thousands of tech employees who will work in these offices will also want to live, dine, and shop nearby, driving a major increase in overall property values.
  • Experienced partner: The principals of the borrower have collectively entitled and developed more than 60 projects valued at roughly $650 million worth of real estate.
  • City-wide housing shortage: LA home prices have grown much faster than incomes in recent years, resulting in a major affordability crisis within the city. With large sections of the city simply out of reach for many renters and homebuyers, we believe that smart investments in up-and-coming areas will deliver attractive long-term returns. See our LA market analysis.

As always, please don’t hesitate to reach out to investments@fundrise.com with any questions or feedback.