We’ve invested in the acquisition and development of a new community of 67 townhomes in Sandy Springs, Georgia, just thirty minutes north of downtown Atlanta.

At a strategic level, this investment fits within our affordably-priced Sunbelt apartment / rental housing thesis. 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.

As we stated in our first quarter flagship portfolio update and 2020 year-end letters to investors, we believe that this long-term trend has only been further accelerated by the pandemic. In an economy where remote work is becoming the norm for more and more people, we expect that an increasing share of the population won’t need to live in expensive gateway cities and will instead seek out locations that offer lower living costs and more agreeable climates.

This acquisition was made by a joint venture between two Fundrise sponsored funds, the Fundrise Interval Fund, which invested roughly $14.1 million, and the Growth eREIT VII, which invested roughly $1.6 million.

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

We acquired the property from a national homebuilder, who has already secured the permits and entitlements necessary to build 67 townhomes on the site, completed the initial phase of land development for the entire community, including paving the roads, setting utilities, and laying foundations, and even started vertical construction on homes. At the time of our acquisition, the first 13 townhomes in the community were finished, and construction was underway on seven additional homes.

Our initial investment of roughly $15.6 million includes an all-cash purchase of the first 13 townhomes completed in the community and 47 construction-ready lots. Our intent is to purchase the other seven homes directly from the homebuilder when they wrap up construction.

As the owner of the construction-ready lots, we have engaged the same builder to complete construction on the homes, which they have agreed to deliver at a fixed price (i.e. they are responsible for cost overruns). They expect to deliver the new homes in batches of roughly eight homes per month.

Similar to our other single-family rental home communities, our intent is to lease up each batch of homes as they deliver, while construction on the overall community continues. In addition to the homes, the finished community will include key common amenities, such as a clubhouse and pool. When construction is complete, we will be the sole owners of an entire community of 67 rental townhomes, situated in a desirable location in northern Atlanta, putting us in an excellent position for both ongoing rental income generation and long-term appreciation.

We expect the project’s total cost to be roughly $31.8 million. We have agreed to fund the construction costs to the builder in installments, following the completion of determined development milestones of each batch of homes, such as finishing framing or drywall installation.

Our intent with this and other similar investments — including both single-family rental home communities and some apartment communities — is to be a long-term investor, building a scaled portfolio that generates consistent rental income, while at the same time positioning ourselves to capture what we believe will be outsized price appreciation thanks to a confluence of demographic factors driving demand across the Sunbelt.

While we’ve acquired the land in an all-cash transaction, we intend to obtain portfolio-level financing on the completed homes , with the aim of increasing expected returns and freeing up cash to deploy elsewhere.

Why we invested

  • Construction-ready site: Prior to our investment, all of the processes necessary in order for us to build homes at the property had already been completed, including permitting, design, entitlements, initial land development, and even vertical construction on the first phase of homes. Because the property is already fully prepped for construction, we’re able to begin development immediately, which reduces our overall risk in the investment.

  • Healthy local economy: Between 2010 and 2019, the Atlanta area’s population grew nearly three times faster than the national average, according to the U.S. Census. As the area continues to grow, affordability is becoming a top concern, making neighboring areas like Sandy Springs attractive to both renters and homebuyers.

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