We’ve invested roughly $8.1 million to acquire 18 rental homes within the Ridgeview Villas community in Allen, Texas, about 40 minutes north of downtown Dallas, with plans to acquire an additional nine rental homes in the community upon completion of construction later this year.

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. Learn more about the single-family rental asset class here.

As we referenced in our 2022 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. For example, residential properties in the Sunbelt: In an economy where remote work is becoming the norm for more and more people, we expect that an increasing share of the population will no longer need to live in expensive gateway cities and will instead seek out locations that offer lower living costs and more agreeable climates. 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.

This acquisition was made by a joint venture between two Fundrise sponsored funds, the Fundrise Flagship Fund, which invested roughly $7.3 million, and the Growth eREIT VII, which invested roughly $805,000.

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 initial investment at Ridgeview Villas is an all-cash purchase of 18 finished homes within the community. Our intent is to acquire and lease up an additional nine homes in fall 2022, eventually taking ownership of a total of 27 homes within the community.

Our intent with this and other investments in single-family rental home communities is to be a long-term investor, building a scaled portfolio that generates consistent rental income, while at the same time being positioned to capture what we believe will be outsized price appreciation thanks to a confluence of demographic factors driving demand across the Sunbelt. While the properties of course look different than multifamily apartments, the underlying investment thesis is ultimately very similar.

We expect the aggregate purchase price of all 27 homes will be roughly $11.5 million, and our total commitment to be roughly $12 million, accounting for expected costs. While we acquired the 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 construction: Construction on the first 18 homes wrapped up earlier this year, and the remaining homes will be delivered upon completion of construction. Since the community consists of new construction, we do not expect significant costs for renovations or updates in the near future.

  • High-demand property type: We believe the community’s spacious three-bedroom homes will be particularly attractive to renters who are in need of more living space as norms around work shift.

  • Institutional-quality asset: This deal is structured so as to allow us to acquire tranches of homes directly from a nationally recognized homebuilder. Once our investment in the 27 homes is complete, we will have added an institutional-quality asset of ready-to-rent homes to our portfolio.

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.