We’ve invested in the acquisition and development of an approximately 77-acre property in Mount Dora, Florida, roughly 30 minutes northwest of downtown Orlando, as the future site of a new community of 257 single-family homes. As part of this investment, we’ve entered into an agreement with a national homebuilder to provide financing for the development of the land in exchange for earning a fixed rate of return of roughly 9.5% annually, beginning in August 2022 when the investment initiated.

Strategy

Fixed Income

Provide real estate backed loans or similar structured financing

  • Risk-return profile: Low to moderate
  • Expected timing / delay of returns: Typically immediately after acquisition
  • Expected source of returns: Interest income

More about our strategies

Note that this section is intended to provide a general overview of the Fixed Income 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

The goal of this investment is to produce an attractive income stream through financing the development of new housing in a growing area. The business plan is designed to generate fixed income, similar to traditional investments in construction financing, with the primary difference being that we acquired the property rather than providing a loan to the builder.

As the property owner, we have engaged the builder to perform the land development, which essentially means taking raw land and performing all the improvements needed before vertical construction on the homes can begin (e.g. grading and water retention, paving roads and sidewalks, running utilities, and pouring foundations). The builder has agreed to deliver this work at a fixed price, which we will fund in draws as certain milestones are completed.

In addition, we have an agreement with the builder whereby they are entitled to buy the finished lots from us at a set price. To maintain these rights, they have agreed to pay a fixed monthly payment, which functions similarly to an interest payment, along with posting a non-refundable deposit of 15% of the finished lot purchase price.

The combined effect of these agreements is that we are financing the property acquisition and initial phase of development, which creates an inventory pipeline of finished lots for the builder without tying up their capital. In exchange for providing this benefit, we can earn an attractive yield on our investment with a considerable margin of safety.

Why we invested

  • Attractive margin of safety: In addition to being owners of the land, the homebuilder has provided a deposit in the amount of 15% of the finished lot costs, which serves to further reduce our risk.

  • Fast-growing area: Mount Dora, Florida, is part of the greater Orlando metropolitan area, a region that was ranked second in the country for job growth by the U.S. Bureau of Statistics, driven by a dynamic economy with an array of industries, such as advanced manufacturing, biotech, aerospace, defense, and world-class attractions. The growth and expansion of Orlando's economy continue to make it 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.