We’ve invested roughly $11.5 million to acquire 8.9 acres of land in Houston, Texas, with plans to develop a community of 97 detached homes over the next two years.
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 reiterated in our third quarter performance update for 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 Flagship Fund, which invested roughly $10,359,000 and the Growth eREIT VII, which invested $1,151,000.
Strategy
Opportunistic
Acquire and (re)develop the real estate, often from the ground up
- Risk-return profile: Very high
- Expected timing / delay of returns: Often two years or more
- Expected source of returns: Growth
Note that this section is intended to provide a general overview of the Opportunistic 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 Timbergrove Village is an all-cash purchase of 8.9 acres of unimproved land, where the single-family rental homes will be built. Our intent is to develop and lease up batches of roughly ten homes per month beginning in October 2022, when the first set of homes is expected to be delivered, eventually completing 97 homes within the community. Though we purchased the land upfront, the phased development structure should result in much more efficient deployment of investors’ capital, as opposed to holding cash for several months while waiting for an entire community to be built, and then acquiring it all at once.
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 have engaged a leading property manager of single-family rental communities across the US.
We expect our aggregate investment in the completed community of 97 homes will be roughly $42.7 million. While we acquired the initial investment in the undeveloped land in an all-cash transaction, once the homes are constructed and leased up we eventually intend to use portfolio-level financing, with the aim of increasing expected returns and freeing up cash to deploy elsewhere.
Why we invested
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Fast-growing area: Between 2010 and 2019, the Houston area’s population grew 19% to approximately 7 million residents, making it the fifth largest MSA in the country, according to the U.S. Census.
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Social distancing-friendly: We believe the privacy provided by the community’s fully detached and individual homes will be particularly attractive to renters seeking an additional level of social distancing, or who simply need more living space as norms around work and school shift.
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Institutional-quality asset: We are working directly with a nationally recognized homebuilder to develop the Timbergrove Village community from the ground up. Once construction on the 97 homes is complete, we will have added an institutional-quality asset of rental homes to our portfolio, consisting entirely of brand-new construction.
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.
