Investment firm Fundrise found an opportunity in that bottleneck. Last week, the startup secured a $ 300 million line of credit from Goldman Sachs to fund nearly $ 500 million in new home construction to increase supply in the Sun Belt.
But the firm’s new developments will be houses built to rent from its investors. While the properties will expand the supply of rental options, they will do nothing to expand homeownership opportunities.
Fundrise argues that its approach, unlike other institutional investors, does not crowd out buyers. But in December, the startup outbid larger firms to acquire a new rental development in Conroe, Texas, for $ 1 billion in December. The Wall street journal reported that DR Horton, by taking the deal, earned nearly double what middle-class buyers could have brought in.
Still, a greater supply of affordable rental housing is needed, said Ben Miller, CEO of Fundrise.
“It would be nice if I had a quarter of a million dollars to deposit, but not everyone has that,” Miller said. “You can rent a house for a thousand dollars a month and that is extremely affordable.”
The company also expands Fundrise investment offerings. Investors can buy into the company’s diversified interval fund, which encompasses single-family, multi-family and industrial buildings, or invest in a specific single-family home. eREIT – the non-negotiable real estate investment trust in which Fundrise specializes.
This startup attracts unaccredited investors: normal people with at least $ 500 to invest. Miller believes that single-family deals be a success with the 150,000 Fundrise users. It is an easy investment to understand.
“It’s not that intuitive to understand why a commercial real estate deal may or may not be so good,” Miller said. “But everyone understands why someone would want to live in a house.”
The executive is betting on the boom in telecommuting, added to the cultural distancing from the cities, means that the demand for rentals has a trajectory of 10 years.
“If you’re 30 years old, you have a child and you can work from home instead of an 800-square-foot apartment, you will,” he said.