The demand for single-family rentals is surging as a result of record-high home prices and Millennial household formation. Saddled with student debt and entering their child-rearing years, many Millennials simply can’t afford to own a home but crave the additional living space that often comes with a detached home.
Direct-to-investor real estate investment platform Fundrise announced last week that they had closed a $300 million credit facility with Goldman Sachs to bankroll the construction of nearly half a billion dollars worth of new single-family rentals across the Sunbelt.
These new communities would be investor-owned as Fundrise is a collective of 150,000 individuals who have invested over $1 billion to acquire more than 300 properties. The online platform allows users to invest as little as $500 to build a portfolio and tap into the once-exclusive private real estate market.
“Thanks to our technology, investors on Fundrise are able to reap the benefits of some of the most sought-after institutional investments in the world,” said Fundrise Co-Founder and CEO Ben Miller.
“As Fundrise continues to grow into one of the largest real estate investment platforms in the world, securing financing from high-quality financial institutions globally will allow us to continue to provide our investors with the highest quality investments possible.”
Fundrise currently owns both residential and commercial properties including single-family and multi-family rentals, for-sale housing, hotels, retail space and office buildings. Having identified a lack of inventory in the single-family rental market, the startup has partnered with six of the country’s largest homebuilders to ramp up supply and meet the growing demand.
In December, Fundrise placed a winning $32.3 million bid to acquire Amber Pines at Fosters Ridge, a 124-unit single-family rental community built by D.R. Horton in Conroe, Texas. Located about 40 miles outside of Houston, the development offers many of the same perks as a for-sale community like onsite amenities, attached garages and private backyards.
An article from The Wall Street Journal noted that D.R. Horton raked in about twice as much cash as it typically would from selling homes to individual buyers. Critics have argued that the proliferation of single-family rental communities could make it harder for first-time buyers to enter the market as for-sale properties get snatched up by all-cash corporate buyers.
A recent press release called the acquisition of Amber Pines at Fosters Ridge “the first of many large-scale initiatives planned in the near term to scale [Fundrise] operations across several key markets.”