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Fundrise, a new fund that has just secured $300 million in credit from Goldman Sachs, is putting investors with as little as $500 to spend into the real estate business.
The overheated, overpriced housing market is shutting out more and more buyers who want to live in single-family homes with yards, especially now that more white-collar employees can work from home and live farther from urban centers.
Also, many Millennials are delaying home purchases for now.
To help those groups succeed in their plans, companies such as Invitation Homes and America are snapping up homes that come up for sale, typically in suburbs, then leasing them at premium prices.
That real estate play has been limited to asset management firms with tens of millions of dollars pocketed from wealthy clients.
Now with apps and social media luring younger investors of more modest means into stocks, Fundrise is hoping to bring many of those same people to residential real estate, especially those repelled by stocks’ volatility and who might be looking to protect their nest eggs from the ravages of inflation.
The fund claims more than 150,000 small investors and has raised about $200 million since opening in January, CEO Ben Miller told the Wall Street Journal, and it has made deals on about 2,500 homes in fast-growing markets such as Charlotte, Tampa, and San Antonio.
Fundrise is an “interval” fund, meaning that small investors can enter without using a broker but can only withdraw their money at certain times.
Also, unlike many of its competitors, Fundrise invests only in newly-built homes, grabbing them as they are completed or making deals with contractors before the homes are built.
Fundrise’s website claims a portfolio valued at more than $5 billion, with investors already having earned dividends above $100 million.
TRENDPOST: Cash-rich private equity funds are elbowing families aside in the race to buy today’s scarce homes. Funds offer cash and quick closings, often convincing sellers to accept a lower offer in return for getting cash for their property as fast as possible.
TREND FORECAST: Private equity firms are creating a new generation of renters out of would-be homeowners. The firms charge premium rents, making it harder for working-class or middle-class families with children to save the 20 percent or more often required as down payments.