The investment firm has acquired a building of 87 single-family homes in Palm Bay – part of a growing trend of investors buying real estate in Florida and elsewhere.
Announcing the $ 45.7 million deal, a firm called Fundrise said its investment in the development of Cypress Bay in southeast Palm Bay “fits into our broader strategies for investing in affordable housing through the Sunshine Belt.”
However, there are fears that this trend may further exacerbate the difficulties of middle-income residents in their attempts to find affordable homes to buy or rent.
Separately, Fundrise is also investing in the construction of a 252-apartment residential complex in southeast Palm Bay.
Fundrise says it is “America’s largest real estate investment platform for direct investors.”
Explaining his strategy and how the Cypress Bay deal fits into it, Fundrise said: “From millennials to retirees a broad group of Americans have been migrating from the northern states to the south over the past decade, boosting continued demand for good-value property.” well-placed, and supporting stable returns for disciplined investors. We believe this long-term trend has been further accelerated by the pandemic. “
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Cypress Bay is located west of Interstate 95 and east of Babcock Street. Fundrise said the property in Cypress Bay he purchased includes three-, four- and five-bedroom homes, “each with an attached garage and a fenced yard where pets can be used.” The homes were built by DR Horton, which since 2002 has been the largest manufacturer of homes by volume in the United States.
“In an economy where remote work is becoming the norm for more and more people, we expect that an increasing proportion of the population will not have to live in expensive gateway cities and will instead look for places that offer fewer opportunities.” living costs and a more pleasant climate ”.
Fundrise said its intention with this and other investments in single-family rental properties is to create a portfolio “that generates steady income from rent payments from tenants, while these facilities also have the potential to grow in value over time.” .
An analysis of FLORIDA TODAY real estate in Brevard County found that at least 19.8% of Space Coast real estate is owned by investors, compared to 13.7% in 2013.
“Capitalism with a bigger heart”
Kenneth Delgato, a senior pastor at Palm Bay Church House, said he wanted to see how such investor developments affect the affordable housing market in Palm Bay and elsewhere.
Delgato is the organizer of One Brevard, a coalition of dozens of religious organizations and businesses in Brevard County that are working to address a range of public issues, including affordable housing.
Delgato said he would like to see new investors involved in renting housing in Cypress Bay rent out their homes to the community.
He understands that investors need to make a profit from their investments, and “it’s a free market society,” but added, “I like capitalism more than the heart.”
Delgate compared him to someone who has a patent for a life-saving drug. This person has several options – including selling it for $ 1,000 per dose just because he or she can; or market it at a more reasonable price and “make it available to John Doe” while making a profit.
Palm Bay Mayor Rob Medina has said he sees both sides in the issue of additional investor-owned housing in the city, and does not believe the Cypress Bay deal will negatively affect the Palm Bay housing market.
“Renting real estate in the city is in great demand, so it is advantageous to have additional rental options in the city,” said Medina. “We have a lot of new residents moving into the area, and rents are helping to serve them. Over the past few years, thousands of new single-family homes have been built in Palm Bay without signs of slowing down. We have several new units at various stages of inspection and construction. also single-family homes being built on scattered plots throughout the community. ”
Thus, the deal on 87 single-family homes in Cypress Bay “will have minimal impact on Palm Bay inventory,” Medina said.
Also, Medina said, because these homes are rented, not detached, “the city actually receives a large amount of tax revenue, which helps us serve our community to meet the needs of police, fire and other basic services.”
Medina said Palm Bay is working to address affordable housing, including the city council approving changes to city ordinances to allow the development of so-called “tiny homes” and “tiny homes on wheels”. This includes efforts to create small planned blocks in which developers could build entire communities of tiny homes.
Also earlier this month, the city council allocated about $ 5 million to fund the federal U.S. Rescue Plan Act, which Palm Bay received for use in addressing affordable housing and homelessness in the city.
Discussing the Cypress Bay agreement with DR Horton, Fundrise said he purchased the building from “a major, well-known home builder who completed construction in the community in February. At the time of our acquisition, about 41% of the homes were occupied.”
“Given how the community has recently been completed, we expect the homes to remain competitive, attract tenants and sustain rent growth in the foreseeable future without significant capital needs for renovations,” Fundris said. “We expect to work with a professional property manager and be a long-term owner for the next few years to a decade.”
Fundrise has stated that its intention “with this and other investments in community rentals for one family is to be a long-term investor, creating a large-scale portfolio that generates stable rental income, and at the same time is in positions to capture what we believe will be an extraordinary rise in price, due to a combination of demographic factors that stimulate demand through the Sun. ”
Why Cypress Bay: Location
Fundrise said it is focused on Cypress Bay for these investments in part because of its “excellent location” on Florida’s space coast, near the Kennedy and Orlando Space Center; Brevard County population growth; and the recognition of Palm Bay “as a hub for excellent work, pay and high-tech growth”.
It says Cypress Bay is a “high-quality asset” and “socially distance-friendly” because “the privacy provided by completely individual and individual homes will be a particularly attractive attribute for tenants”.
The $ 45.7 million acquisition was made through a joint venture between the two Fundrise-sponsored funds for a total of $ 21.6 million combined with a $ 24.1 million loan.
The Fundrise single-family rental portfolio consists of 61 communities in 23 metropolitan areas and 10 states, especially in the Sunny Belt.
The company also invests in apartment buildings, commercial real estate and multi-purpose buildings.
Among the 254 properties listed by Fundrise on its website is a $ 6.03 million investment in the construction of Mason Palm Bay, a 252-apartment residential complex near Emerson Drive and Malabar Road in southeastern Palm Bay.
“Our loan will be used to finance the construction of this new community, which the borrower estimates will take about two years to complete,” Fundrise said on its website. “At this point, they expect to lease the facilities and repay our loan by selling or refinancing as soon as the property stabilizes. The purpose of these investments is to generate attractive profits by financing the creation of new housing in the growth area.”
Fundrise said it is working in partnership with Waypoint Residential on the Mason Palm Bay project. Waypoint has invested more than $ 2 billion in more than 20,000 rental homes in the South, Southeast and Midwest markets. Fundrise said it had previously invested in eight other similar projects with Waypoint Residential.
Fundrise stated that the average annual return for all Fundrise customers was 22.99% over 2021.
FLORIDA TODAY Data reporter Amir Swyle contributed to this story,