WASHINGTON–A new start-up is using the crowdfunding model to help people buy a house within cities.
Fundrise here has begun selling shares in funds dedicated to building and remodeling single family housing in urban locations. They’re calling the new vehicles “eFunds,” according to Forbes.com
“We need to figure out ways to add supply in the cities where people want to be, not force people to leave the cities because they can’t afford to be there. That is what the eFunds are about,” Fundrise CEO and Co-founder Ben Miller told Forbes. The funds “are a way to bring a generation of people together to change the power dynamic, to change the funding dynamic” in the housing market.
Fundrise is launching the concept with two $50 million eFunds, one for Los Angeles and the other for Washington, D.C. The company received SEC approval last month and has been building up portfolios of projects in those cities, 100 in all, Forbes.com reported. By the end of this year, Fundrise hopes to have eFunds in major cities across the country, the publication added.
According to the company, similar to Fundrise’s existing offerings of commercial and rental properties, investors will be able to join the eFunds for as little as $1,000. Returns will come from the value added by development and also from any gains in the local real estate market. “Fundrise is therefore pushing this as a tool for future homebuyers, allowing them capture some of the gains on their eventual homes today,” Forbes.com explained.
In addition, the goal is for a subset of the fund investors to become owners of the very places their money is helping build. Fundrise calls these “homebuyer investors” or HBIs, and argues these people will save by cutting out middle men like traditional real estate agents. A secondary goal of the model is to turn investors into to advocates for changing cumbersome urban building regulations, Forbes.com said.