Investors in Austin, home of the HIVE conference, kicked off a real estate fund that will supply more affordable housing through strategic renovations. The fund is gaining traction, delivering good return to the investors and great return to the community. Here, the Austin Statesman discusses how it works.
Keeping Austin affordable while it’s also experiencing a housing shortage requires creativity and innovation. Enterprising developers are snatching up what’s left and flipping it into high-rent properties that squeeze out the residents Austin needs to function, such as teachers, police officers and health care workers.
A private equity fund to purchase and conserve affordable housing rather than redevelop it recently saw some success when it delivered a modest return to its investors. This unique fund, a kind of philanthropic solution that also generates a financial return, is managed by the Affordable Central Texas.
David Steinwedell, president and CEO of the nonprofit, said the fund attracts accredited investors who appreciate that it is low-risk with a modest return while also contributing to the betterment of the community. “The fund is doing something good for the community, and that can either be the icing on the cake for an investor or the main reason they’re investing. In essence, what we’ve come up with is a fund nobody has ever done before.”
In May, the fund returned 3% to its initial investors, holding some of its capital back for reserves. “It’s good practice for an investment fund to maintain a level of reserves,” said Steinwedell, “because you never know what’s going to happen in the marketplace.”