Wahed Real Estate Fund Acquisition Case Study: 142 Flintlock Way, Alabama

Wahed investment focus

Our real estate fund is intended to be an anchor investment in most investors’ portfolios.  It is intended to produce consistent income while offering upside from home price appreciation.  It is not intended to generate consistent double-digit returns and it is also not designed to take significant risk.  

Any home we purchase must go through investment committee approval and our investments must also pass muster with our Shari’ah and Risk Committee. Our investment management team prepares a financial model as well as a write-up on the merits and concerns about each investment property.  Once the property is approved, we proceed to due diligence.  After we are comfortable with the due diligence (inspection, appraisal, and other analysis that may be needed, we will go into escrow (firmly committed) and if all is well, we will close (purchase the property).  

Home prices broadly tend to outperform inflation by 0.5% to 2.0% per year. Our objective is that homes we invest in, will outperform inflation by approximately 1.0% over the long term. 

We look for properties that are either in good shape or will be in good shape post-renovation.  This serves a dual purpose, first to have lower maintenance expenses than a property in poorer shape, and second to attract better quality tenants.  Tenant quality is measured in terms of credit score, employment, and income.  Typically, lower credit tenants that may have income issues have to pay more rent so yields may be higher, but can come with significantly more risk.

We also look for properties that are representative of their area.  This means there will be many comparable properties and when we buy and whenever we sell, we can be confident that the price will reflect market conditions.  A house may not be attractive if it is considered atypical for the area.  Think of a 2-bedroom 600 square foot home in a neighborhood of 3-bedroom 2,000 square foot homes, or think of a home that is the same as homes in the neighborhood, but is the only one that is designed by a celebrity architect.  Sometimes a home may seem typical, but when you visit it, you may see peculiar features such as a toilet in a living room, or bedrooms with no closets.  Anything that makes it difficult to price a home is something that will give us pause and may prevent us from investing in a particular home. 

Another area of focus is natural disaster risk.  Most regions in the US are subject to some kind of natural disaster.  If it isn't fire risk, then it may be earthquake, flooding, or tornado risk.  In any given city, we avoid FEMA-designated flood plains, and we will also look to avoid exposing the portfolio to one specific risk.  We do this by diversifying the geographies we focus on. 

We generally tend to avoid anything in the property that would cause headaches without increasing the rent or value we may extract from the property.  For example, an above-ground pool adds no value, but does increase liability.  An in-ground pool may add value or liquidity (how quickly a property will sell) in markets like California, Texas, or Florida but it adds very little in Illinois or Washington.  Similarly, outbuildings like barns, or ponds on the property increase risk without any upside.

We want homes that are connected to the electric grid, water lines, and gas lines (where common).  In some circumstances, using well water is acceptable, but not having access to the electric grid or natural gas lines would make it very unlikely that we would be able to find an investment that is sufficiently de-risked for Wahed to be comfortable.

What assumptions do we make about the property?

We do a physical inspection and appraisal before purchasing the property.  This allows us to assess what, if any work is required prior to renting the property out.  In the US, it is generally preferable to purchase a property vacant, unlike in other parts of the world.  The reason for this is that tenants that have been in a home for a long time may have deferred maintenance repairs that are unknown.  One of the other major issues is that it is very difficult to gain access to the property in order to do a thorough inspection, if the home is occupied by a tenant prior to sale.  

Below, are the main items that we make assumptions about:

There are other assumptions we make in order to get comfortable making an investment, but these are the main assumptions around the expenditures associated with a property.

About the home

142 Flintlock Way was built in 2025 by Forest Brook Builders and Spartan Invest.  It has 4 bedrooms, 2.5 bathrooms and 2,238 square feet.  It is a very typical American home, on a lot that is one-third of an acre.  

The home, like most homes in Alabama does not have a basement. The square footage is all above ground, and the house is almost equal square footage on its first and second floors.  The home is of typical construction with a brick facade at the front and vinyl siding at the back.  It is connected to municipal sources for water and electricity. The home is built on a concrete slab foundation and the roof has OSB sheathing. The home is built on a level grade, with a 150 amp service, which can be easily upgraded to 200 amp service if the need ever arises. Plumbing is PEX with PVC drains, and the flooring is mostly LVP (luxury vinyl plank) throughout. 

We expect this home to appreciate in-line with the area and expect it to require relatively minimal maintenance, given its age and condition.  We completed a full inspection of the home and found no major issues or cause for concern. Termite prevention treatment was completed prior to closing.

‍

About the area

New Market is a suburb of Huntsville, Alabama which is known as Rocket City due to being a center of research and development for advanced weapon systems and propulsion systems.  NASA designed the Saturn V rocket here and the current Artemis missions have a significant amount of propulsion systems being made here.  As a result, it is one of the most important places in the world for advanced aerospace, defense, military, and space innovation.  

Huntsville’s metro area has a population of almost 600,000 and New Market is conveniently a 20-25 minute commute to most major employers in the area.  

New Market has good schools and has grown alongside Huntsville both of which are in Madison County.  The population of Madison County has grown steadily, growing from 276,700 in 2000 to 403,600 in 2025.

About the investment

The home was purchased for $275,000 and is rented out at $1,875 per month which is representative of the market in the area.  This indicates a gross yield of 8.2% which is in the range of what we target, and after all expenses is expected to result in an average yield of about 4.6% over our intended hold period (approximately 10 years).  The fund yield is intended to be paid quarterly via distribution.  Appreciation, if any, would be realized at the time of sale.  Proceeds from appreciation may be distributed or may be redeployed into another property.    Rent growth may occur, in our analysis however, we assume that both the rent and the expenses increase by 3% a year which results in only a modest increase in expected yield each year.  

After rent, we pay the property taxes, home insurance, and property management fees.  Other than that, the only additional expenses are any maintenance issues that arise, taxes (if any), and Wahed’s 0.75% annual management fee.   If the property becomes vacant, then there may be remediation expenses to make it ‘rent ready’ once again, and typically a property manager will charge the equivalent of 1 month’s rent to put another tenant into the home.

Risks to the investment

The major risk is oversupply; if too many homes are built and if not enough renters move to the area, then we could see yields decline.  This itself would not necessarily produce negative returns but could compress our returns from 4.6% downwards. 

If there are major items for maintenance that occur this could significantly impact the overall return. The main way to avoid this, is annual inspections and ensuring that maintenance is not deferred - a small problem becomes a big problem. 

While at this specific location. it is less likely that we will see damage from a natural disaster. It is still possible.  In Northern Alabama, the most likely events would be a tornado or some kind of flooding. We would lose rent for the period of time that the property is being repaired.  However, we would be compensated for the reconstruction and renovation expenses, but would be subject to normal insurance deductibles which will negatively impact the investment return.

If tenants are not appropriately screened then it is possible that a tenant causes significant damage to a property.  While accidental or incidental damage is protected via deposit and a landlord insurance policy, there remains the risk that a tenant causes malicious damage.  While you can pursue this matter legally, it very rarely results in any compensation.  The primary means of protection is to carefully screen candidates, check references, and confirm employment; all of which we do. Investing in a fund, rather than in specific properties also mitigates the impact of this kind of risk to a large degree.

Major economic shocks may cause rents to decline and/or home prices to fall.  These are typically temporary events with an eventual recovery, but it must still be flagged.  In Huntsville specifically the biggest risk would be a reduction in federal defense and space spending.  Wahed does not have a set sell timeline, and could accelerate or delay the sale of a home at any time.  Nevertheless, this risk remains.

‍

Risk Disclosure: 

This article is for educational and informational purposes only. It does not constitute financial, investment,legal, or religious advice. Wahed Financial, LLC ("Wahed"), as a manager of Wahed Real Estate Fund I LLC; Wahed Real Estate Series I, LLC (the “Wahed Issuer”), operates the wahed.com/real-estate website (the "Site") and is not a broker-dealer or investment advisor. All securities related activity is conducted through Dalmore Group LLC, a registered broker-dealer and member of FINRA/SIPC, located at 525 Green Place, Woodmere, NY 11598.

This investment is speculative, illiquid and involves substantial risk, including the possible loss of your entire investment. Securities are offered through Dalmore Group LLC, Member FINRA/SIPC. Wahed and Dalmore are not affiliates. Investors will be clients of Wahed. An offering statement has been filed with the SEC. SEC qualification does not imply approval or endorsement of the offering’s merits. Please review the full offering circular for complete terms and risks.

Investors are purchasing shares of a Fund and not the underlying asset(s) of the Fund. There is no assurance any Fund will achieve its objectives, is not listed on an exchange and may not be suitable for all investors. Distributions are subject to and are not guaranteed.

‍