To enable customers to own shares in single-family rentals for “as little as $100,” Arrived has secured $25 million in a Series a fundraising round that was co-led by Forerunner Ventures. Bezos Expeditions, Jeff Bezos’ private investment firm, Good Friends, a venture fund run by the CEOs and co-founders of Warby Parker, Harry’s, and Allbirds, Spencer Rascoff, the co-founder and former CEO of Zillow, as well as Core Innovation Capital, PSL Ventures, and Neo, Ali Partovi’s venture fund, are among the investors who have renewed their support.
Although the idea of fractional ownership in real estate is not brand-new, a flurry of businesses have recently emerged to serve this market. For instance, TechCrunch has covered the residential real estate-related companies Fractional and Fintor in the previous 14 months alone. Commercial real estate investing is the emphasis of others like Fundrise and Cadre. Seattle-based Arrived asserts that its “fully SEC-qualified” status, which means that it has received permission from the Securities and Exchange Commission to offer shares in specific houses, sets it apart from other companies in the category.
Since they both knew people who had made “wildly profitable” real estate investments, but they had “been left out” because they “simply didn’t have the time” or “weren’t in the same location long enough to achieve that,” CEO Ryan Frazier said he founded Arrived with Kenneth Cason. Alejandro Chouza, who grew up in Mexico and seen personally how challenging it can be for minorities to acquire property ownership, quickly joined the pair. For those who “don’t have the experience, time, or substantial sums of funds needed to acquire a rental property on their own,” the startup’s goal is to “make real estate investment straightforward and accessible.”
Without becoming accredited investors, which necessitates that an individual’s net worth exceeds $1 million, anyone can spend anywhere between $100 and $10,000 to $15,000 per property with the possibility to establish a portfolio of rental properties. The startup oversees the administrative tasks and asserts that users of its platform may generate passive money.
According to Frazier, almost two thirds of investors using Arrived are not accredited. In addition to managing the local day-to-day rental activities locally, Arrived serves as the asset manager and collaborates with property management firms to identify tenants. The homes are promoted locally by those property management organizations, and Arrived “customizes the lease requirements.”
Currently, quarterly dividends are how investors get their part of rental revenue. In the upcoming months, the firm intends to distribute dividends on a monthly basis. Arrived worked “on regulatory setup” for almost a year with the SEC to streamline the approval procedure for potential investors. Because of this, Frazier claims that potential investors may peruse a property listing and then click the “Buy Now” button to purchase shares “in under four minutes.”
Over 102 properties in 17 locations in Alabama, Arizona, Arkansas, Colorado, Georgia, North Carolina, and South Carolina have been completely funded by Arrived as of this writing, for an investment of more than $40 million. Currently, residences on the platform are mainly turnkey homes and range in price from $165,000 to $650,000. No single investor is permitted to own more than 9.8% of any given property, which is done on purpose to provide for “more advantageous tax treatment,” according to Frazier.
He argues that if you purchased 1% of a property, you would receive 1% of the income remaining after costs as dividends. You will get 1% of any rise in the price per share or the proceeds when the property is eventually sold as the value of the property increases. It effectively recreates the entire economics of direct real estate ownership. In terms of percentage, purchasing 100 properties can be equivalent to exactly owning one property alone, but over time, market diversification offers advantages over sole ownership.
While the idea of making it possible for regular Americans to invest in real estate has some benefits, there are worries that the widespread practice of investors buying single-family homes will make it more difficult for other people to buy homes to live in by removing inventory from the market or raising the cost of competition. Frazier, though, holds came about to provide individuals with access to investing that they would not have otherwise had. There are often 100 to 200 investors per property, many of whom are first-time landlords. It has aided 5,000 investors in purchasing shares thus far.
