Arrived Homes, founded in 2019 and backed by Jeff Bezos and Marc Benioff, operates on a simple premise: it shouldn’t just be the investment banks and hedge funds that scoop up single-family homes and tap them for rental income. Arrived wants every average Joe and Jane in America to be a landlord.
Through Arrived, investors can buy shares in individual single-family rental homes for as little as $100, with the average investment per user coming in around $2,300. It is also the first and, currently, only fractional real estate investment company with SEC-qualified offerings.
“We settled on the $100 minimum because we wanted to keep the barrier to start as low as possible,” said Ryan Frazier, the co-founder and CEO. “Although users are not investing as much money as they would in purchasing their own rental property, we are seeing them diversify their portfolio and putting their money into five or 10 properties in multiple cities.”
For decades, single-family rental properties were the domain of local real estate investors. The housing crash over a decade ago changed the game. Wall Street investors like Blackstone-backed Invitation Homes would send workers with duffel bags full of cash to foreclosure auctions, buying up tens of thousands of homes across the country. They even cracked the code on how to manage the properties efficiently and profitably (though not without controversy).
Since the pandemic began, that trend has only accelerated. Institutional investors like Brookfield Asset Management, Nuveen Real Estate, JPMorgan Chase, KKR and others have moved into the space, spending billions to acquire tens of thousands of single-family homes. In a sense, this is who Joe and Jane are competing with.
Though many everyday people are looking to invest in real estate, there are barriers to buying a home. For some, it’s the accelerating home prices, now at a record high. For others, it is the time commitment needed to manage a property. Other potential investors do not live in areas conducive to rental properties.
“I recently read a study from the Fed that showed that more Americans see real estate as a better long term investment than the stock market, but 60% of people are investing in stocks and only 13% own property outside of their home,” Frazier said. “That gap is really what we are trying to resolve. We really want to make real estate investment more democratic.”
All properties are managed by Arrived and vetted for their potential rental income.
“We’re really looking for markets that are seeing high population growth trends, as that is an indicator of the health of the market and what is to come for future rental demand in the area,” Frazier said.
They also take into consideration the housing demand in the area, as well as possible supply constraints in the area.
“We target these areas because they can provide greater yields and more balanced returns from cash flow and appreciation,” Frazier explained. “Last quarter we paid out between 5.5% and 6% annualized dividend yields, which is much better than some of the public REITs or real estate funds that are offering around 2%.”
Each of Arrived’s rental homes is set up as its own fund. Investors will receive rental income and shares of property appreciation quarterly. In case of the loss of a renter or major damages to the property that aren’t covered by insurance, each home has its own cash reserve that Arrived can pull from to cover repairs and continue to provide investors with dividends.
“The cash reserves basically work as a buffer to allow us to keep dividend yields consistent and we can pull from them to pay property taxes or deal with major repairs,” Frazier explained. “If something exceeded the cash reserve then we would have to go to our lending facility. The debt would be repaid through future rental income, so in an instance like this, investors would see a drop in their dividend yields.”
If investors are unhappy with their shares, they can put them up for sale through Arrived at any time and another investor can buy them from them.
The company currently has over 30 properties throughout northern Arkansas, Georgia, Colorado, Arizona, North Carolina and South Carolina. At the moment, all of the properties are already fully funded or being prepared to be offered to investors and, as of late October, 514 new investors have signed up to be notified of new properties.
“A lot of our expansion is being driven by investors,” Frazier explained. “They are sharing what they want to invest in and we are looking for properties that fit those profiles. We are really focused on newer homes that are roughly middle of the market because we want to provide investors with a sense of consistency in what they are investing in, so we are trying to build relationships with property builders.”
While Frazier acknowledges that Arrived is not the only fractional real estate investment platform out there – Roofstock, Cadre and Fundrise among them – he says Arrived offers investors some major benefits over the competition.
“Being SEC qualified allows us to sell to non-accredited investors and that has been really important to us because we want to make this accessible to everyone,” Frazier said. “We have had over 22,000 people sign up and about 70% of them are not accredited. In addition, we also allow people to be self-directed in picking what homes they want to invest in. A lot of the other platforms just put you into a blind pool so you have no control over what cities or properties you are investing in.”
Investors, like Jake Webb from New Jersey, appreciate the control they have over their investments and the care the company shows for its investors.
“I looked at a couple of other real estate investment organizations and while they looked good on the surface, once I read the fine print there was the potential for a lot of fees and far more involvement than I was looking for,” Webb said. “With Arrived it really seemed like I could invest and then just sit back and relax and so far that has been my experience. I really appreciate the time the executive team has spent getting to know me and hearing my feedback. I am not a huge investor, but they go out of their way to treat me with the same respect as someone who has invested a lot more.”
Arrived made headlines earlier this summer when it announced it had raised $37 million in a combination of seed funding and debt financing. Some of the largest contributors including Good Friends, a venture fund run by the CEOs of Warby Parker, Harry’s and Allbirds, and Bezos Expeditions, the personal investment company of Amazon founder Jeff Bezos. The company plans on using funds to scale its team and continue to build and expand its supply of rental properties for investors to buy into.
“In this next part of our expansion we are looking at some of the markets that are more appreciation focused,” Frazier said. “We are really looking for markets like Denver, which we have just launched in, and we are evaluating conditions here in Seattle where we are based and in Austin.”
Over the next few years Frazier hopes to build the pool of homes for investors and to continue working to make real estate investment accessible.
“Right now we are acquiring about 20 homes per month and next year we would like to be at about 100 homes a month in at least 50 markets,” Frazier said. “Once we reach that scale we will have more shares of homes available and in doing so we will bring a greater liquidity to the housing market.”
