As demand for single-family home rentals has been soaring, developers and builders have been eagerly investing in them.
Arrived Homes wants to spread the wealth. “There’s a massive unmet demand where most Americans see real estate as an incredible investment, but there’s no easy way to access it,” says Ryan Frazier, CEO and cofounder, Arrived Homes.
His startup provides that easy access, allowing anyone to buy shares of rental homes. Through Arrived Homes, individuals can invest as little as $100 in a rental home or as much as 9.8% of a home’s total shares (a cap owing to each property’s structure as a real estate investment trust, or REIT).
Arrived Homes handles the acquisition, as well as the property managers.
“People we talk to have wanted to access ownership of homes. That’s what we’re trying to give them, the same ownership experience, but without the same amount of risk and effort involved,” Frazier says.
Arrived Homes' Single-family Rental investment model
Like a real estate website, Arrived Homes’ site lists properties and their details along with enticing property photos. But it also provides each home’s investment details: the number of shares, the price per share, Arrived Homes’ one-time sourcing fee (which Frazier says is similar to a real estate broker’s fee), and its annual asset management fee of 1%.
The average investment has been about $1,800. Some investors, however, have put hundreds of thousands of dollars in a diverse portfolio of homes. So far, Arrived Homes has had over 10,000 investors, with each property averaging 100 to 200 investors.
It takes about four minutes to sign up on the site and invest in a home, Frazier says. Once a user has an account, it then takes only about a minute to invest in another home.
But it took a lot of time to get that user experience right, Frazier says. “No one had ever built an online checkout for shares of houses before,” he says. “There was no template for what that looks like.”
After launching their company in 2019, cofounders Frazier, CTO Kenny Cason, and COO Alejandro Chouza spent a year working with the SEC to create qualified offerings for people to invest in shares of individual homes—similar to a public offering or IPO. Arrived Homes is the “first and only company” to provide such offerings, Frazier says.
Arrived Homes places a mortgage on about 60% to 65% of the property value, with the remaining value funded by the investors, who become full owners of the LLC that owns the title to a property. Investors receive the rent payments, after expenses, and any increase in property value when Arrived Homes sells the property or they sell their shares. Arrived doesn’t have an ownership stake in the homes.
For its first six properties, the dividend yield ranged from about 5% to 6.5%.
Over 90% of Arrived Homes’ customers say they want to continue investing in its properties, on a monthly or quarter basis. “They want to invest in a lot of homes and they want to diversify across homes,” Frazier says. “That’s about the ease of being able to invest.”
Arrived has listed 12 homes on its site, worth about $3 million in property value and located in five metropolitan areas. “We’re targeting those markets that are seeing high growth in population,” Frazier says. For instance, one of its first five markets, Northwest Arkansas, includes Bentonville, home to Walmart’s headquarters and several other Fortune 500 companies. The others are Charleston, Columbia, and Greenville in South Carolina, and Raleigh, North Carolina.
Arrived Home eyes build-for-rent (BFR) homebuilding market
The company looks for newly or recently built homes, which addresses concerns about ongoing operational costs and also appeals to investors’ own interests: “They’re looking to invest in homes they’re proud to own,” homes they’d want to live in themselves, Frazier says.
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The startup has plans for rapid growth. It’s in the process of buying 30 homes and soon will offer 15 to 20 per month. “By the end of the year, we can easily be at 50, maybe 100 homes per month,” Frazier says. It intends to be in at least 20 cities by the end of this year.
Some deep-pocketed investors are helping to propel that expansion. In June, the startup announced it had raised $37 million in equity and debt from a group of investors that includes Jeff Bezos’s personal investment company, Bezos Expeditions, and Salesforce CEO Marc Benioff’s investment fund, Time Ventures.