We look for properties that are in high tourist and vacation destinations. With this model we think a lot more people can invest together, in some cases 500-1,000 in one property. Right now those same vacation properties are traditionally owned by one person.
We like to partner with current Airbnb operators and they also help facilitate the day to day management. There is a "Partner with Arrived" link on our header
Housing market unfortunately does not conform to the free market rules since its supply is heavily regulated by voting whereas demand keeps soaring in most places. Having secondary instruments like this website only worsens the existing problem.
> In some cases it's justified. But if I just want to invest in a rural house in Arizona that is used as a vacation spot, what's the issue with that?
I think it's because that house is in a community that people need to live in. There are too many instance to count where vacation rentals have priced residents out of their own communities. And when the people can't live there, how are they going to work there?
Good feedback, thank you! We've also started adding third-party valuation reports to properties and they should include more of the detailed property information. We're also working on incorporating more of the expense items. Will get it added!
The Initial Investment and 7% of rent are two separate mechanisms that contribute to the ending investment value at the end of the term. Your initial investment will grow at an annual rate based on the performance of the fund + 7% of your rent will be contributed.
OK, so most of the return is based on the initial investment, not the rent? And it's based on an assumed annual rate that you cannot guarantee and that you don't even disclose in the example? That doesn't inspire confidence.
It depends on the initial investment size, if the initial investment is large enough then it will make up a larger portion. The projected annual returns are listed on the /invest page.
We've researched many co-operative ownership models and some of the more common "rent to own" models that others sub-posted. The main difference with Arrived is that members, and their investment, are not tied to a single home.
Arrived the company and Arrived the fund (which owns the homes) are separate entities. Arrived the company is the manager of the fund, but the fund assets are protected in it's own entity. Members of the service invest as LPs in the fund and would have the option to exchange their shares based on the income and value of the homes. If all fund LPs wanted to exchange their shares, the fund may need to sell its ownership position in the portfolio of homes and each member would receive their share accordingly.
> As it stands, I would be interested since I like the idea of being able to move from any property to another property without negotiating a new lease or contract - it means I'm not locked to any particular economic region.
^ This is one aspect of housing we think is missing and that we're trying to support. More and more people are ready to build home ownership, but still want the flexibility to move homes or cities. So they get torn between renting or buying. By building the ownership position in a real estate fund, instead of a single home, that ownership position can move with you to new homes.
Re Rent: Monthly rent is set based on the value of the home a member moves into and local rental rates for the area. It should be in-line with what you'd expect to pay in rent for a similar home outside of Arrived and is transparent to members at the outset.
Re Profits: Members participate as LPs in our real estate fund and receive a percentage of rent and appreciation which adds to their investment over their lease term. We take a long-term buy and hold position in the homes so appreciation is based on re-appraisals of the homes over time to incorporate changes in value.
And thank you for the feedback on an FAQ, we're working on it!
Hi HN, I'm Ryan, one of the co-founders of Arrived. Feel free to ask us anything about the service and I'll try to answer some of the questions that have already been posted. And of course all of your feedback is deeply appreciated!
> have you defined what would happen if Arrived went bankrupt?
I posted this above, but thought it might be helpful to repost here. Arrived the company and Arrived the fund (which owns the homes) are separate entities. Arrived the company is the manager of the fund, but the fund assets are protected in it's own entity. Members of the service invest as LPs in the fund and would have the option to exchange their shares based on the income and value of the homes. If all fund LPs wanted to exchange their shares, the fund may need to sell its ownership position in the portfolio of homes and each member would receive their share accordingly.
> would I buy homeowners insurance or renters insurance?
The Arrived fund carries homeowners insurance and our members carry renters insurance.
> Who has authority/responsibility for major work on the house?
Currently improvements on the house can be performed by the member with approval from Arrived. Members can submit an improvement project request and go from there. For major home maintenance items: New Roof, HVAC, Plumbing, Electrical, etc., these are the responsibility of Arrived.
How is this conceptually different from paying rent and investing in a REIT? If I pay rent and invest in a REIT, I can move easily (as if moving were that easy) and I still have "equity" in real estate. In both cases the investment seems to be a stake in a real estate fund, so I'm struggling to figure out the difference.
Or, is the value-add that it is automatically done for renters?
It's funny, this is what we were doing which led to the idea for the service. We were renting and investing in REITs and thought "what would a better version of this look like?"
One big difference is that we wanted to feel like an owner of the home we were living in. It carries some emotional appeal and as we got further into planning out the business found there are some tax and return benefits as well.
A few problems we ran into with REITs available to us:
- You pay a premium (lower yield) for access to public market liquidity
- Public REITs are quite large and not really a great hedge against single family home values (they're invested in multiple property types and residential REITs are often focused on multi-family)
- Market sentiment can change the value in an instant, and as a result, share price is not always based on the value of the properties. Not as big of an issue with long-term investing, but can be a problem during periods of time you may want to access the funds (like the end of a lease).
I suppose that some of the big benefits of home ownership (mortgage interest/local tax deduction, capital gains exemption) are not available with Arrived?
These benefits are not available with REITs, and REITs have to pay out most of their earnings as dividends.
I have been pitching this idea to friends and family for three years or more :) Ideas are cheap though. Congrats on taking your first few steps on making this a realty reality.
Would love to learn more about your level of funding, team etc. in case you're hiring software engineers.
I'm still having so many question about Arrived platform like:
- Can customer choose a new house of their dream and Arrived will buy it? Or will customer just can choose from Arrived house list?
- Does customer have to sign the contract and make initial investment before Arrived buys the house?
- Customer cannot buy the house in the end so how come does this platform makes customers feel like their own home? They're still paying monthly rent anyways
And last but not least, how does Arrived calculate the amount of appreciation for the initial investment of customers? like how many percents?
> Can customer choose a new house of their dream and Arrived will buy it? Or will customer just can choose from Arrived house list?
Both options are possible. We have a set of available homes and we continue to buy homes as we grow. Residents are part of the process for new homes we buy into the network.
> Does customer have to sign the contract and make initial investment before Arrived buys the house?
Our Residents go under contract once we've acquired the property, not before.
> Customer cannot buy the house in the end so how come does this platform makes customers feel like their own home? They're still paying monthly rent anyways
The model is a way to build investment exposure to real estate for individuals who want to own, but choose to rent for the flexibility to move over time. At the end of any lease term, Residents can decide to "cash out" their investment and buy a home if their lifestyle changes.
> And last but not least, how does Arrived calculate the amount of appreciation for the initial investment of customers? like how many percents?
We calculate appreciation through periodic third-party appraisals of our properties.
Question 1: For Arrived residents with enough equity, is there going to be an option to liquidate and "buy out" the property they live in?
Question 2: What kind of stability can the residents expect? In particular, can the portfolio offer some stability in rents after moving into a property or do renters still have to worry about rents being jacked up x% a year ad infinity? Similarly, is there any risk of being not "renewed" on a lease (i.e. portfolio decided to liquidate the property)?
Re Q1: It's not a requirement of the model and the majority of our Residents are not planning on staying in the same property for more than 3 years. We can support buying out the property they live in if they wanted though.
Re Q2: We include a fixed monthly rate for two years and a rental cap for future renewals in the lease agreement.
How do you making money? Is it just capitalizing your fund for a specific timeframe (the lease period) and you essentially take a management fee? Is it essentially a REIT of the properties that people are leasing?
What happens to the house at the end if the period? The description wanst very clear on that.
The big one: what happens if the fund doesn't make enough and has to close up from another market downtown?
Interesting idea, but more technical description would need useful for us finance geeks.
How do you make money? - We make money from fees for managing the the real estate fund and properties, currently 1% of AUM (assets under management) and 10% of rent.
What happens to the home at the end of the period? - At the end of the initial lease term, residents have the option to renew their lease, move to a new Arrived home, or move out of the platform. At that point they can either continue contributing to their account or "cash out" and use the funds they've accrued. We haven't built in an option to buy the specific home outright although it's likely an option we'd support.
What happens if the fund doesn't make enough or there's another market downturn? - Good question and we think a lot about downside protection. Typically a fund "not making enough" is based on the fund not being able to pay it's debt service payments. To protect against this and a possible market downturn right now, our fund owns the title to the homes and we aren't taking on debt. So our fund should be resilient through market changes compared to a leveraged fund.
We plan to add them to the website. Our fees are fairly standard, we make money from managing the fund and rental properties, 1% of AUM (assets under management) and 10% of rent.
Thanks, and please do add them. Sites that are up-front with their fees and much more trustworthy in my eyes. If the fees aren't shown, it is often a sign that there's a nasty reason why.
It's shared across the owners of the fund. All parties receive their equal share based on amount invested. This is also true for the risk of any price declines.
