Our in-depth review compiles crucial details to help you assess whether Ark7 is legit, ensuring you make informed investment decisions.
What is Ark7 and how does it work?
The core mission of Ark7 is to break down the barriers of traditional real estate investment by utilizing modern technology to facilitate the buying, holding, and selling of fractional shares in rental properties across the United States. This approach allows for a lower entry point in terms of cost—eliminating the need for a hefty down payment and making investment opportunities affordable to a broader range of individuals. Investors can start with as little as purchasing a single share in a property.
Ark7's strategy involves a meticulous selection of properties that are poised for both monthly rental income and long-term appreciation. These properties are professionally managed, aligning with standard operating procedures aimed at maximizing returns. The platform also emphasizes working closely with local partners for property and tenant management, intending to enhance the value of the homes.
A distinctive feature of Ark7 is its end-to-end investment flow, designed for ease and convenience. Investors enjoy several benefits, including secure money transactions with bank accounts linkable through third-party vendors like Plaid and Dwolla, the opportunity to diversify their portfolio with a variety of income-producing properties, and receiving real income in the form of monthly payments proportional to their share ownership. Moreover, Ark7 takes charge of all property details, supported by professional management teams and technology-driven solutions, like the Renters App, to ensure a hassle-free investment experience. The platform also boasts a modern interface for smooth transactions and decision-making, as well as high liquidity options through a secondary market for trading shares and special redemption programs for certain properties.
Properties on Ark7 are owned by specific series LLCs under the umbrella of Ark7 Properties LLC, a Delaware series LLC. Each series usually corresponds to a single property title, thereby making investors shareholders of that particular registered series LLC. For instance, Ark7 Properties LLC, Series #KYLBE, owns a property in Berkeley, CA, with investors in that property being shareholders of this series. This structure clarifies that the maintenance costs and other operational expenses related to a property are managed by the respective registered series LLC, ensuring a transparent and organized management of investment returns and property upkeep.
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How risky is Ark7?
3/5
— Moderate RiskInvesting through Ark7, like any investment platform, involves certain risks. These risks can include market volatility, property value fluctuations, and the potential impact of economic and environmental factors on real estate markets.
Additionally, while the secondary market provided by Ark7 offers a liquidity option, the ability to sell shares can be influenced by market demand, potentially affecting the ease of exit and the return on investment. Investors should also consider the platform-specific risk associated with the reliance on technology for investment management and trading on the secondary market.
It’s crucial for investors to conduct thorough research and possibly consult with a financial advisor to fully understand these risks before investing.
How liquid is Ark7?
2/5
— Moderate LiquidityArk7 offers liquidity to its investors through the ability to sell shares on a secondary market, with a minimum holding period requirement of one year, although this period can be shorter for certain specified offerings. Once the minimum holding period has elapsed, investors gain the flexibility to trade their shares directly through the marketplace provided by Ark7.
This feature is designed to enhance the liquidity of the investment, giving investors a pathway to potentially exit their investment before the typical real estate investment horizon.
For properties that have been fully funded during their initial offering, Ark7 introduces these investments to the secondary market in phased batches. The platform keeps investors informed about when specific properties will become available for trade on the secondary market through regular news updates, including a release plan and a detailed schedule. This phased approach to introducing properties to the secondary market is intended to manage liquidity in a structured manner, ensuring an orderly market for investors looking to sell their shares.
How volatile is Ark7?
3/5
— Moderate VolatilityThe assets available for investment on Ark7, primarily consisting of rental properties, are subject to certain levels of volatility. This volatility is influenced by various factors, including changes in the real estate market, economic conditions, location-specific variables, and demand for rental properties. Although real estate is often considered a stable investment compared to more volatile markets like stocks, property values and rental incomes can still fluctuate due to these external influences.
Furthermore, the liquidity of these assets, especially when looking to sell shares on the secondary market, can also contribute to volatility. Market demand for shares of specific properties can vary, affecting the ease with which investors can exit their investments and the prices they might receive.
What is the average rate of return for Ark7?
3.22-6.96 %
— Low ReturnArk7 calculates the annualized cash return rate for investors based on the performance of rental properties over the past 12 months. For properties that have been listed for less than 12 months, Ark7 uses either the average return rate since the Initial Public Offering (IPO) or an estimated rate.
Based on the listings on their website, investors can expect annualized cash return rates ranging from 3.22% to 6.96%, or monetary returns from $0.1 to $0.58 per share. These figures provide a snapshot of the potential income investors might earn from their shares in rental properties through Ark7.
What is the minimum investment amount for Ark7?
$20
The minimum investment requirement on Ark7 for shares in curated properties is starting from $20 per share.
What is the investment time horizon for Ark7?
1+ year
Ark7's investments are typically oriented towards long-term holding, allowing investors to benefit from real estate asset appreciation over time. However, investors are provided with flexibility through the option to sell their shares after a minimum holding period, offering a balance between long-term growth potential and personal financial planning needs.
Who can invest in Ark7?
United States
Ark7's investment platform is available exclusively to individuals within the United States.
To be eligible to invest through Ark7, one must possess either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN), in addition to having a US bank account. This requirement makes the platform accessible to a wide range of investors, including U.S. citizens and residents who are above the age of 18.
However, it's important to note that while Ark7 generally opens its doors to a broad audience of investors, certain selective offerings on the platform are exclusively open to accredited investors. This distinction ensures that more sensitive or higher-risk investment opportunities are available only to individuals or entities that meet specific financial criteria, as defined by regulatory authorities.
Is Ark7 regulated or audited?
SEC Regulated
Ark7 operates within a regulatory framework designed to ensure transparency, security, and compliance with applicable laws. A critical component of this framework is its adherence to regulations set by the U.S. Securities and Exchange Commission (SEC). Ark7 makes necessary filings with the SEC, which are public documents that provide detailed information about the company's financial performance, investment offerings, and operational structure. These filings are an important aspect of Ark7's commitment to regulatory compliance and investor transparency.
Additionally, Ark7 undergoes regular audits to verify the accuracy of its financial statements and operational compliance. These audits are conducted by independent third-party firms, ensuring an objective evaluation of Ark7's adherence to accounting standards and regulatory requirements. The combination of SEC filings and independent audits provides a dual layer of oversight, enhancing investor confidence in the platform's governance and financial integrity.
Is Ark7 insured?
Yes
Ark7 ensures that all properties on its platform are covered by comprehensive insurance policies. These policies are designed to protect against a wide range of risks, including natural disasters, property damage, and liability issues.
By securing such insurance, Ark7 aims to mitigate potential financial losses that could affect the properties and, consequently, the investors' returns. This layer of protection is an important aspect of the platform's risk management strategy, providing a safeguard for both the physical assets and the investors' capital.
Does Ark7 distribute payouts?
Dividends
Ark7 provides returns to investors through two main channels: monthly cash distributions and long-term property appreciation.
1. Monthly Cash Distributions: These are the cash incomes generated from the operation of the rental property, including rental revenue minus operating expenses such as property taxes, HOA fees, insurance premiums, maintenance costs, and property management fees. The amount distributed to each investor is prorated based on the number of shares owned and is deposited automatically into the investor's account on the 3rd of each month for the prior calendar month. The calculation of distributions starts from the date the order is fulfilled, with proration applied for any incomplete months based on days invested.
2. Property Appreciation: This represents the potential gain in home value over time, which investors may realize upon selling the property or their shares in it. After the initial public offering and a required holding period, properties are listed on the secondary market where shares can be sold at no additional cost. Real estate is historically known for its resilience against inflation and potential for long-term appreciation, making it a strategic asset for portfolio diversification and risk adjustment.
It's important to note that the actual monthly distribution amount may vary due to factors like seasonal changes, occupancy rates, remodeling projects, financial reconciliations, or unexpected repairs.
How do I get my money back from Ark7?
An investor can get their money back from Ark7 primarily through two methods: selling their shares on the secondary market or benefiting from property appreciation upon a sale.
1. Secondary Market: After adhering to a minimum holding period, typically one year, investors have the flexibility to sell their shares on Ark7's secondary market. This allows for liquidity, enabling investors to exit their investment based on current market conditions and demand.
2. Property Appreciation: Investors also benefit from the appreciation of the property value over time. When a property is sold or if the investor sells their shares on the secondary market at a higher price, they can realize gains from the increased value of the property.
Transactions are facilitated through the Ark7 platform, with monthly cash distributions deposited directly into investors' accounts, and sales on the secondary market conducted within the platform's marketplace.
What are the annual fees for Ark7?
Ark7 incorporates specific fees at different stages of the investment process to cover the costs associated with property acquisition and ongoing management. These fees are structured as follows:
1. Sourcing Fee: This is a one-time fee amounting to 3% of the property's market capitalization. It is charged by Ark7 for the services involved in sourcing, acquiring, and subsequently listing the property on the Ark7 platform in the form of sellable shares. This fee compensates Ark7 for the upfront efforts and resources required to make the property available for investment.
2. Asset Management Fee: On a monthly basis, Ark7 charges between 8% and 15% of the rental income generated by the property. This fee is paid to Ark7 in its role as the asset manager responsible for the day-to-day maintenance of the property and managing tenant relations. The range in this fee accounts for varying levels of effort and resources needed to manage different properties effectively.
While the Ark7 platform and app are free for users, these fees are integral to the model, ensuring that all properties on the platform are not only well-selected but also well-maintained, thereby aiming to secure and enhance the value of investors' shares over time.
How do I handle my investments in Ark7?
On Ark7, investors have several asset management capabilities to actively manage their real estate investments:
- View listed properties to explore investment opportunities.
- Buy shares in properties to start or expand their investment portfolio.
- Cancel pending orders if they change their mind before transactions are finalized.
- Access their account summary on the Home dashboard for an overview of their investments.
- Seed or A1 Users, receive the privilege of pre-ordering shares in newly listed properties before they become available to the general public. This early access can provide a strategic advantage in securing shares in desirable properties.
- Investors also have the freedom to sell their shares on the secondary market after adhering to a minimum holding period of one year, offering liquidity and flexibility in managing their investment over time.
How does Ark7 get taxed?
Ark7 provides tax reporting support to its investors by issuing tax documents that reflect the structure of their investment in rental properties. Historically, since each property is held by a registered series LLC and treated as a partnership for U.S. federal income tax purposes, investors have been receiving Schedule K-1 forms for each property in which they own shares. This form details the investor's share of income, deductions, and credits.
Moving forward, as Ark7 opens up to the general public, there is an intention to have each series LLC taxed as Real Estate Investment Trusts (REITs). In this scenario, investors will receive a 1099-DIV form instead, which reports dividends received.
Regardless of the form issued, Ark7 ensures that all applicable tax documents are sent to investors before March 15th, based on their investment portfolio. Additionally, the company takes into account depreciation deductions and expenses, aiming to decrease and defer taxable rental income for investors, thereby providing a layer of tax efficiency to the investment.
How many investors are on Ark7?
The website received an average of 167,000 visits in the last 3 months.
As of October 2023, Ark7 has successfully garnered a substantial user base and financial footprint within the real estate investment sphere. The platform boasts over 60,000 active investors, indicating a strong and growing community of individuals who have chosen Ark7 as their gateway to real estate investment.
In terms of financials, Ark7 has facilitated the funding of properties with a total value exceeding $16 million. This significant amount of property value funded through the platform underscores Ark7's capacity to mobilize capital towards promising real estate investments across the United States. It showcases the platform's effectiveness in attracting and deploying investor funds into tangible assets that generate income and appreciate over time.
Furthermore, Ark7 has distributed over $1.9 million in cash distributions to its investors. This figure highlights the platform's ability to generate real income for its users, aligning with its promise of providing monthly income based on actual market conditions. The cash distributions paid out to investors serve as a testament to the profitability and stability of investing in rental homes through Ark7, reflecting the platform's commitment to delivering tangible financial benefits to its community.
Who is the CEO of Ark7?
Andy Zhao serves as the Co-founder and CEO of Ark7.
Zhao's early career saw him at Google, where he embarked on his professional journey as a Software Engineer. His skills and expertise then led him to Twitter in 2013, where he assumed the role of Software Engineer II. The following year, Zhao moved to LinkedIn, taking on the responsibilities of a Senior Software Engineer.
In 2017, Zhao's career took him to Uber, where he continued to make his mark as a Senior Software Engineer. It was in 2018 that Zhao ventured into the realm of real estate investment by co-founding Ark7 Inc. Under Zhao's leadership, Ark7 has bridged the gap between individuals and property investments, enabling many to build personalized real estate investment portfolios.
