What is Arrived and how does it work?
Arrived is a company that facilitates investment in rental and vacation homes. It functions by acquiring properties and transforming them into rental opportunities. Arrived then permits individuals to invest in these properties through the purchase of shares.
The organization oversees the entire process, including the selection of properties, their rental, and ongoing maintenance, providing investors with a potential source of passive income.
When investing with Arrived, individuals become shareholders in an entity, typically a limited liability company (LLC), which owns the property. Each property is divided into a number of shares, enabling investors to participate in the real estate market at a financial level that is accessible to them.
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How risky is Arrived?
3/5— Moderate Risk
Investing through the Arrived platform carries various risks, much like any investment in real estate. These can include changes in the housing market, shifts in economic conditions, and other property-specific issues.
While investments are structured with the intent to mitigate these risks, there are no guarantees against loss. Additionally, real estate investments are not typically as liquid as other types of investments, such as stocks, which could impact an investor's ability to exit their investment when desired.
Investors should be aware that they may lose part or all of their initial investment and are advised to carefully review all offering materials and consider their own risk tolerance before investing.
How liquid is Arrived?
1/5— Minimum Liquidity
Arrived considers real estate to be most advantageous as a long-term investment, and as such, its investment products are structured with the intention to be held over several years. However, Arrived does offer varying investment products with different time frames and liquidity options to align with investor preferences.
For the Arrived Single Family Residential Fund, a redemption plan is in place that allows investors to request redemption of their shares after six months from their investment date. If approved, the redemption is processed at the current share price at the end of the quarter. This redemption plan comes with certain limitations and may include fees based on the duration of the hold period. Investors should consult the offering circular and the platform's Share Redemption Help section for comprehensive details on liquidity.
For individual rental properties, such as single-family residences and vacation rentals, investors are generally expected to hold their shares for the entire investment period, which lasts until the property is sold. The estimated hold period is 5-7 years for single-family residences and 5-15 years for vacation rentals. Arrived is exploring the possibility of establishing a secondary trading market with SEC approval for these shares to offer liquidity during the investment period, although this is not guaranteed and the timing remains uncertain.
It is important to note that there is no current public trading market for Arrived's interests, and as such, it may be difficult for investors to resell their shares before the end of the investment period. The development of such a market is not assured, and even if it were to develop, share prices could fall below the purchase price or incur fees.
How volatile is Arrived?
3/5— Moderate Volatility
Real estate assets on the Arrived platform can experience volatility due to various factors such as economic shifts, changes in interest rates, and local real estate market dynamics.
While Arrived targets long-term holding periods to potentially mitigate short-term market volatility, the value of the real estate assets can still fluctuate. I
nvestors should be aware that this volatility could impact the value of their investments, and there's a possibility for decreased investment value in response to unfavorable market conditions.
What is the average rate of return for Arrived?
5.5-15 %— Low Return
Investors in Arrived rental properties can anticipate returns from two primary sources:
- Dividends generated from the property's rental income, which are currently paid out monthly.
- Appreciation in the property's value, which is realized at the end of the investment's holding period.
The estimated historical annual return range for a diversified portfolio of properties, without considering leverage, is between 6% to 10% for Single-Family Residentials and between 5.5% to 12% for Vacation Rentals. With leverage, the range is estimated at 7% to 12% for Single-Family Residentials and 6% to 15% for Vacation Rentals. The target investment period is 5-7 years for Single-Family Residentials and 5-15 years for Vacation Rentals.
It's important to note that these are historical estimates based on past data, and actual returns for individual properties may vary. They may perform better or worse than the estimated ranges.
What is the minimum investment amount for Arrived?
The minimum investment required to participate in a property with Arrived is $100 USD.
While this is the entry point for investment, the average investment per property by customers is typically around $3,195.
What is the investment time horizon for Arrived?
The estimated hold periods are 5-7 years for Single-Family Residentials and 5-15 years for Vacation Rentals.
Investors should be prepared for this multi-year commitment and the possibility of holding their shares throughout the entire investment period, as there may not be immediate opportunities for liquidity or resale.
Who can invest in Arrived?
The Arrived platform is accessible to U.S. citizens or residents who are 18 years of age or older.
There is no requirement for individuals to be accredited investors to use the Arrived platform.
Investments can also be made through certain entities or self-directed retirement accounts.
Is Arrived regulated or audited?
Arrived operates under the regulatory framework of the Securities and Exchange Commission (SEC). The company's offerings involve financial instruments that are subject to SEC regulations and oversight, which include mandatory disclosures and compliance with securities laws.
Arrived's investment opportunities are structured as offerings of shares in specific properties, with each offering requiring an SEC-qualified offering statement.
Investors in Arrived have access to offering circulars that contain detailed information about the investment, including associated risks, and these documents should be reviewed carefully before investing.
Audits and financial reviews are part of the regulatory requirements, aiming to ensure transparency and accuracy in the company's financial reporting.
However, despite these measures, investors should be aware of the risks involved, including the potential for financial loss and the illiquidity of shares, as they may not be able to sell their shares easily or at all.
Is Arrived insured?
Arrived ensures that the properties on its platform are insured to provide a safeguard against physical damage or loss.
However, it's important to note that insurance policies usually have limitations and may not cover all incidents or the full range of potential risks, such as market volatility, economic downturns, or fraud. Additionally, the coverage amount might not match the property's market value at all times.
While such insurance can help mitigate certain risks, it does not entirely remove the financial risks inherent in property investment.
Does Arrived distribute payouts?
Arrived investors receive dividends from the rental income generated by the properties in which they have invested. Dividends for Q4 2023 will be paid by the end of January 2024, and thereafter, dividends will move to a monthly distribution schedule.
For individual properties, dividends begin once the property generates income and represent the cash flow after expenses and reserves. The time frame for receiving the first dividend varies based on the property type and operational factors, such as leasing time for single-family residences or setup and operational ramp-up for vacation rentals.
For the Single Family Residential Fund, dividends are expected to be paid monthly, with the potential for up to a 60-day wait for the first dividend after investment. Subsequent dividends are paid near the end of each month.
All dividends are deposited into the investor's Arrived wallet and can be reinvested or withdrawn. The timing of the first dividend payment may depend on the investment date and the property’s readiness to generate income.
What are the annual fees for Arrived?
Arrived charges various fees throughout different stages of the investment process.
Property Management Fees:
- For long-term rental properties: 8% of the gross rental income.
- For vacation rentals: 15-25% of the gross rental income, varying by market.
One-Time Expenses: Charges for lease-ups, renewals, or rehab and turn support may be incurred.
Arrived Single Family Residential Fund Fees:
- Asset Management Fee: 0.25% quarterly, equating to $2.50 per $1,000 invested per quarter.
- Closing, Offering, Acquisition, Renovation, & Holding Costs: These include closing costs on the property, a one-time sourcing fee of up to 3.5% of the property purchase price, offering costs for the shares, property improvement expenses, and financing costs.
- Operating, Financing, Legal & Management Expenses: May include repair and maintenance, property taxes, insurance, management services, tax/audit expenses, LLC registration expenses, and mortgage interest if leverage is used.
Specific Fees for Property Types:
- Long Term Rentals: 3.5% sourcing fee and 0.15% quarterly Asset Management Fee (AUM) of the property purchase price.
- Vacation Rentals: 5% sourcing fee and 5% of Gross Revenue as a Gross Rents Fee.
How do I handle my investments in Arrived?
Arrived handles the management of rental properties, including acquisition, tenanting, and maintenance.
Investors can buy shares in these properties but typically cannot actively manage the properties themselves.
Options for selling shares or managing the investment are limited and subject to the platform's available liquidity options.
How does Arrived get taxed?
Arrived provides investors with a 1099-DIV form summarizing their dividend income by the end of January following the tax year, enabling them to report income correctly on their tax returns.
Investing in properties located in different states from the investor's residence does not create additional state tax filing obligations. State taxes due are based on the investor's state of residence, not the property location.
Investors should note that vacation rentals are taxed as a corporation but do not qualify as a REIT, though this distinction does not change the tax reporting method in this context.
How many investors are on Arrived?
Arrived has a community of 560,000 registered investors. These investors collectively hold properties with a value of $128 million, and the company has distributed over $3.5 million in dividends to its users.
Who is the CEO of Arrived?
Ryan Frazier is the Co-Founder and CEO of Arrived. He is an American entrepreneur with a deep-rooted interest in investment.
Before establishing Arrived, Ryan co-founded DataRank, a company specializing in social listening tools that gained traction among Fortune 500 companies and financial institutions for tracking consumer trends.
After DataRank merged, Ryan took on the role of General Manager at Sprout Social Seattle, where he led a team of 100 people.
Ryan is a Y Combinator alum and holds a Series 65 license from FINRA, which qualifies him as an investment adviser representative.