Assess their risks, liquidity, returns, and timeframes
Investing in Arrived carries risks including market fluctuations, economic factors, and property-specific issues. There's also the potential for loss, and investments are generally illiquid, meaning they can't be easily sold or exchanged for cash quickly.
Investing with Lofty carries typical real estate investment risks, including market volatility, economic changes, and property management challenges. Additionally, the use of cryptocurrency and tokenization presents legal and regulatory uncertainties.
Arrived is designed for long-term investments with limited liquidity options. The Single Family Residential Fund offers share redemption after six months with restrictions. For individual properties, shares are held until the property is sold, typically after 5-7 or 5-15 years. A secondary market for shares is being considered but is not currently available.
Lofty provides liquidity by allowing investors to list their property tokens for sale on the marketplace at any time, with a 2.5% transaction fee. Orders are held in escrow and have a 30-day expiration.
Arrived investors may earn returns through monthly rental income dividends and property value appreciation upon sale, with historical annual return estimates ranging from 5.5% to 15%, depending on the property type and use of leverage.
Lofty offers a 5% cash on cash return, with token values updating monthly based on HouseCanary's Automated Valuation Model (AVM).
Arrived targets a 5-7 year hold period for Single-Family Residentials and a 5-15 year hold period for Vacation Rentals, emphasizing a long-term investment horizon.
Investment time horizon on Lofty is not fixed and is determined by property owners' collective decision on when to sell through the governance system.
U.S. citizens or residents who are at least 18 years old can invest with Arrived, and accreditation as an investor is not necessary.
Investors from the US and abroad can invest with Lofty, excluding those from OFAC-sanctioned countries.
Real estate assets on Arrived can be subject to market volatility influenced by economic shifts, interest rates, and local market conditions.
The value of assets on Lofty's platform can be volatile, influenced by economic trends, interest rates, and real estate market conditions, potentially leading to variable financial outcomes for investors.
Arrived's offerings are regulated by the SEC, requiring compliance with securities laws and provision of detailed offering circulars to investors. Audits and financial reviews are conducted for transparency.
Lofty's marketplace transactions are executed using a smart contract on the Algorand blockchain, which has been audited by CertiK for security.
Arrived properties are insured against physical damage or loss, but insurance may not cover all risks and does not protect against market volatility, economic downturns, or other investment-related losses.
Lofty's specific insurance details are not provided, but properties on investment platforms are usually insured against physical damage.
Arrived pays out dividends monthly, with single-family residential properties historically averaging 45 days to lease and vacation rentals taking 3-6 months to start generating income. The first dividend payment for the Single Family Residential Fund is scheduled for February 25th for investments made by December 31st, and it may take up to 60 days to receive the first dividend after investing. Subsequent dividends are paid monthly, near the end of the month.
Lofty provides daily rental income to investors, which can be withdrawn at any time through various methods including ACH, PayPal, and cryptocurrency options.
For long-term rentals, Arrived charges an 8% management fee on gross rental income. Vacation rentals incur a 15-25% management fee. Additional fees include a one-time sourcing fee (3.5% for long-term, 5% for vacation rentals), and a quarterly Asset Management Fee (0.25% for the fund, 0.15% for long-term rentals). Other costs may apply for closing, renovation, and operating expenses.
Arrived sends investors a 1099-DIV form by the end of January for tax reporting, and state taxes are based on the investor's state of residence, not the property's location. Vacation rentals are taxed similarly but do not qualify as a REIT.
Lofty provides US residents with pre-filled 1099 tax forms for income and capital gains reporting. Non-US residents may reduce withholding taxes with forms W-8BEN or W-8BEN-E if they have a US SSN or ITIN.