Forerunner, Bezos back Arrived, a startup that lets you buy single-family rentals for ‘as little as $100’ – TechCrunch

Arrived has raised $25 million in a Series A funding round led by Forerunner Ventures to give people the ability to buy shares in single-family rentals with “as little as $100.”

Returning sponsors include Bezos Expeditions, the personal investment firm of Jeff Bezos; Good Friends, a venture fund run by the CEOs and co-founders of Warby Parker, Harry’s and Allbirds); Spencer Rascoff, co-founder and former CEO of Zillow, as well as Core Innovation Capital, PSL Ventures and Neo, Ali Partovi’s venture fund.

The concept of fractional ownership in real estate is not new, and in recent years we have seen a flood of startups focused on the space. In the last 14 months alone, for example, TechCrunch has reported on Fractional and Fintor, which also focus on residential real estate. Others, like Fundrise and Cadre, focus on commercial real estate investing.

Seattle-based Arrived claims it is different from others in the category in that it is “fully SEC rated,” meaning it has approval of the Securities and Exchange Commission to offer shares of individual homes.

CEO Ryan Frazier said he originally started Arrived with Kenneth Cason when they both lamented the fact that they knew people who had had “tremendous success” investing in property, but who “had been left out” because they “just didn’t have the time or we weren’t in the same place long enough to do it.” The couple was soon joined by Alejandro Chouza, who grew up in Mexico and saw firsthand how difficult it could be for minorities to access property.

And so Arrived was born.

In a nutshell, the startup’s mission is to “make real estate investing easy and accessible” for people “who don’t have the experience, time, or large amounts of capital required to purchase a rental property on their own.” bill”. Individuals can invest $100 to $10,000 to $15,000 per home with the ability to build a portfolio of rental properties without becoming an accredited investor, which requires an individual’s net worth to exceed $1 million. The startup manages the operational work and claims that investors using its platform can earn passive income. About two-thirds of investors using Arrived today are not accredited, according to Frazier.

Arrived acts as an asset manager and partners with property management companies to find tenants and manage local daily rental operations. Those property management companies market the properties locally, and Arrived “customizes the leasing criteria.”

Investors currently receive their share of rental income through quarterly dividends. The startup plans to offer monthly dividends in the coming months.

Arrived spent about a year working with the SEC “on regulatory setup” to streamline the approval process for potential investors. As a result, interested parties can search for a property listing and then hit the “Buy Now” button to buy shares “in less than four minutes,” according to Frazier.

To date, Arrived has fully financed more than 102 properties in 17 cities in Alabama, Arizona, Arkansas, Colorado, Georgia, North Carolina and South Carolina, totaling more than $40 million invested. Homes on the platform currently range in price from $165,000 to $650,000 and are generally turnkey properties. No single investor can have more than a 9.8% interest in a given property, and that was intentional to allow “more favorable tax treatment,” Frazier said.

“If you bought 1% of one of the properties, you would get 1% of the income after expenses paid in the form of dividends,” he explains. “And then, as the value of the property grows, you’ll get 1% of any increase in the share price or earnings when the property is later sold. And so it really recreates the entire economics of owning direct real estate. If you buy 100 houses, then it might be proportionally the same as exactly owning a house on your own, but you’d be diversified by markets and over time, that really creates some benefits beyond owning on your own.”

While the concept of providing average Americans with a way to become real estate investors certainly has its advantages, there are concerns about the general practice of investors buying single-family homes, making it difficult for others to buy homes to live in by pulling inventory. From the market. , or hindering competition.

Rather, Frazier sees Arrived as a means of giving people access to investments they might not otherwise have had. It averages 100 to 200 investors per property, and many of those people are first-time rental property owners. So far, he has helped 5,000 investors buy shares.

“Our view is that we’re leveraging a lot of the work that institutional investors have done in single-family homes to recreate the same experience, but for retail investors,” he said.

In the meantime, if the value of the properties decreases, then the value of an individual share may be less than what the investor originally bought, but the investor would not “lose money” until he or she sold his or her shares or property, according to Frazier. And, he added, investors would still get rental income to support their returns.

“The ability to earn in multiple ways is part of what has made real estate such a consistent driver of wealth creation over time,” Frazier said. “Essentially, we’re creating these individual house IPOs: where we have a contract, we buy a property, we register it through our public offering with the SEC, and then we allow investors to buy shares of that individual house.”

An advantage for investors, he added, is that each home is owned by a limited liability company, or LLC, specific to that property; all investments are structured as REITs (real estate investment trusts). So when one of those LLCs enters into a loan agreement, that loan is not in the name of the investors and they do not have to go through a credit reporting process or be held accountable for the performance of that loan.

“That means investors who invest in individual properties can’t dive into their investments,” Frazier told TechCrunch. “We will not go after them if there is a major expense beyond the property’s current cash reserves.”

Image credits: Arrived

Arrived earns money in two ways. For one, it charges a sourcing fee, which amounts to around 3-3.5% for almost acting as an agent on behalf of investors. It also charges 1% per annum of capital being invested as an asset management fee paid out of rental income, so the dividends investors receive follow those fees.

It came secured $10 million in seed financing and $27 million in debt financing in June 2021, as well as a $100 million credit facility in December 2021. This latest financing brings its total capital raised to $35 million since its inception in 2019. Part of the proceeds from the new financing will go towards an expansion into new markets such as Florida, Texas, Nevada and Indiana. The startup also plans to expand to give people a way to invest in short-term rental properties, like those listed on Airbnb.

For Brian O’Malley, a partner at Forerunner Ventures, Arrived opens up the real estate investment category to retail traders by taking a page from the stock market and issuing shares in individual properties.

“Real estate has been an important investment category for wealthy Americans, given the steady appreciation and steady dividend payments,” he told TechCrunch. “This is even more important as debt pays very little today, and stocks and cryptocurrencies can be described as volatile at best… To date, there has been much more demand than supply as Arrived opens the platform more broadly and enables simpler liquidity for investors.”

In fact, Frazier said The company recently launched 12 new rental properties in four markets and they sold out within four hours.

“We find ourselves constantly selling every time we launch new properties,” he added.

Meanwhile, O’Malley says he was also drawn to Arrived’s “simple” model.

“Making something like this look simple requires expertise in product development, customer service, real estate appraisal and underlying financial instruments,” O’Malley said.

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