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

Come 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 contributors include Bezos Expeditions, the personal investment company of Jeff Bezos; Good Friends, a venture capital fund managed 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 capital fund.

The concept of condominiums in real estate isn’t new, and in recent years we’ve seen a wave of space-focused startups. In the past 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 says it’s different from others in the category in that it’s “fully SEC qualified,” meaning it has Securities and Exchange Commission approval to offer shares of individual homes.

CEO Ryan Frazier said he originally started Happened with Kenneth Cason when they both lamented the fact that they knew people who had been “very successful” in investing in real estate, but had “been left out” because they “just didn’t have the time or weren’t didn’t stay in one place long enough to do so.” The couple were soon joined by Alejandro Chouza, who grew up in Mexico and saw firsthand how difficult it can be for minorities to access homeownership. .

And so Arrived was born.

Simply put, the startup’s mission is to “make real estate investing easy and accessible” to people “who don’t have the expertise, time, or big capital to buy a rental property on their own.” . People can invest between $100, $10,000 and $15,000 per home with the ability to build a portfolio of rental properties without becoming accredited investors, which requires an individual’s net worth to exceed $1 million. The startup handles operational work and claims that investors using its platform can earn passive income. According to Frazier, about two-thirds of investors using Arrived today are unaccredited.

Arrived acts as an asset manager and partners with property management companies to source tenants and manage local day-to-day rental operations. These property management companies market the properties locally and Arrived “customizes the rental 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 the regulatory setup” to simplify the approval process for potential investors. As a result, interested parties can browse through a list of properties and then press a “Buy Now” button to purchase shares “in less than four minutes,” according to Frazier.

To date, Arrived has fully financed over 102 properties in 17 cities across Alabama, Arizona, Arkansas, Colorado, Georgia, North Carolina and South Carolina, for a total of over of $40 million invested. Currently, home prices on the platform range from $165,000 to $650,000 and are generally turnkey properties. No investor can own more than 9.8% equity in any given property, which is intentional to allow for “more favorable tax treatment,” Frazier said.

“If you were to buy 1% of any of the properties, you would get 1% of the after-expense income paid out as dividends,” he explains. “And then as the value of the property increases, you’ll get 1% of any increase in the price per share or the proceeds from the sale of the property. And so it really recreates the full economics of owning a direct real estate If you buy 100 houses, that might be proportionally equal to owning exactly one house on your own, but you would be diversified by markets and over time, it would really create benefits beyond owning by yourself.

While the concept of giving average Americans a way to become real estate investors certainly has its upsides, there are concerns about the general practice of investors buying single-family homes, making it harder for others to buy homes. to live there by removing the inventory from the market. , or to make competition more difficult.

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

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

Meanwhile, if property values ​​drop, then the value of an individual stock may be lower than the investor originally bought it, but the investor would not “lose money” until they sold their stock or that the property would have been sold, according to Frazier. And, he added, investors would still earn rental income to support their returns.

“The ability to earn in multiple ways is part of what has made real estate such a consistent engine of wealth creation over time,” Frazier said. “Essentially, we’re creating these single-family home IPOs — where we 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 house. individual.”

A benefit for investors, he added, is that each home is owned by a limited liability company, or LLC, specific to that property, and all investments are structured as REITs (real estate investment trusts). So when one of these 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 report process or be responsible for performing that ready.

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

Arrived makes money in two ways. On the one hand, it charges a supply 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 invested equity as an asset management fee which is paid out of rental income so that the dividends investors receive are after this fee.

Arrived secured $10 million in seed funding and $27 million in debt funding in June 2021, as well as a $100 million credit facility in December 2021. This latest funding brings its total capital raised to $35 million since its inception in 2019. A portion of the proceeds from the new funding will go toward 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 such as those listed on Airbnb.

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

“Real estate has been an important investment category for affluent Americans, given the steady appreciation and steady dividend payments,” he told TechCrunch. “This is all the more important as debt pays very little today, and equity and crypto can best be described as volatile… To date, there has been far more demand than supply. , as Arrived opens up the platform more widely and enables easier liquidity for investors. »

Indeed, Frazier said the company recently launched 12 new rental properties in four markets, and they sold out in four hours.

“We constantly find ourselves 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 sound simple requires expertise in product development, customer service, real estate valuation and the underlying financial instruments,” O’Malley said.

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