There are clear advantages to rental property ownership, such as diversification from market-traded equities, hedging against inflation risks, and considerable tax benefits.
The main drawback is the time-consuming effort that’s required to find investment-grade rental properties, which can be considerable. If you’re holding down a full-time job, your ability to invest in property outside your local area is also likely to be limited. Even if you can do your due diligence, most people tend to be deterred by the high investment minimums.
Arrived Homes is a better option, it’s a digital rental property platform that helps users build a diverse portfolio of rental homes in many areas. The minimum investment is just $100 per property, which makes this an affordable way to invest for an average person. In this Arrived Homes review, we’ll cover all the details so you can decide if it’s the right platform for you.
Arrived Homes Review: The Basics
Arrived Homes was founded in 2020 by Kenny Cason, Alejandro Chousza, and Ryan Frazier. It’s a U.S. company operating from Seattle, Washington. The goal of the company is to make real estate investing accessible with the $100 per property minimum investment.
It’s important to note that Arrived Homes has received $37 million from prominent investors and business owners, including Jeff Bezos, Darah Khosrowshahi, Spencer Rascoff, and more.
Many would-be property investors don’t have sufficient money to purchase an entire property outright, and crowdfunding is the solution. If you choose to invest with the Arrived Homes platform
, you can have rental real estate-owning benefits without the associated hassles.
How Arrived Homes Works
Residential real estate has been a reliable source of income for decades because it offers a steady income stream through monthly rental payments. There are downturns, such as during the 2008-2011 real estate crash, but there has been a consistent rise in property values over time for long-term investors.
The combination of property appreciation and passive income generation is an attractive draw for many new investors. But, purchasing and managing rental properties is difficult. Outsourcing to a property management company is possible, but it will reduce the returns for investors.
Arrived Homes has a four-step real estate investment approach to simplify the process:
The Arrived Homes website has a list of individual homes that have been vetted to ensure that the platform can purchase the property at the right price. This vetting process considers four key factors, they are:
- The Market Appreciation Potential: Arrived Homes considers the housing price trends in the market and selects properties based on their appreciation potential.
- The Market Cash Flow Potential: The company combs through hundreds of real estate markets to find homes that have the best cash flow potential.
- Neighborhood and Home Attributes: Arrived Homes uses local market knowledge and their proprietary analysis protocols to find desirable neighborhoods and homes in those areas.
- Investment Committee Review: Before a property is purchased the company presents an analysis to the investment committee for a detailed review. This ensures that Arrived Homes is acquiring properties that offer maximum appreciation and rental income potential for the investors.
The Arrived Homes property listings display a lot of information on the available homes, including purchase prices, key features (bed and bath count, square footage), monthly rent, Zillow valuation reports, rental status, local real estate price trends, Arrived Homes one-time proceeds, the annual management fee, share price and count, the raise amount (the investment required), financing and equity (the financed vs. owned outright details), the financial breakdown (operating income, dividends, allocation to cash reserves and more) and local economy details (major employers, population growth rate and more).
At this point, you’ll need to determine which properties interest you and how much you want to invest in them. The number of shares that purchased in each property can be customized to your tastes as long as there are sufficient shares remaining and you can meet the minimum investment threshold. This allows the investor to mix and match their property investments as they wish, which provides some level of diversification.
If you’re ready to purchase shares in an Arrived Homes property, take some time to review the materials before making a final commitment. The supplied documents contain information about the terms and potential risks of the investment.
It’s important to understand that the investment is not as liquid as other market traded securities. The anticipated holding period is 5-7 years on every investment property. If you’re comfortable with this concept, simply sign the investment documents electronically and fund the share purchase from your preferred external bank account.
As an investor in Arrived Homes properties, you have no operational obligations to consider. There’s no need to communicate with tenants, visit the property, make repairs or undertake any property management tasks. Arrived Homes handles these details, and you simply relax and collect the passive income from your investment.
The quarterly property dividends are paid from the operating income to your bank account. Periodically, you may want to review an investment to ensure that it’s performing in line with your expectations. The net return can vary due to operating expenses, market conditions, and other key factors. But, Arrived Homes property dividends have produced an annual return on investment from 5.41% up to 7.02% as of Q3 2021.
Arrived Homes Purchase Process
Arrived Homes is different from other real estate investing platforms because it specializes in single-family homes. You’ll find no townhomes, condos, duplexes, or commercial buildings on Arrived Homes, at least, as of now. Most homes are located in a subdivision with an average price of $250,00. The purchasing process can be broken down into six steps. They are:
1. Identifying Lucrative Markets
The key factors include affordability, local job growth, sustained economic development, and rising population growth.
2. Finding the Best Neighborhoods
Within the aforementioned markets, there are neighborhoods that are more desirable for investment. The determining criteria include commuting times to the economic center, access to good schools, and lower crime rates.
3. Ideal Homes
In the identified neighborhoods, there are homes that offer the ideal mix of desirable investment criteria, including price, square footage, renovation levels, year built, and bed/bath distribution.
4. Sourcing the Deals
Creative deal sourcing is conducted to purchase the identified homes at the best possible price, this includes direct purchasing, approaching property wholesalers, and building relationships with local sales agents.
5. Making the Offer
When the ideal rental home is found and the investment committee approves, Arrived Homes will make a cash offer for that property.
6. Strategic Renovation
Arrived Homes focuses on renovations that will net the highest rental income and appreciation value returns.
Arrived Homes will purchase the properties with their capital and a mortgage. The property is refinanced when the investors have made their purchase and the typical interest-only loan period is seven years. The interest on more recent loans was 3.875% with LTV ratios in the 50-70% range.
Arrived Home Fees
There are three fees you need to understand before you invest in an Arrived Homes property.
- The 1% Annual Management Fee: This is paid to Arrived Homes to cover the work that they undertake to run the business.
- The 8% Property Management Fee: This is paid to the property managers that manage the day-to-day care of the property.
- The Sourcing Fee: This is a one-time fee applied to each property, it’s paid upon purchasing and included in the share price. This is specified in the “Offering Details” section of the investment page on the Arrived Homes website.
Cashing Out Early
The anticipated holding time on each property is 5-7 years, but this is not guaranteed and the home could be sold out of this duration period if certain market conditions are met. Arrived Homes are not interested in flipping homes quickly and they generally hold a property for at least a few years before selling.
If you want to sell your shares, you can do this on a secondary market offered by the platform for this purpose. There’s no guarantee of liquidity or a minimum amount that you would receive from an early share sale. So, you should be prepared for a 5-7 commitment to your Arrived Homes investment or you may lose money.
Arrived Homes has an A rating with the Better Business Bureau (BBB), which is a representation of how the company interacts with its investors. The BBB rating takes into account factors, such as customer complaints, business practices, the time in business, and more.
It’s important to note that Arrived Homes has not been the subject of any public scandals or major lawsuits and there are zero complaints filed against the company at the time of writing.
Arrived Homes Pros and Cons
There are a number of Arrived Homes pros and cons to consider.
- Low Investment Minimums: As an investor, you can get started with only $100, which makes it more realistic to invest in multiple properties. If $2,000 was spread across 20 different properties, you would have enhanced portfolio diversification.
- Open to Anyone: You don’t need to be an accredited investor.
- Due Diligence: Arrived Homes conducts a rigorous due diligence process on all potential investment properties with final approval from the investment committee. This gives investors confidence because only the best investment properties are chosen.
- High Rental Standards: Arrived Homes carried out thorough vetting for pòtential renters to mitigate the risk of vacancies and delinquencies that can impact the cash flow for investors.
- No Operational Responsibility: As an investor, you have no obligation to handle property management on a day-to-day basis, as that will be handled by a property manager.
- Potential for High Return Markets: Arrived Homes evaluates hundreds of potential housing markets to find properties with the highest potential return on investment. This is ideal for investors that may not reside in areas with ready access to high-return rental real estate opportunities.
- Consistent Cash Flow: As an Arrived Homes investor, you can receive consistent rental income from the homes that you’ve invested in. The actual rates of return can vary, but consistent cash flow is expected every quarter.
- Limited Availability: Arrived Homes is a relatively new company. There are limited numbers of available properties for investment and demand is high. At this time this is a significant disadvantage, but as the company grows this may be less of an issue.
- No Formal Share Redemption Program or Secondary Market: At this time, Arrived Homes is working on a secondary market for the early selling of shares to increase liquidity. But, this is not in place yet and this could be a disadvantage for investors who want a reliable way to sell their shares before the completion of a 5-7 year investment period.
- Long-Term Commitment: Following on from the previous point, the investment terms are 5-7 years, which is typical for crowdfunded real estate platforms. This is a long-term and generally less volatile investment opportunity than cryptocurrency or stocks.
Arrived Home Alternatives
Arrived Homes is not the only real estate crowdfunding platform for non-accredited investors. There are other options in this competitive market, including Fundrise, Groundfloor, Roofstock One, and Landa. Let’s take a closer look at these four alternative platforms to see how they stack up against Arrived Homes.
Fundrise was established in 2012. It’s a real estate crowdfunding platform that offers a similar service to Arrived Homes. But this company focuses on commercial real estate that can be invested in through eREITs. Fundrise investors receive a quarterly dividend and they will benefit from the appreciation in the share value.
The historical annualized return from 2014 to 2019 was in the 9-12% range, which is a little higher than you could find with Arrived Homes at this time (read more about Fundrise Returns). There are a few fees to consider, including an 0.85% annual management fee, an origination fee of 0-2%, and an annual 0.15% advisory fee. Overall, the Fundrise fee pricing structure is a little cheaper than Arrived Homes.
- The initial investment buy-in is only $10, which is extremely affordable.
- The Fundrise app is well designed and easy to use.
- Solid history of producing returns for investors.
- You can choose from long-term, income, or balanced core strategies with investments starting at $5,000.
- Additional fees may be charged for liquidation and asset development that are not easy to understand.
- Limited liquidity. Early investment removal can cost up to 3% in eFunds and eREITs at certain levels of service.
Groundfloor is a real-estate crowdfunding platform that pulls in investments to make property purchases, carries out renovations, and flips those properties to make a profit.
Purchasing properties in this manner requires a large number of smaller capital investments and Groundfloor pays back the initial investments with a good return. This encourages investors to come back to the platform regularly with short-term loans for 6, 9, and 12-month periods.
Groundfloor is a great option for real estate investors that have smaller amounts to invest and that want a fast return on those investments. The minimum Groundfloor investment is only $10, there are no management fees. The returns are typically around 10%, and sometimes more.
- There are no Groundfloor management fees.
- The low minimum $10 investment is a great way to get started in real estate investing.
- The short-term loans improve liquidity and the returns may be faster than alternative options.
- There is no Groundfloor mobile app, but their website is mobile-friendly.
Roofstock One was launched in 2015. This is an online market with hundreds of single-family tenant-occupied homes. These listings are supplied with 3D models, photographs, complete inspections, and more. The company also offers accredited investors access to REIT investments via its Roofstock One platform.
Since its launch, Roofstock One has passed a transaction value of $4 billion. Roofstock One differs from Roofstock Marketplace because it’s only available for accredited investors. It allows a way for investors to invest in portfolios that have single-family homes like other real estate crowdfunding platforms.
Roofstock One requires a minimum $500 investment and the company handles all the property management hassles. The investments are illiquid because the investment horizon is set at a minimum of 5 years with no access to a secondary market to sell Roofstock One shares. Investors are charged an asset management fee that starts at 0.50% of the home value and that’s adjusted as the gross rent charges change.
- Accredited investors have access to REIT investments with Roofstock One
- The commissions are lower for home sellers.
- This is a great platform to purchase single-family homes online.
- The fee structure is unclear and hard to understand.
- This is an illiquid investment opportunity.
Landa is a real estate investment app that was founded in 2018 with a minimum investment threshold of only $5. The company is aiming to add a variety of real estate properties to the platform, including multi-family homes, offices, industrial, retail locations, recreation facilities, hospitality, and more.
The app allows investors to purchase shares from rented properties to earn a monthly income and grow an investment portfolio. Each property is divided into shares which when combined are the total value of the property. So, the more shares you own, the more dividends you’re going to receive, and you can get them on a monthly schedule. Landa has removed the real estate middleman from the process and those saved fees are added to the dividend.
There are no paid services. The earnings are made by investing with a minimum $5 buy-in. Quick returns are possible, but some projects take longer to complete which can delay the return on investment.
- The shares can take some time to process but the potential returns are solid.
- Landa is an easy way to earn passive income.
- The app is easy to navigate and the process can all be completed within the app.
- The property investment opportunities may be limited at times.
- Many properties are located in one area, which can limit the ownership options.
Arrived Homes Review: Final Thoughts
Owning rental properties is a proven way to build wealth. However, this type of investment has traditionally only been available to those who can afford to purchase a property. The downsides of managing the property and tenants have also held back many potential landlords.
But today it’s easier than ever to get the benefits of owning rental property without the hassles that have traditionally been involved. Hopefully, this Arrived Homes review has been helpful in allowing you to determine if this rental real estate investment platform is right for you to start investing.