Forerunner, Bezos Back Arrived, a startup that lets you buy single-family home for ‘just $100’ – TechCrunch

arrived has raised $25 million in a Series A funding round led by Forerunner Ventures to give people the opportunity to buy stock in single-family homes with “just $100”.

Returning donors include: Bezos Expeditions, Jeff Bezos’ personal investment company; Good Friends, a venture capital 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, the venture fund of Ali Partovi.

The concept of fractional ownership in real estate is not new and in recent years we have seen a flurry of startups targeting the space. For example, in the past 14 months alone, TechCrunch has reported on Fractional and Fintor, which also focus on residential real estate. Others, such as Fundrise and Cadre, focus on commercial real estate investing.

Arriving in Seattle claims it differs from others in the category in that it is “fully SEC qualified” meaning it approval from the Securities and Exchange Commission to offer shares of individual homes.

Director Ryan Frazier said he originally started Arrived with Kenneth Cason when they both complained the fact that they knew people who had been “extremely successful” investing in real estate, but that they were “locked out” because they “just didn’t have the time or we weren’t in the same place long enough to do that.” The pair were soon joined by Alejandro Chouza, who grew up in Mexico and saw firsthand how difficult it can be for minorities to access property.

And so Arrived was born.

Simply put, the startup’s mission statement is “to make real estate investing easy and accessible” for people “who don’t have the expertise, time, or large amounts of capital needed to buy a rental property on their own.” People can invest anywhere from $100 to $10,000 to $15,000 per home with the ability to build a portfolio of rental properties without becoming licensed investors, which requires a person’s wealth to be greater than $1 millionThe startup manages the 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 works with property management companies to find tenants and manage local day-to-day rental operations. Those property management companies market the properties locally and Arrived “adjusts the lease criteria”.

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

Arriving for about a year worked with the SEC “on regulatory agencies” to simplify the approval process for potential investors. As a result, interested parties can browse a real estate listing and then click the “Buy Now” button to buy stocks “in less than four minutes,” Frazier said.

To date, Arrived has fully funded more than 102 properties in 17 cities in Alabama, Arizona, Arkansas, Colorado, Georgia, North Carolina and South Carolina, totaling more than $40 million in investments. Currently, homes on the platform range in price from $165,000 to $650,000 and are mostly turnkey properties. No investor can own more than 9.8% interest in any particular property and that was 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 income after expenses in the form of dividends,” he explains. “And as the property’s value increases, you get 1% of any increase in the price per share or the proceeds when the property is later sold. And so it really recreates the entire economics of owning direct real estate. If you buy 100 houses it might be proportional to having exactly one house alone, but you would be diversified by markets and over time that really creates some benefits beyond just owning.

While the concept of giving average Americans a way to become real estate investors certainly has benefits, there is concern about the common practice of investors buying single-family homes, making it more difficult for others to buy homes to live in by taking inventory of the properties. market or make it more difficult to compete.

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

“Our vision is that we are leveraging much of the work institutional investors have done in single-family homes to recreate the same experience, but for retail investors,” he said.

In the meantimeif property values ​​fall, then the value of an individual stock may be less than what the investor originally bought it for, but the investor wouldn’t “lose money” according to Frazier until he sold his stock or sold the property. 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 for wealth creation over time,” Frazier said. “Essentially, we create these individual IPOs for homes — where we go into 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 home.”

One 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 don’t have to go through a credit reporting process or be liable for the execution of that loan.

“That means investors who invest in individual properties cannot go under water with their investments,” Frazier told TechCrunch. “We won’t go after them if there are costs greater than the property’s current cash reserves.”

Image Credits: arrived

Arriving yields money in two ways. First, it charges a redemption fee, which amounts to about 3 to 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 paid from rental income, so the dividends investors receive come after those fees.

Arrived in June 2021 secured $10 million in seed funding and $27 million in debt financing, as well as a $100 million credit facility in December 2021. The latter financing brings total equity raised to $35 million since the start of 2019 A portion of the proceeds from the new financing will go toward expanding into new markets such as Florida, Texas, Nevada and Indiana. The startup also plans to expand to provide a way for people to invest in short-term rental properties like those on Airbnb.

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

“Real estate has been an important investment category for wealthy Americans given its steady valuation and consistent dividend payments,” he told TechCrunch. “This is all the more important as debt pays very little these days, and stocks and crypto can be described as volatile at best…To date there has been much more demand than supply as Arrived opens up the platform more widely and allows easier liquidity for investors .”

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

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

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

“To make something like this seem simple, it takes expertise in product development, customer service, real estate evaluation and underlying financial instruments,” says O’Malley.

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