Corporate ownership of rental properties is a worrying trend for prospective homebuyers but a potential moneymaker for even small-time investors.
Arrived Homes, a real estate investment platform that allows users to buy shares in individual homes, announced last week that it had raised $37 million in a round of seed funding and debt financing. Core Innovation Capital led the financing round with participation from Amazon CEO Jeff Bezos’ personal investment company, along with other big names like Spencer Rascoff (former CEO of Zillow), Dara Khosrowshahi (CEO of Uber), and Marc Benioff (founder and CEO of Salesforce).
Arrived will use the $37 million to hire additional employees and acquire more rental properties across the US. The company’s portfolio currently includes over 30 properties in sunbelt states like Arkansas, North Carolina and South Carolina. Users are able to invest as little as $100 and earn quarterly rental income, plus their share of the home’s appreciation.
The company differentiates itself from competitors by allowing users to purchase shares of individual homes rather than investing in an entire development, like a community of single-family homes or an apartment complex.
Users are able to browse properties like they would an online listing, clicking through photos, reading property descriptions and gleaning market insights. The homes tout cutesy names like The Luna, The Pinot and The Plumtree. At the time of publishing, future properties were being advertised in Charleston and Columbia, South Carolina, and the financing for fully reserved properties was accompanied by comments from investors.
Fundrise, a similar direct-to-investor real estate investment platform, recently closed a $300 million credit facility with Goldman Sachs to fund the construction of nearly half a billion dollars worth of new single-family rentals across the Sunbelt. Last year, Fundrise acquired Amber Pines at Fosters Ridge, a newly built rental community of single-family homes in Conroe, Texas.
Both ventures open up the once-exclusive world of real estate investing to the masses. “Investing in real estate is synonymous with the American dream, yet very few people are in a financial position to buy whole homes or have the time to invest in and manage rental properties,” said Ryan Frazier, CEO and co-founder of Arrived, in a press release.
“With Arrived, we’re breaking down the barriers to investing in rental homes, by taking a process that typically takes months and making it accessible in less than 4 minutes, starting from just $100. We’re really passionate about the opportunity to help millions of people better access this historically great asset class.”
Interest in personal investing surged during the pandemic, particularly among Millennials and Zoomers. More time spent at home, coupled with three rounds of federal stimulus checks, led a growing number of young people to download no-fee trading apps and track buzzed-about stocks on communities like Reddit’s r/WallStreetBets.
At the same time, proptech (property technology) startups raised billions of dollars from venture capital firms as many aspects of the buying and selling process moved online. The real estate industry has long been resistant to change and is now considered ripe with opportunity.
These two factors created an opening in the market for Seattle-based Arrived, which was founded in 2019 by Ryan Frazier (CEO), Kenny Cason (CTO) and Alejandro Chouza (COO).
With this initial round of founding, the company hopes to expand its portfolio to 100 rental homes by the end of the year.