New funding: Seattle startup Arrived Homes raised $10 million in equity and $27 million in debt financing to help scale its tech-infused real estate model that lets people invest in single-family rental homes for as little as $100. The company’s backers include the venture capital arms of Jeff Bezos (Bezos Expeditions) and Marc Benioff (Time Ventures); former Zillow Group CEO Spencer Rascoff; Uber CEO Dara Khosrowshahi, and other longtime tech execs.
The model: Arrived is a crowdfunding platform that allows anyone to purchase shares of rental properties and earn a passive income while the company handles everything from property acquisition to necessary improvements and management of daily operations.
The idea is to open up access to real estate investing beyond wealthy individuals and institutional investors, and use technology to help identify and manage rental properties. It’s a model used by companies such as Pacaso, another new startup which raised $75 million in March and splits ownership of vacation homes into different pieces as part of an LLC, much like Arrived.
Arrived is not legally permitted to share projected returns but does provide historical data and an investment calculator, as well as case studies. Investors can invest up to $20,000 per house and are paid quarterly. Rental tenants also receive shares in the property. If Arrived sells a home, the proceeds are distributed to investors.
The business: The company makes money in a few different ways, including a commission paid by the original seller when Arrived first buys a home; by sourcing the property and preparing it for investment; and through management fees for its portfolio of homes, such as a 1% management fee on the money people invest.
The traction: Arrived has secured more than 30 properties across Arkansas, North Carolina, and South Carolina; 12 of those are full funded or reserved, with about $3 million in property value funded over the past three months. The company declined to provide revenue metrics or number of users. Arrived is focused on residential homes in the middle of the market that can provide strong cashflow and dividends to users, but is also planning to launch in places such as Austin and Seattle that have strong appreciation potential.
The opportunity: There are other startups with similar pitches such as Roofstock and Goldman Sachs-backed Fundrise, but Arrived says it is the only company with SEC qualified offerings allowing anyone to buy shares in individual homes.
Investors have many options to invest in single-family homes — public REITs, rental home marketplaces, real estate crowdfunding companies such as Portland startup Crowdstreet — but they mainly focus on commercial buildings or require large upfront costs, said Arrived co-founder Alejandro Chouza.
“Arrived is entirely focused on single-family homes, which we are very bullish on during the next 10 years,” Chouza said. “As new home construction has not and will likely not keep up with the growing demand, we believe there are strong appreciation trends over the next decade.”
The real estate market: Chouza said the 10-person company has found “really great investments” despite record-low inventory in the current chaotic housing market. If market growth decelerates, Arrived can acquire even more homes with good long-term prospects, he said. “While single family homes sometimes can go through short-term cycles, the asset class has proven to be incredibly resilient and has shown consistent upward movement for the past 100 years,” Chouza added.
Home rental prices dipped during the pandemic in some markets such as Seattle and San Francisco but have rebounded overall, with year-over-year growth nationally at 5.4%, according to Apartment List, which notes that some mid-sized markets saw rent prices spike. Rental rates in Boise, Idaho, for example, are up 31% since the pandemic began, and in Spokane, Wash., they are up 22%.
“Real estate doesn’t exhibit homogeneous behavior across the country and our flexible operating model allows us to seek out the best assets no matter what the macro narrative seems to be,” Chouza noted.
The leaders: Chouza, who previously led Northwest operations for Oyo and Uber, is COO. His co-founders include CEO Ryan Frazier, formerly of Simply Measured and Sprout Social; and CTO Kenny Cason, also from Simply Measured.
The investors: The equity funding — the company’s first — was led by Core Innovation Capital. Other backers include Good Friends; PSL Ventures; Neo; Code.org Hadi Partovi; and former Invitation Homes CEO Fred Tuomi. “They have created an entirely new category of consumer investing and we’re proud to help them democratize wealth creation in a way that’s never been done before,” Arjan Schütte, founder and managing partner at Core Innovation Capital, said in a statement.