Fractional real estate investment platform Arrived has added a $25 million Series A funding round led by Forerunner Ventures to provide investors with the ability to purchase shares in single-family rentals for as little as $100 without becoming accredited investors.
Arrived is on a mission “to make real estate investing easy and accessible” to people who don’t have the expertise, time or large amounts of capital needed to buy a rental property on their own.
Founded in 2019, Arrived is backed by a number of high profile investors who also returned and participated in this latest funding round including:
- Jeff Bezos’ personal investment company Bezos Expeditions;
- Good Friends—a venture capital fund managed by the CEOs of Warby Parker, Harry’s, and Allbirds;
- Spencer Rascoff, former CEO and co-founder of Zillow;
- Core Innovation Capital;
- PSL Ventures; and
- Ali Partovi's venture fund Neo.
Fractional real estate investment
While fractional ownership in real estate isn’t new, Arrived differentiates itself from its competitors including Fractional, Fintor, and Fundrise as well as others featured on Funding Fridays including Flock Homes, Home365, and Roofstock by being the only company in its category to have full qualification and approval from the Securities and Exchange Commission (SEC) to offer shares of individual homes.
Everyday investors can invest anywhere between $100 and $15,000 per home with the ability to build a portfolio of rental properties without ever having to become accredited investors—which requires that an individual’s net worth exceed $1 million. In fact, about 2/3 of Arrived's investors today are non-accredited and no single investor can have more than a 9.8% stake in any given property.
So how does Arrived work?
The platform charges a sourcing fee (3-3.5%) for acting as an agent on behalf of its investors while it also charges an asset management fee of 1% per year on the equity that’s invested.
Each home is owned by a limited liability company (LLC) specific to that property and all investments are structured as real estate investment trusts (REITS). Arrived does this so that when one of the LLCs enters into a loan agreement, that loan is not in the name of its investors and they do not have to go through a credit report process or be liable for the performance of that loan.
Arrived manages all of the operations while investors using its platform earn passive income by receiving their share of rental income through quarterly dividends.
While there are concerns regarding the effect of institutional investment in single-family homes on housing affordability across the US, Arrived believes its platform democratizes access to investing for everyday Americans.
According to Arrived, the platform has on average 100 to 200 investors per property with a significant proportion of those being first-time rental property owners.
Arrived's financial history
To date, Arrived has funded the purchase of over 100 properties in 17 cities in Alabama, Arizona, Arkansas, Colorado, Georgia, North Carolina and South Carolina—worth a total of $40 million.
Since its inception in 2019, Arrived has raised a total of $35 million in equity including a $10 million seed funding round and $27 million debt financing round raised in June 2021 as well as a $100 million credit facility in December 2021.
In fact, we featured Arrived Homes back in August of last year after they had raised their seed funding round. You can read that blog here.
This latest round of funding will be used to expand into new markets including Florida, Texas, Nevada and Indiana as well as provide investors with a way to invest in short-term rental properties such as those listed on Airbnb.
CEO Take: As previously mentioned, Arrived operates in a similar fashion to other fractional real estate platforms previously featured on Funding Fridays including Flock Homes, Home365, and Roofstock in that it levels the playfield for everyday American investors looking to unlock the wealth associated with real estate that has typically only been reserved for wealthy institutional and accredited investors in the past.
Arrived's platform uses a combination of a proprietary underwriting algorithm and robust data to democratize access to a portfolio of real estate properties.
It's a brilliant example of how proptech can be used to solve real world problems in a market where real estate access is dwindling for everyday Americans due to low inventory, skyrocketing home prices, and rampant home affordability issues.
Congratulations to everyone over at Arrived on your latest Series A and expansion into new markets and short-term rental investments. If you are in the market for a property data provider to enhance your underwriting processes, please reach out to us here!
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