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Podcast: How to Invest in Real Estate with Arrived Homes’ Ryan Frazier

Arrived Homes: A Different Approach to Real Estate Investing

Although skyscrapers may dominate the typical city skyline (and the imagination), the truth is that a large percentage of landlords in America are not REITs, but individuals who own less than 5 units. It’s also true that a lot of Americans rent single-family homes. 

This, of course, raises the question; why do so many investment platforms focus on large commercial properties instead of single-family homes? After all, it’s much easier for smaller investors to understand the mechanics of buying a single-family home and operating it as an investment property. It’s also more affordable. 

The simple answer is money. Most real estate investment platforms focus on accredited investors and the best way to get them the kind of returns they expect is to buy large commercial properties.  

Arrived Homes seeks to shift that paradigm, by giving small, non-accredited investors the opportunity to buy shares of rental homes all over the country and get the benefits that real estate investing provides. Real estate is a diverse asset class with investment options that can fit any bank account when working with the right platform.

How Does Arrived Homes Work?

Arrived Homes is run by a team of experienced real estate market and industry professionals who identify single-family homes with potential as rental properties and long-term upside. The main difference here is that while most real estate crowdfunding platforms focus on large multi-family or commercial properties, Arrived Homes focuses on single-family homes. 

Once Arrived Homes purchases a home, it turns the ownership of the property over to an individual LLC. The LLC sells individual “shares” to investors at a price of $10 per share, which is how the platform raises capital to renovate the properties and put them on the rental market. 

Investors can then buy 10 or more of these individual shares for as little as $100 until the funding goal for the property is met. It’s important to note that investors who purchase shares will have to commit to the hold period, which varies with each individual property, but is estimated to last between 5 to 7 years.

Once those goals are met, Arrived Homes teams up with a preselected management team in the area to handle the nuts and bolts of showing the property and collecting rents. After the property is rented, Arrived Homes investors can earn income on the rent based on the number of shares purchased for the duration of the hold period. Investors can also earn money at the end of the hold period (usually between 5 to 7 years) if their chosen property has appreciated and is sold at a profit. 

Arrived Homes has taken many of the benefits of REIT offerings (the chance to earn rental income while the property appreciates) and combined them with an investor-friendly business model that allows non-accredited investors to participate. Arrived Homes investors will receive the same kind of detailed expense reports and balance sheets that shareholders in REITs get on an annual basis. Additionally, because Arrived Homes investors are actual property owners, you can gain the annual tax breaks that come with property depreciation and writing off the capital expenses associated with the property.  

Almost every investment offering has fees, but Arrived Homes does a good job of minimizing those fees. The company buys properties directly from owners, which usually eliminates broker commissions. After that, Arrived Homes charges 2 basic fees. 

One is a Sourcing Fee, which is a reimbursement paid to Arrived Homes for the cost of scouting out a property and running it through the platform’s vetting process. This vetting is designed to make sure that the properties being targeted hit the sweet spot between affordability and market upside. 

There is also an annual asset management fee (AUM), which covers the cost of the property manager and maintenance for the investor’s chosen property.

These fees vary from property to property, but they will be very clearly spelled out in the investment prospectus for each of their offerings. Overall, it’s a pretty straightforward fee structure and considering that investors can buy in for as little as $100, Arrived Homes deserves a lot of credit for keeping it simple and affordable.

When it comes to using any web-based platform, the easier it is to use, the better off the platform and its users will be. That goes doubly so for investment platforms that have offerings for non-accredited investors.

Arrived Homes’ founders understand this and have acted accordingly. Sign up is incredibly easy, requiring only an email address and password. After completing the sign up, investors are offered the chance to participate in their choice of a 15-minute Zoom call, Google call or live telephone call with an Arrived Homes team member who will walk them through how the platform works and what they can expect as investors. 

This small gesture goes a long way towards building investor confidence. Investors can ask direct questions and receive answers from an actual Arrived Homes team member. Investors who wish to dive right in can skip past the intro session and dive right into investing, where the offerings will also feature the relevant information to make an informed decision.

The process for investing in properties on the platform is just as simple. Investors can browse all available offerings or apply filters to find properties that meet their own investment criteria.

Investors can view property-specific details for each offering and then easily purchase shares in homes they want to add to their portfolio.

Arrived Homes realizes that no online real estate investing platform can accomplish its mission without a highly-developed investor education section. This commitment to investor education starts at sign-up and the Zoom call, Google call or live call for new members. 

Even though this call is only designed to be about 15 minutes long, it’s incredibly reassuring to a new investor that there is a live person they can ask questions right out of the gate. 

The Learn tab on the platform’s home page will lead investors to an incredibly informative series of blogs on a variety of learning topics. The first 3 blogs are titled as follows:

• Real Estate Investing Guide
• How Arrived Works
• Top Reasons to Invest in Real Estate

Each of the blogs are well-organized and accessible to novice investors with no experience in real estate. The platform’s education efforts do not short any topic, and it seems topics in the Learn section are carefully selected.

Another great resource here is the How Arrived Works section, which can be accessed under the Learn tab. Clicking this section will direct investors to a simple to use page that features a YouTube video outlining how the platform works. The rest of the section is dedicated to informing investors how the platform targets properties and how investors make money. 

The frequently asked questions page on Arrived Homes is much more than an afterthought. It’s well stocked with information, and investors can get answers to any questions not covered here by clicking on the message widget at the bottom corner of the page. 

The platform aims to respond to those questions within 2 to 3 hours, and if you have a burning question, you can call the 1-814-ARRIVED phone number at the top of the page. 

Arrives Homes’ investor education is concise, complete, accessible and thorough. 

The Arrived Homes business model of scouting out rental properties in markets with upside is solid. It’s so solid that the company has already fully funded over 180 rental properties with a total value of more than $65 million. The platform typically adds new properties every 1 to 2 weeks, with some of the most popular properties selling out in a matter of minutes.

Arrived Homes also launched its first batch of short-term rental properties in September 2022 to allow investors to add even greater diversification to their portfolios and benefit from the greater potential upside with investing in vacation rentals.

Arrived Homes offers a wide range of investment opportunities, each of which have their own risk profile and targeted returns. Factoring in dividends and appreciation, the total annualized returns on the platform so far range from 3% to as high as 94.8%.

Annual dividend yields from the rental income range from 3% to 7.6%, with most being somewhere around 5%. It may not be an eye-popping number until you consider that it’s higher than most REITs and that this type of investment isn’t vulnerable to stock market volatility like most REITs are.

So far in 2022, investors on the Arrived Homes platform have generated over $3.3 million in wealth through rental dividends and property appreciation. Investors have collectively received $675,000 in dividends this year and properties have increased in value by a total of $2.7 million.

The Arrived Homes platform does an admirable job of combining the best aspects of REIT investing with a business model that caters to everyday investors. The opportunity to earn passive income with $100 buy-ins, and the ability to take advantage of tax breaks that are usually only available to large investors, only sweeten the package.  

Yes, there is a hold period and risk of loss, but at current interest rates, $100 in a savings account isn’t going to be much more than $100 in 5 to 7 years. Arrived Homes gives investors the chance to put even small amounts of money to work for them by investing in a tangible asset;  without accreditation.

Arrived Homes is worthy of serious consideration by any investor. That goes doubly so for non-accredited investors who want to jump into investing in a real estate property. The final verdict is a well-earned 4.5 stars.

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