Another tech-fueled real estate startup has arrived on the scene in Seattle.
Arrived Homes 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 startup was co-founded by a trio of tech veterans, including CEO Ryan Frazier, formerly of Simply Measured and Sprout Social; CTO Kenny Cason, also from Simply Measured; and COO Alejandro Chouza, who headed up offices for Oyo and Uber. Real estate vet Joel Mezistrano is also part of the team as CFO.
The company got off the ground more than a year ago, but is announcing for the first time this week that it has posted its first few homes for investment. It’s an idea that had been in the works for some time, as Frazier said friends and family were always looking for the right way to invest in real estate without having to put $50,000 into a single home.
“There’s this massive unmet demand, where Americans love real estate, but there’s not an easy way where they can get exposure,” Frazier told GeekWire, adding that they’ve spent much of their upfront time learning from potential users and working with the Securities and Exchange Commission and regulators.
Arrived is relying on tech tools and big data to determine where best to buy, including what cities, neighborhoods and properties. The data will also inform how much to renovate certain properties.
Once Arrived buys a home, it makes necessary improvements and then invites potential investors through its platform to earn income from rental payments. The platform simplifies the investment process and eliminates the need for a large down payment. Each share in an Arrived home is only $100, and the company expects each investment to return around 10% annually. Investors start earning passive income the first month they invest.
The focus right now is in the heartland states of the U.S., on residential homes in the middle of the market that can provide strong cashflow and dividends to users, but also have strong appreciation potential over the longterm. The first homes are in Fayetteville and Northwest Arkansas, where Walmart is headquartered. Kansas City is eyed as a second market for now. Markets like Seattle and San Francisco are deemed less desirable because they don’t yield the same type of cashflow and are suited more toward the speculative nature of appreciation around a city’s home prices.
There are a limited number of shares per property. Arrived said it only took 72 hours for the first three offerings to be fully-reserved, and there is now a waitlist with over 3,000 investors. The company plans to offer several new rental properties in the next month.
A page for a specific home on the Arrived website, like the one below, offers a variety of information, from projected annual returns on the investment to what it’s like to live in the area where the home is located.
Arrived raised funds through a friends and family round and says it’s not a capital-intensive business, relying instead on a large line of credit and a strong bank partner, according to Frazier. Right now the startup has a small team of employees on contract, with plans to hire for key positions such as growth marketing manager and real estate acquisition manager.
The company makes money in a few different ways, including a commission paid by the original seller when Arrived first buys a home; by creating additional home value through home improvements; and through management fees for its portfolio of homes, such as a 1% management fee on the money people invest and 8% of rent for property management.
There are other startups using tech to democratize real estate investing by splitting up properties into smaller chunks, and Arrived is the latest real estate startup to come out of Seattle, which has become a hotbed for real estate technology.
The area is home to heavyweights such as Zillow and Redfin — which are investing heavily in their own home buying and selling platforms — and startups including Flyhomes, Blokable, Loftium and others. Earlier this month New York-based real estate brokerage and tech company Compass announced its acquisition of Modus, a Seattle startup that automates the title and escrow phase of closing on a home.