Hi HN, I'm Ryan, one of the co-founders of Arrived. Feel free to ask us anything about the service and I'll try to answer some of the questions that have already been posted. And of course all of your feedback is deeply appreciated!
- would I buy homeowners insurance or renters insurance?
- Who has authority/responsibility for major work on the house?
I posted this above, but thought it might be helpful to repost here. Arrived the company and Arrived the fund (which owns the homes) are separate entities. Arrived the company is the manager of the fund, but the fund assets are protected in it's own entity. Members of the service invest as LPs in the fund and would have the option to exchange their shares based on the income and value of the homes. If all fund LPs wanted to exchange their shares, the fund may need to sell its ownership position in the portfolio of homes and each member would receive their share accordingly.
> would I buy homeowners insurance or renters insurance?
The Arrived fund carries homeowners insurance and our members carry renters insurance.
> Who has authority/responsibility for major work on the house?
Currently improvements on the house can be performed by the member with approval from Arrived. Members can submit an improvement project request and go from there. For major home maintenance items: New Roof, HVAC, Plumbing, Electrical, etc., these are the responsibility of Arrived.
Or, is the value-add that it is automatically done for renters?
One big difference is that we wanted to feel like an owner of the home we were living in. It carries some emotional appeal and as we got further into planning out the business found there are some tax and return benefits as well.
A few problems we ran into with REITs available to us: - You pay a premium (lower yield) for access to public market liquidity - Public REITs are quite large and not really a great hedge against single family home values (they're invested in multiple property types and residential REITs are often focused on multi-family) - Market sentiment can change the value in an instant, and as a result, share price is not always based on the value of the properties. Not as big of an issue with long-term investing, but can be a problem during periods of time you may want to access the funds (like the end of a lease).
I suppose that some of the big benefits of home ownership (mortgage interest/local tax deduction, capital gains exemption) are not available with Arrived?
These benefits are not available with REITs, and REITs have to pay out most of their earnings as dividends.
Is Arrived classified as a REIT?
Would love to learn more about your level of funding, team etc. in case you're hiring software engineers.
- Does customer have to sign the contract and make initial investment before Arrived buys the house?
- Customer cannot buy the house in the end so how come does this platform makes customers feel like their own home? They're still paying monthly rent anyways
And last but not least, how does Arrived calculate the amount of appreciation for the initial investment of customers? like how many percents?
So many questions in my mind right now.
Both options are possible. We have a set of available homes and we continue to buy homes as we grow. Residents are part of the process for new homes we buy into the network.
> Does customer have to sign the contract and make initial investment before Arrived buys the house?
Our Residents go under contract once we've acquired the property, not before.
> Customer cannot buy the house in the end so how come does this platform makes customers feel like their own home? They're still paying monthly rent anyways
The model is a way to build investment exposure to real estate for individuals who want to own, but choose to rent for the flexibility to move over time. At the end of any lease term, Residents can decide to "cash out" their investment and buy a home if their lifestyle changes.
> And last but not least, how does Arrived calculate the amount of appreciation for the initial investment of customers? like how many percents?
We calculate appreciation through periodic third-party appraisals of our properties.
Question 2: What kind of stability can the residents expect? In particular, can the portfolio offer some stability in rents after moving into a property or do renters still have to worry about rents being jacked up x% a year ad infinity? Similarly, is there any risk of being not "renewed" on a lease (i.e. portfolio decided to liquidate the property)?
Re Q2: We include a fixed monthly rate for two years and a rental cap for future renewals in the lease agreement.
What happens to the house at the end if the period? The description wanst very clear on that.
The big one: what happens if the fund doesn't make enough and has to close up from another market downtown?
Interesting idea, but more technical description would need useful for us finance geeks.
What happens to the home at the end of the period? - At the end of the initial lease term, residents have the option to renew their lease, move to a new Arrived home, or move out of the platform. At that point they can either continue contributing to their account or "cash out" and use the funds they've accrued. We haven't built in an option to buy the specific home outright although it's likely an option we'd support.
What happens if the fund doesn't make enough or there's another market downturn? - Good question and we think a lot about downside protection. Typically a fund "not making enough" is based on the fund not being able to pay it's debt service payments. To protect against this and a possible market downturn right now, our fund owns the title to the homes and we aren't taking on debt. So our fund should be resilient through market changes compared to a leveraged fund.