Jeff Bezos, the renowned former CEO of Amazon, has ventured into the real estate market by backing Arrived, an innovative real estate company that began operations in 2021. This firm is revolutionizing the property investment landscape by enabling everyday individuals to invest in rental homes with an entry point as low as $100, thus democratizing real estate investments traditionally in the domain of wealthy individuals and large corporations.
Until recently, Arrived’s business model enabled customers to buy shares in individual homes, receiving dividends from rental profits. This innovative approach effectively created a network of distributed landlords, a concept previously unimagined in the real estate sector. However, the company is now doing something even more significant. With the introduction of the “Single Family Residential Fund,” investors can diversify their portfolio by investing in a range of properties across Arrived’s holdings, similar to a big Real Estate Investment Trust, starting with just $100.
In a webinar, Arrived shed light on its strategic direction. The company focuses on single-family home rentals, a sector seeing increased demand due to the growing unaffordability of home ownership. Cameron Wu, Arrived’s Vice President of Investments, outlined the company’s approach to identifying properties with strong cash flow potential. Starting in Fayetteville, Arkansas, where its co-founders were once based, Arrived has expanded to areas like Greeley, Colorado, known for its relative affordability.
Ryan Frazier, Arrived’s CEO, emphasized the opportunity arising from the current housing shortage in the U.S. “The single-family home residential home market has just been so undersupplied for more than the last decade, and the supply of properties in the market is lower now … as mortgage interest rates have gone up,” Frazier said.
Arrived has caught the attention of several high-profile tech moguls, including Jeff Bezos, Salesforce CEO Mark Benioff, Zillow co-founder Spencer Rascoff, and Uber CEO Dara Khosrowshahi. Frazier, who previously founded a social media data mining company, told Talk Business and Politics that he established Arrived with the vision of offering an alternative to traditional renting and homeownership.
However, Arrived’s business model isn’t without its critics. By converting single-family homes into rentals, the company is inadvertently reducing the availability of homes for purchase, worsening the issue it seeks to capitalize on. This concern has been echoed for other large-scale real estate investors, especially post-pandemic. According to Stateline and Pew Charitable Trusts, investors accounted for a quarter of all homes sold in 2021 and 28 percent in 2022.
Notwithstanding these concerns, the proportion of homes owned by investor firms like Arrived remains relatively small. According to Yardi, a company that also invests in single-family homes, as of 2022, the total share of investor-owned single-family homes was only about 5 percent, though it’s projected to grow substantially by 40 percent in 2030.
Arrived, with its 300 homes in different states and half a million investors, is smaller than some other companies like Invitation Homes, which claims to own 80,000 single-family homes across the country, or Tricon Residential, which says it owns about 35,000 homes. But it’s growing fast, showing that more and more investment firms are interested in entering the housing market.
In an era where mortgages are becoming less accessible, the rise of companies like Arrived reflects a shift in the housing market dynamics. These firms are not only taking on the role of landlords but are also providing avenues for the general populace to invest in housing in ways previously unattainable. This paradigm shift could potentially have far-reaching implications for both the home buying and rental markets in the future.
