Arrived launches trading platform for shares of rental homes

A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and emerging opportunities for real estate investors, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. become a member to receive future editions straight to your inbox.

Fractional ownership isn’t exactly a new concept in real estate, but one company is taking it to a new level with the help of new funding from major investors. This creates a so-called stock market for real estate.

Launched in 2021, Arrived is a platform where real estate investors can buy and sell rental home shares for as little as $100. Instead of investing in a publicly traded REIT, they can build their own property portfolio managed by Arrived. Real estate not only generates income from rents, but can also gain value over time. Since each property can belong to hundreds of investors, it is taxed as a REIT.

“We worked with the SEC for nearly a year to create this regulatory framework in which both accredited and non-accredited investors can participate,” said Arrived co-founder and CEO Ryan Frazier. “So we have a recurring offering structure through the SEC to register each property and then qualify each property as a REIT.”

Frazier describes this as “unbundling” the REIT into individual properties so investors can pick and choose what they want. Some properties have over a thousand investors. So far, Arrived has around 500 properties in 65 cities. It doubles the number of properties every year.

Investment platform Roofstock, which mostly sells entire investment properties on its site, also has fractional ownership opportunities, but with a much higher minimum investment.

Arrived is now announcing a new $27 million fundraising to help launch a secondary market platform where investors can buy and sell shares of individual homes across the U.S. in minutes. This allows them to quickly exit or expand positions as well as gain value and rebalance portfolios.

“Now investors can buy and sell shares from each other on Arrived,” Frazier said, noting that the option was active in the first three weeks and investors placed 57,000 buy and sell orders in the market.

“I think it’s exciting because we’re really bringing that liquidity to the real estate market, which I think makes it easier for real estate investments to move online,” he added.

The new fund was led by Neo, a venture capital fund and mentoring community.

“The Arrived team is cracking, and I love the audacity of their vision: a stock market for real estate,” Ali Partovi, Neo’s CEO, said in a statement. “I’m betting they will democratize and digitize access to America’s $50 trillion in residential real estate.”

Also participating were Forerunner Ventures, Bezos Expeditions and Core. Other existing investors include Salesforce CEO Marc Benioff, Match Group CEO Spencer Rascoff, and Uber CEO Dara Khosrowshahi, bringing total funding to date to $61.7 million.

Since its founding, more than 850,000 investors have collectively invested more than $330 million in Arrived Homes, according to the company.

This new platform comes at a time when traditional home buying has stalled and investors are finding it increasingly expensive to purchase single-family rental homes on their own. Home prices are still historically high and interest rates are significantly higher than they were just three years ago during the last housing boom.

Investors make up the largest share of homebuyers on record this year, according to Cotality, but that’s because the homebuyer pool has become very narrow.

To protect itself against weakness in the overall housing market, Arrived has been very selective about its markets and stopped using long-term leverage in the portfolio, Frazier said. The majority of properties on the Arrived platform are owned by investors with 100 percent equity, he said, adding that the average interest rate for those with a mortgage is below 4 percent.