A startup that crowdfunds single-family rental properties in Denver, Colorado Springs and 14 other metro areasnationwide raised $25 million in Series A financing to purchase more homes and begin selling shares in short-term rentals.
Seattle-based Arrived Homes allows people to buy shares in rental homes for as little as $100 and earn income from rent. Cash dividends are paid out quarterly, and the company boasts returns on investments of anywhere between 3.2% to 7.2% per year.
As of mid-May, the startup owned 108 properties across the country, including nine homes in Denver and three in Colorado Springs. Bolstered by its latest capital infusion, it plans to expand into 24 more cities over the next year and add 25 to 30 homes per month, said Ryan Frazier, its chief executive.
San Francisco-based Forerunner Ventures led the $25 million funding round. Also participating were Core Innovation Capital, PSL Ventures, Neo and Good Friends, as well as Bezos Expeditions, the personal investment company of billionaire Jeff Bezos.
Arrived Homes sought the fundraising to keep up with high consumer demand for its properties, Frazier said. The startup launched its latest batch of single-family rental homes last week, and shares sold out in only eight minutes. One property in Denver was among the six homes in the batch.
“We were just so surprised by the amount of demand that we’ve seen,” Frazier said. “The idea of investing in shares in a house – we thought it might be harder for people to understand. But people just got it right away. We’re now really having to move quickly.”
With the funding, Arrived Homes also plans to offer shares in short-term rentals starting this summer. The startup will seek to acquire homes in vacation destinations, which may include Colorado properties in or near the Rocky Mountains, Frazier said.
“Similar to how there has been challenges to property ownership, we’ve seen the same thing with short-term rentals,” Frazier said. “Hundreds of millions of people have now stayed in Airbnbs, but so few people get to participate on the owners or host side of the economy. We think we play a unique role to let people actually participate.”
About 80,000 people subscribed to be notified when Arrived Homes lists new properties, and 5,500 people have invested in the homes. Of those, 2,000 investors rent their primary residence, and three-fourths are non-accredited investors, Frazier said. About 40% of participants start by spending less than $500.
The startup has so far selected properties in areas with high population growth. In addition to Colorado, Arrived Homes has rental homes in Alabama, Arizona, Arkansas, Georgia, North Carolina and South Carolina.
Arrived Homes raised $37 million in seed funding last June and took on $100 million in credit financing in December. The startup employs 35 people, with two employees based in Denver. Frazier said he plans to double the staff over the next year.
