What Returns Can I Expect From Arrived Properties?

Investing in Arrived rental properties can deliver returns to investors in two different ways:

1. Dividends from the rental income on each property; currently paid out to investors quarterly

2. Appreciation from the change in property value that will be realized at the end of the investment hold period

The below table shows the estimated historical return range for a diversified portfolio of properties for each investment strategy. Actual returns for individual properties will vary and may over or under perform these ranges. Diversifying across several properties and across asset types can be a helpful strategy for minimizing individual property risk.

Estimated Historical Annual Return Range For Diversified Portfolio

	Single-Family Residentials	Vacation Rentals
Without Leverage	6% to 10%	5.5% to 12%
With Leverage	7% to 12%	6% to 15%
Target Investment Period	5-7 Years	5-15 Years

Past performance does not guarantee future results and there is no guarantee this trend will continue. Note: The above scenarios are for illustrative purposes only and are not intended to be used to estimate the returns of an individual property. The table is estimated by combining the 20 year historical home price appreciation from the Zillow Home Value Index (ending Q1 2023) and average historical dividend yields from the Arrived portfolio (ending Q1 2023). These data sources were combined to estimate a hypothetical IRR for each asset type and leverage classification and then rounded to whole numbers.

The calculation also assumes an average hold period of 7 years for SFRs and 10 years for VRs, 6% property disposition costs, and an average annual net operating income increase of 3% for SFRs and 5% for VRs. The leverage classification estimates an average of 63% financing and a 4.75% interest rate, which was selected based on existing properties with leverage at the time of calculation.

Investment Strategies

There are two types of investment strategies currently available at Arrived, each with their unique risk and return profile.

	Single Family Residential	Vacation Rental
Income Strategy	Long-term rentals; usually 18-24 month leases	Short-term rentals; Rented out by the day on booking platforms including Airbnb and VRBO
Property Type	Newer or renovated single-family homes in quality residential neighborhoods	Residential homes with luxury upgrades and fixtures to appeal to travelers
Dividends	Dividends tend to be consistent since the rent amount is fixed from month to month; Arrived aims to increase the cash flow over the investment hold period.	Dividends may vary widely depending on property performance and seasonal demand. Vacation Rentals can generate much higher revenue than Single Family Residential since they’re booked by the day, but can also end up with much lower revenue during an off-season, if the tourism industry wanes, or if the supply of vacation rentals increases dramatically.
Equity Appreciation	Equity returns from property value appreciation will depend on the local market prices over the next expected holding period of 5-7 years.	Equity returns will depend on the local market over the expected holding period of 5 - 15 years. Vacation rental properties may be in tourism-driven markets that could experience larger ranges of peak to trough demand. This strategy also requires material investment into furnishings and unique assets, which may not appreciate like land or structures.

In the below chart we can see the wider range of potential return outcomes that can be expected from a single family residential rental home versus a vacation rental. It is meant to illustrate how Vacation Rentals may have higher potential returns than Single-Family Residential properties, but also come with higher potential downside. This is meant for illustrative purposes only and may not accurately reflect the relative risk and potential returns. Actual results will vary.

The chart below takes a step back and shows the relationship between potential returns and risk across a wider range of asset classes. This is meant for illustrative purposes only and may not accurately reflect the relative risk and potential returns for each asset class. Actual results will vary.

Leverage

In general, adding leverage to an investment widens the range of potential returns – increasing the average anticipated returns, but also increasing the potential downside. Strategic Re-finance properties have no leverage at IPO, but Arrived will seek to add a loan to the property during the investment time period if favorable loan terms and interest rates are available.

The below chart above is meant to illustrate the impact of an investment that includes leverage versus and investment that does not include leverage As leverage is added, the range of results will increase, including the potential for a larger decline.