Investing on the Arrived platform can provide returns to investors in two ways: through dividends and appreciation. Below is our guide to potential returns on the Arrived platform. This includes the various ways that returns can be achieved, the estimated historical returns for different investment strategies, and how potential returns are affected by volatility and leverage.
Estimated Historical Return Range
The figures below outline the estimated historical return range for a diversified portfolio of properties for our three main investment strategies: Single Family Residential (including individual properties and the Single Family Residential Fund), Vacation Rental properties, and the Private Credit Fund. It's important to note that actual returns for individual properties may vary and could either over or underperform the ranges provided. When investing in individual properties, diversifying across several properties and asset types can be an effective strategy for reducing individual property risk
Single-Family Residential (Individual Properties or Fund)
Return Type: Income + Appreciation
Total Historical Returns: 6 -10% annual
Income Portion: 3 - 5% annual*
Appreciation: Included
Minimum investment Hold: Individual properties must be held for a minimum of 5-7 years. Single Family Residential Fund investors may request redemptions 6 months after their initial investment. (More Info)
Vacation Rentals
Return Type: Income + Appreciation
Total Historical Returns: 4.5 -12% annual
Income Portion: 2 - 5% annual*
Appreciation: Included
Minimum investment Hold: 5-15 Year hold (More Info)
Private Credit Fund
Return Type: Income
Total Returns: 7 -9% annual
Income Portion: 7-9% annual
Appreciation: Not Included
Minimum investment Hold: Investors may request redemptions 6 months after their initial investment. (More Info)
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 single family residential and vacation rental calculations also assume 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.The private credit fund range is estimated by combining 2024 market data for interest rates, loan term lengths, and credit loss rates from origination partners the fund intends to source loans from.
*The income return range is for new properties and does not include properties that do not receive a monthly dividend due to specific circumstances, such as vacancies, eviction proceedings, significant maintenance issues impacting the property’s cash flow, or not yet booking-ready. Any operating income for these properties will be added to the property’s cash reserves and distributed at a later dividend date. For Vacation Rentals, the above income range represents the initial phases of the j-curve and may see an increase over time |
Historical Returns & Specific Product Guidance
In addition to the above estimated historical return ranges above, you may visit the dedicated resources below to learn more about the historical returns for individual investment strategies.
Individual Properties (Single Family Residences & Vacation Rentals): Our Historical Returns page shows the total returns, rental income, and property appreciation for each property in the Arrived portfolio.
Single Family Residential Fund: Visit the Single Family Residential Fund page to view historical returns for the fund.
Private Credit Fund: Visit the Private Credit Fund page for details on returns and anticipated annual cash flow.
Potential Returns and Volatility
The chart below illustrates the broader range of potential returns that can be expected from a diversified basket of individual properties (such as single family residential rental homes or vacation rental properties) or our two funds, the Single Family Residential Fund and the Private Credit Fund. It demonstrates how different investment strategies may offer higher potential returns but also carry higher potential downsides. This is for illustrative purposes only and may not accurately reflect the relative risk and potential returns. Actual results will vary.
Vacation Rentals not only have a wider range of returns, but the investment timeline is different given its unique J-curve performance that you can learn about here.
Benefits of Diversification
It's important to note that individual properties may perform better or worse than the historical ranges mentioned. As a result, many investors choose to spread their investments across multiple properties. This portfolio diversification benefits investors in three ways:
Risk Mitigation - Investing in multiple properties can reduce your overall exposure to any single property, spreading your risk across different assets.
Income Stability - Rental income from real estate properties can be impacted by factors such as occupancy rates, rental prices, and local economic conditions. Diversifying your portfolio allows you to stabilize your yield and increase the likelihood of achieving returns that align with the portfolio average.
Market Exposure - Different markets can experience significant variations in performance over time. Therefore, investing across various geographical areas can help minimize exposure to risks associated with any single market.
Impacts of Leverage
In general, adding leverage to an investment widens the range of potential returns, increasing the average anticipated returns and potential downside.
The chart below illustrates the impact of an investment that includes leverage versus an investment that does not. As leverage is added, the range of potential returns will widen, including the potential for a larger decline.
Strategic Refinance properties and the Single Family Residential fund do not initially have leverage at the time of funding, but Arrived may seek to add financing during the investment period if favorable loan terms and interest rates are available.
Other Related Links: