
Arrived – a new model of home ownership - novahawg
https://arrivedhomes.com/
======
AkshatM
This is not only not new, but is the standard model for how home loans work in
Islamic finance.

Since Islam forbids collecting interest, Sharia-compliant banks and lending
institutions instead _buy_ the asset (in this case, a house), and lease it out
to the would-be borrower on an installment basis until a predetermined sum has
been paid. At that point, ownership can either remain with the bank (but with
zero installments) or transition to the would-be borrower.

About the only thing Arrived seems to be doing differently is allowing
homeowners to change houses without affecting how much they're paying towards
any house - in other words, you're really purchasing a subscription to a
collection of homes.

I find this latter concept intriguing, but hard to reason about competitively.
Wouldn't the subscription price point have to be higher than interest on a
single home loan to offset the average cost of all of these houses?

~~~
AkshatM
After reading more closely, it looks like it's not a full-fledged subscription
model. Your "subscription" is your monthly rent, which goes from 1k to 10k per
month. I don't understand if these "rents" are negotiable or come pre-attached
to any specific house.

Further, "home equity" is a weird term in this context. Home equity is a mark
of ownership and makes clear sense in the cass of a single home - 100% home
equity in a single house means you get 100% of all the profits after that
house is sold. The total number of "shares" for a single house is fixed and
never changes, meaning home equity never dilutes. For a collection of homes in
this model, it's murkier because new renters and new houses would impact the
number of "shares" available.

Does Arrived plan to distribute profits to renters after any home is sold to
all of its renters? Does Arrived plan to sell houses in the first place? Does
my "home equity" dilute as more people sign up to use the service?

I wish there was an FAQ page to really address these risks. As it stands, I
would be interested since I like the idea of being able to move from any
property to another property without negotiating a new lease or contract - it
means I'm not locked to any particular economic region.

~~~
darawk
> Further, "home equity" is a weird term in this context. Home equity is a
> mark of ownership and makes clear sense in the cass of a single home - 100%
> home equity in a single house means you get 100% of all the profits after
> that house is sold. The total number of "shares" for a single house is fixed
> and never changes, meaning home equity never dilutes. For a collection of
> homes in this model, it's murkier because new renters and new houses would
> impact the number of "shares" available.

If I understand correctly, I think they're thinking of it more like credit.
When you make payments to them, you accrue "equity credit". You may exchange
that equity credit for a given home, if it reaches whatever value threshold
that home has. You can apply your equity credits to any home in their
collection, however each home will require a different amount to purchase, and
a different monthly payment to live in.

I think it's a really clever and really interesting idea, if i'm understanding
it correctly.

~~~
AkshatM
Then I have even more questions, because in order to offset operating
recurring costs for Arrived, that "equity credit" can't be a one-to-one
mapping to the house's actual value - it has to offset costs for maintaining
the house for you.

In other words, if you use your "equity credit" to take a house for yourself,
you could end up paying more than the house is actually worth.

~~~
djmobley
Of course you end up paying more than the house is worth, just as you would if
you paid down a mortgage with interest.

~~~
kijin
Moreover, you'd have to pay for maintenance even if you outright owned the
house.

------
untog
It's going to be one hell of a "our amazing journey" email that informs
customers they don't have a home any more...

~~~
yashap
Indeed. If (when?) these guys fail, their assets, i.e. your home, will be
liquidated. And you probably won’t get your “investment” back either, you’ll
just have paid inflated rent for awhile.

------
lumost
I'm curious why no one's tried a modern spin on housing co-ops. The big
advantage of owning comes from locking your housing costs against
inflation/future price increases, as one is naturally short housing. Why can't
I buy into a general fund with similar benefits?

e.g. Write a contract such that equity is accrued over time, while I pay
dividends on the "financed" portion of the home. This would also provide a
hedge for home owners against their home price going down as the fund's assets
would be spread across multiple markets.

As an individual I'd net out to the same investment position as if I sold the
equity portion of my home to a REIT, then re-invested the money into the same
REIT.

~~~
esotericn
Disagree that the big advantage of owning comes from locking in housing costs.

That's part of it, sure, but the biggest reason for me is permanence. I want a
place I know that I'll be able to call home in 20 years. Homeownership
achieves that.

------
pbiggar
There's a whole slew of home ownership startups recently; I was recently
buying a house and checked them out.

Board ([https://board.live](https://board.live)) lets you make a cash offer
instead of a

Zerodown ([https://zerodown.com](https://zerodown.com)) and Unison
([https://unison.com](https://unison.com)) I believe have a similar models to
Arrived, with some different specifics.

Generally, they seem to be a response to how hard it is for millenials to buy
homes [1]. I did the numbers on ZeroDown, and it seems to be a good deal for
someone early in their careers who is faced with high rent and student loans
to pay off, given their other choice is waiting 15-20 years to save up a down-
payment (during which time prices will have tripled again).

[1] AFAICT, this is due to the complete refusal of every city in the US to
zone and build enough homes to keep up with demand, as well the student debt
crisis, general wealth inequality, and similar stuff.

~~~
prlambert
Also Haus ([https://haus.com/](https://haus.com/)) founded by Garrett Camp
(Uber co-founder, StumbleUpon founder)

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numakerg
On the surface it looks like a bad deal, because you could rent, put the same
7% of your rent into a mutual fund and/or get compound interest on your
investment. By what mechanic will the effective in-network rent be lower than
the market rent, and there's also the question of selection.

The biggest concern is what happens when the company folds? What if after
liquidation they don't have enough value to pay out everyone's investments. Do
seed investors get paid out first?

------
fvryan
Hi HN, I'm Ryan, one of the co-founders of Arrived. Feel free to ask us
anything about the service and I'll try to answer some of the questions that
have already been posted. And of course all of your feedback is deeply
appreciated!

~~~
lazyasciiart
\- have you defined what would happen if Arrived went bankrupt?

\- would I buy homeowners insurance or renters insurance?

\- Who has authority/responsibility for major work on the house?

~~~
fvryan
> have you defined what would happen if Arrived went bankrupt?

I posted this above, but thought it might be helpful to repost here. Arrived
the company and Arrived the fund (which owns the homes) are separate entities.
Arrived the company is the manager of the fund, but the fund assets are
protected in it's own entity. Members of the service invest as LPs in the fund
and would have the option to exchange their shares based on the income and
value of the homes. If all fund LPs wanted to exchange their shares, the fund
may need to sell its ownership position in the portfolio of homes and each
member would receive their share accordingly.

> would I buy homeowners insurance or renters insurance?

The Arrived fund carries homeowners insurance and our members carry renters
insurance.

> Who has authority/responsibility for major work on the house?

Currently improvements on the house can be performed by the member with
approval from Arrived. Members can submit an improvement project request and
go from there. For major home maintenance items: New Roof, HVAC, Plumbing,
Electrical, etc., these are the responsibility of Arrived.

------
paulsutter
100% guarantee that this is a mediocre-at-best deal now, and that it will
gradually get worse over time as tech bro MBAs hit their quarterly targets by
tweaking the terms to be shittier, shittier, and shittier.

reference: uber driver pay over time

~~~
muzani
Actually if you're referencing uber driver pay, it starts out excellent, and
goes down gradually.

We've also had something similar with Islamic style insurance/takaful. Money
is put into a pool and the takaful fund managers take a service fee for
managing it. The people who joined early got awesome plans. The ones who
joined later got mediocre ones.

------
Ididntdothis
Looks a little sketchy to me. Seems there is almost no real information on the
site.

~~~
muzani
Typical of startups. Make landing page. Get email adresses. Pitch to
investors. Actually build the product later.

~~~
KennyCason
I completely understand that sentiment, but lot of the work an industry like
this is actually offline. Working through securities and real estate laws,
building the data model to evaluate property purchases, raising capital to
purchase the properties, and managing/supporting our residents. We had to put
in all of that leg work to get to where we're at now.

~~~
Ididntdothis
There is just no way I would trust the people who put up that website with
something as important as the place where I live and the amount of money
that’s involved. I think the site is a negative. It would probably have been
better to stay silent until you can put out real information.

------
lettergram
Recently had a startup school interaction with this startup -- congratz on
making it to the front page!

Pretty interesting concept, although I don't know how it'll work long term,
I'll be keeping an eye on this. Personally, I have my doubts that it'll really
impact renters, but we shall see. Definitely _should_ incentivize renters to
be more careful to their homes, but for a few dollars back a month, I don't
know if materially it'll impact poor renters.

~~~
numakerg
It could work if they have a very large portfolio in high-demand areas and can
save on administration costs.

~~~
jnordwick
Sounds like they are buying the places that people wanted to move into so the
fund will naturally own houses in demand to some extent.

~~~
KennyCason
Correct. It’s a little bit of both. We both select housing markets that meet
various criterium we’ve set as well as seeing where customer demand drives us.

------
bitcuration
Essentially this is a loan without requiring down payment or credit score, and
you can quit the loan anytime in the middle. There is no commitment therefore
no need of qualification.

The trick is this must be in an amount much higher than rental. While you may
choose to leave the lease with some "equity", the truth is landlord borrowed
money from the renter in the meantime and earn interest.

The only question is, what's the law and regulation around this model?

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s17n
How is this better than just renting and also putting some money into a reit
each month?

Edit: I suppose one reason would be if you want to rent, but you like a house
that's not on the rental market. Any others?

~~~
asdfasgasdgasdg
There are other startups in this space. I am not sure that it is better than
renting. For example, one risk that seems under-appreciated is the possibility
of Arrived (or similar startup) going bankrupt. In a general market downturn,
it is possible that Arrived would become insolvent. In such a scenario, you
are their creditor. That means you will lose some or all of your investment,
and probably your home.

~~~
Animats
That's a big question. As in "who really owns the property" and "is this a a
real investment fund?"

They filed with the SEC.[1] But just a no-info Form D.

If this was legit, I'd expect it to be set up as a Real Estate Investment
Trust. The REIT would own the properties, borrow at bulk rates, tenants buy
shares in the REIT, and the company behind the web site is the fund manager.
That way, if the management company goes bust, the tenants still have their
equity.

[1] [https://sec.report/CIK/0001780774](https://sec.report/CIK/0001780774)

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tbyehl
When I started down the path of buying my current home I'd wished for a "Buy
the house I want and give me a lease on it" service. Buying, owning, and
eventually selling come with hassles and risks that I'd rather have avoided
but the available rental inventory in my area didn't really have what I
wanted.

Kudos.

~~~
fvryan
Thank you! This is exactly what we wanted as well :)

------
nomad_manhattan
Interesting model towards home ownership that might work for certain clients -
those who wish to own with flexibility and those who wish in invest in
residential real estate with minimized risk. Clever.

BUT, not sure if this is a good investment vehicle. how is this different than
investing with a PE firm or hedge fund without diversification (real estate
only)? What is the rate of return here; all subject to the real estate market
condition. I

------
simonebrunozzi
It sounds great... But it probably isn't, at least for the "client".

The only way Arrived can build a sustainable business is by doing what
Opendoor is already doing - either buy low, or sell high.

It might be good to build equity... But you start with a big disadvantage, and
statistically you are going to be worse than if you simply invested in other
types of funds.

------
HillaryBriss
Nowadays the home mortgage interest deduction is, for some homeowners,
overshadowed by the new large standard deduction. I think that fact makes this
model of home ownership a little more acceptable since this model does not
seem to include the mortgage interest deduction anyway.

But it seems sort of like buying shares of an REIT or something.

~~~
tehlike
I wonder how the pricing affects taxes on this.

On a home, the salt is capped. But if you are not directly paying salt, maybe
it is different?

------
tom_mellior
I don't understand the math. I put in 2000 monthly rent, initial investment
50000, and 36 months of stay. That spits out a return of 72784, so my capital
grew by 22784 dollars. In other words, in this particular example, 632.89
dollars per month were saved up for me. How is this 7% of something? What's
the formula for calculating this?

I first thought the system might be crazy and promise 7% _monthly_ compound
interest since 2000 * 1.07 ^ 36 = 22847.88, which squares pretty well with the
number above. But doubling the time to 72 months only grows to a "profit" of
63000 dollars rather than 261000. So that's good, but then I don't understand
how this is calculated.

~~~
fvryan
The Initial Investment and 7% of rent are two separate mechanisms that
contribute to the ending investment value at the end of the term. Your initial
investment will grow at an annual rate based on the performance of the fund +
7% of your rent will be contributed.

~~~
tom_mellior
OK, so most of the return is based on the initial investment, not the rent?
And it's based on an assumed annual rate that you cannot guarantee and that
you don't even disclose in the example? That doesn't inspire confidence.

~~~
fvryan
It depends on the initial investment size, if the initial investment is large
enough then it will make up a larger portion. The projected annual returns are
listed on the /invest page.

~~~
tom_mellior
> The projected annual returns are listed on the /invest page.

Gotcha, thanks. It would be really good to have a bit of that information next
to the calculator on the landing page.

------
lakejf
This looks like a lease option with extra steps.

------
etxm
Curious what happens in the event the company folds?

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andrewstuart
Great company name.

------
djmobley
The example given is approx. $5k equity from $54k of rental payments, or
around 15%

Obviously the rental payments will be inflated to account for this.

------
TenaciousValor
I was curious what mathematics this startup uses to calculate your return on
investment. Based on my research (you can verify it by plugging in identical
values on their site), this is the formula they use (written in Python):

=========

STARTCODE

=========

annual_interest_percentage = 9.75

duration_of_stay = 36

rent_back_percentage = 7.

rent_monthly = 1500.

seed_investment = 3000.

invested_rent = round(rent_monthly * duration_of_stay)

monthly_investment = rent_monthly * (rent_back_percentage / 100.)

appreciate = seed_investment

for _ in range(duration_of_stay):

    
    
        appreciate = appreciate + monthly_investment
    
        appreciate = appreciate + (appreciate * annual_interest_percentage / 1200.)
    

appreciated_investment = round(appreciate)

roi = appreciated_investment - invested_rent

=========

ENDCODE

=========

We can gain a few valuable insights from this:

1) Arrived will be investing some portion of the money you provide them (no
surprise there).

2) They are assuming they can get 9.75% annual returns on their investment.

3) For the values plugged in above ($1500/month rent, living in same place for
3 years), the ROI is $-45,579.

4) With the values from item 3, if your "seed_investment" is $37,601 or
higher, your ROI is positive.

5) For a place like SF ($4000/month rent, living in same place for 3 years),
the ROI is $-121,545.

What pisses me off about Arrived is the snake oil. All the language on their
site makes it seem like you're going to be having a stake in the ownership,
but you never will. They use the term "home" not as something you own but as
the place you live, yet the context makes it sound like ownership. Arrived
will keep the home after you're done. Know what they don't say? If you're
liable for repairs on the property. Because they're selling this as a way to
"build home ownership," I'd wager the leaser will be responsible. If so,
they're trying to be landlords who shirk responsibility.

They're a financial investment firm buying up property without the obligations
of being a landlord.

At first, I thought this was an example of a land contract [1]. However, this
is almost more nefarious. At least with a land contract, the buyer is
guaranteed the deed. (Unfortunately, land contract firms often target the
poor. Contracts may have a clause where the buyer forfeits their right to the
deed if they miss a monthly payment. These contracts will also often require
the buyer to pay for upkeep on the property.) With so many large companies
snapping up real estate and driving prices higher and higher, it seems likely
there's a bubble that could pop.

References:

[1]
[https://en.wikipedia.org/wiki/Land_contract](https://en.wikipedia.org/wiki/Land_contract)

------
mytailorisrich
So... It's a landlord whose tenants invest into an investment fund on top of
their rent.

IMHO, these are things that don't mix.

