Hacker News new | past | comments | ask | show | jobs | submit login
Arrived – a new model of home ownership (arrivedhomes.com)
128 points by novahawg 11 days ago | hide | past | web | favorite | 107 comments
 help




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?


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.


> 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.

^ This is one aspect of housing we think is missing and that we're trying to support. More and more people are ready to build home ownership, but still want the flexibility to move homes or cities. So they get torn between renting or buying. By building the ownership position in a real estate fund, instead of a single home, that ownership position can move with you to new homes.

Re Rent: Monthly rent is set based on the value of the home a member moves into and local rental rates for the area. It should be in-line with what you'd expect to pay in rent for a similar home outside of Arrived and is transparent to members at the outset.

Re Profits: Members participate as LPs in our real estate fund and receive a percentage of rent and appreciation which adds to their investment over their lease term. We take a long-term buy and hold position in the homes so appreciation is based on re-appraisals of the homes over time to incorporate changes in value.

And thank you for the feedback on an FAQ, we're working on it!


> 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.


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.


Of course. You'll overpay, just like you would with interest from a mortgage. But you do get something in return for that overpayment. Whereas with a loan you merely get "time value" for your over-payment in the form of interest, here you are also buying the optionality of moving around. That option has value, and it's appropriate for them to charge some premium for that.

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

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

What happens to your pseudo-equity when Arrived goes bankrupt?

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.

Still doesn’t anwser the question. Seems like once you dissolve the entity the new owners could kick you out of the house

This is not only not new, but is the standard model for how home loans work in Islamic finance.

I've never heard of what you described. I'm guessing it's a new model for most of the US.

(Thanks for describing it.)


Not new conceptually but still a new option in the marketplace in most places.

Or similar to the distinction between calling a taxi vs using an smartphone app with live GPS, you’re still ‘calling’ a cab to a predefined location but the experience is new and different, via maps, picture of the driver/car, reviews, receipts, user selected destination without telling the driver, more car/ride options, etc.

Details are everything in business and product development.


>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

If the would-be borrower misses a payment, do they get to keep a part of their total lease payments? When I take out a mortgage, the house is effectively owned by the bank and I also pay "installments until a predetermined sum has been paid". If I'm not able to pay the "installments" then I get kicked out.


I would imagine you don't get to keep lease payments, since my understanding is it's effectively treated as rent. So, yeah, you could still get kicked out and then never see a dime of the money you paid back.

However, I'm not an expert on Islamic finance - the expectations around leases could be different.


[flagged]


I think this comment assumes corporate greed and consumer hoodwinking from the outset, when instead the economics for this arise organically.

You wish to buy an asset, but don't have the funds to do it. At that point, your only options are to pay in installments towards eventual ownership. So you go to a for-profit lending institution, which agrees to let you pay it back in installments, and has you sign a contract for it.

There's nothing inherently greedy about this - it's just the way agents in an economy work. It would be greed/hoodwinking if customers were tricked into giving money away or didn't have terms explained to then upfront or that "interest" or "rates" beyond what is needed to recoup the asset despite depreciation - but I've not seen anything to suggest that is common practice in any home loan situation.

All that Islamic finance does is change who is nominally the owner of the asset under consideration until the asset is paid back. The standard American model - you're the owner, until the bank reposses it. The Islamic model - the bank is the owner until you buy it back.


This judaic model where all loans are forgiven after a certain period is relevant too. I guess the capitalist workaround would be for the lender to keep ownership of the house and just evict the debtor on that deadline.

Differences matter. Your derisive, dismissive view is shallow.

I haven't analysed the effects of this home ownership structure, but the business investment approach means that the banks aren't lenders, but are part owners of the company. This gives a different incentive structure and changes the relationship - I think for the better.


I thought it would be cool to have something like this with apartments. A company has apartments all over a city/state/country. A renter can move to any of the properties without breaking the lease or paying crazy fees. (Dependant on openings of course)

This way the apartment company can keep good tenants and the tenants can move around as needed with less burden.

I don't belive this will work in the realy world because of greed and whatnot but it's a nice idea.


A friend of mine lives in a housing co-op which works something like this. Rent does not go toward profit: each renter becomes a shareholder in the organization, and rent may only be used to manage existing properties or to buy new properties and expand the network.

When a unit becomes available, existing members have the option to move into it before it will be offered to potential new members. Who gets it is decided by a formula based on need and seniority within the network. This might happen when, for instance, a family starts to need more space, or an elderly tenant would like to move to the ground floor.

It seems to work well, and makes me wish for more non-profit housing.


Equity Apartments does this here in the Bay Area. I’m sure others do too, though they’re the only ones I’m personally aware of.

Confirmed, Equity does this nationwide. I've transferred leases in SoCal and the DC metro area. There are a number of requirements, but it was extraordinarily helpful to not have to scramble finding a replacement tenant, so that I could just focus on moving.

Related Rentals allows you to do this all over the USA fairly seemlessly as long as you’re moving into a more expensive unit.

From what I understand, Islamic financing of home loans is almost there same as a traditional fixed interest home loan, only the house is legally register to the bank and instead of calling it an be interest payment you can it an installment payment. At the end of the term of the loan the house is registered to the party.

This is a little different. You lease and get equity in real estate fund that you are required to contribute to. At the end of the lease you can move or cash out of the fund of you wish. You don't get the home.

This is so you can participate in the upside of owning a home without actually owning. This isn't a way to buy a house. It is a way to lease and still get the appreciation of ownership.


I guess Arrived make a conservative bet on the pool and offer the "renter" a fraction of their calculated profits over iterative re-valuations.

That's common in Germany as well. See Mietkauf or rent to own- https://en.m.wikipedia.org/wiki/Rent-to-own

> 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 mean, that sounds like a huge difference.


>lease it out to the would-be borrower on an installment basis until a predetermined sum has been paid.

A predetermined sum that happens to match what the amortization tables say?


Yes, exactly this. There are some 'halal-banks' in Europe as well. All they do is calculate what the total paid sum for a regular mortgage would be, then they buy the house for you and sell it back to you for the total sum...

It's 100% the same as with interest, but it's a religious thing so I don't think debating this will result in anything.


Which I don't mind. Just disappointed it's not cool/different in some way

I don’t get the distinction between paying fixed interest and paying a fixed amount called rent. In both cases you pay an amount and own the house at the end. In both cases the lender makes money.

This sounds more letter vs spirit of the law

I am not a money lender I am a tap water buyer at 1k a cup, after a year you have to buy your water back at 1.2k a cup ;)


In the interest model you are paying to borrow money. In the rent model the risk is shared between the lender and renter. The lender is responsible for their share of the property and should contribute to the maintenance, building insurance etc.

Yes, the distinction is effectively only a connotational one and not a denotational one.

Agree that this is definitely not new. There have been few variants of this play across the US. Trio (thinktrio.com), for example have been around for quite some time. I wonder though, if the typical HN reader is a great target market for this offering.

While not very common, it is also a thing in Spain. "Alquiler con opción a compra" (renting with the option to buy), lets tenants live for a predetermined time at a place. When the lease ends, they can choose to buy the place with a discount equal to their rent payments up to that moment.

We've researched many co-operative ownership models and some of the more common "rent to own" models that others sub-posted. The main difference with Arrived is that members, and their investment, are not tied to a single home.


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

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.

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.


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.


I was looking for a reference to housing co-ops in the comments, thanks.

To me it looks like a housing co-op scheme with more vendor lock-in, so to speak. But housing co-ops come in so many different shapes and form across the world so there might be some that have also some kind of lock-in disadvantage.

In any case it's refreshing to see that people want to question the home ownership model we rely on on an everyday basis.


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

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

Zerodown (https://zerodown.com) and Unison (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.


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

Point (https://point.com/) is another company in this space.

Every city? What about the cities in Texas with minimal zoning rules?

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?


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!

- 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?


> 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.


How is this conceptually different from paying rent and investing in a REIT? If I pay rent and invest in a REIT, I can move easily (as if moving were that easy) and I still have "equity" in real estate. In both cases the investment seems to be a stake in a real estate fund, so I'm struggling to figure out the difference.

Or, is the value-add that it is automatically done for renters?


It's funny, this is what we were doing which led to the idea for the service. We were renting and investing in REITs and thought "what would a better version of this look like?"

One big difference is that we wanted to feel like an owner of the home we were living in. It carries some emotional appeal and as we got further into planning out the business found there are some tax and return benefits as well.

A few problems we ran into with REITs available to us: - You pay a premium (lower yield) for access to public market liquidity - Public REITs are quite large and not really a great hedge against single family home values (they're invested in multiple property types and residential REITs are often focused on multi-family) - Market sentiment can change the value in an instant, and as a result, share price is not always based on the value of the properties. Not as big of an issue with long-term investing, but can be a problem during periods of time you may want to access the funds (like the end of a lease).


Very interesting, thanks!

I suppose that some of the big benefits of home ownership (mortgage interest/local tax deduction, capital gains exemption) are not available with Arrived?

These benefits are not available with REITs, and REITs have to pay out most of their earnings as dividends.

Is Arrived classified as a REIT?


I have been pitching this idea to friends and family for three years or more :) Ideas are cheap though. Congrats on taking your first few steps on making this a realty reality.

Would love to learn more about your level of funding, team etc. in case you're hiring software engineers.


That's awesome! Would love to get your take/feedback. Email is in my bio if you want to discuss and I can share more on where we're at.

I'm still having so many question about Arrived platform like: - Can customer choose a new house of their dream and Arrived will buy it? Or will customer just can choose from Arrived house list?

- Does customer have to sign the contract and make initial investment before Arrived buys the house?

- Customer cannot buy the house in the end so how come does this platform makes customers feel like their own home? They're still paying monthly rent anyways

And last but not least, how does Arrived calculate the amount of appreciation for the initial investment of customers? like how many percents?

So many questions in my mind right now.


> Can customer choose a new house of their dream and Arrived will buy it? Or will customer just can choose from Arrived house list?

Both options are possible. We have a set of available homes and we continue to buy homes as we grow. Residents are part of the process for new homes we buy into the network.

> Does customer have to sign the contract and make initial investment before Arrived buys the house?

Our Residents go under contract once we've acquired the property, not before.

> Customer cannot buy the house in the end so how come does this platform makes customers feel like their own home? They're still paying monthly rent anyways

The model is a way to build investment exposure to real estate for individuals who want to own, but choose to rent for the flexibility to move over time. At the end of any lease term, Residents can decide to "cash out" their investment and buy a home if their lifestyle changes.

> And last but not least, how does Arrived calculate the amount of appreciation for the initial investment of customers? like how many percents?

We calculate appreciation through periodic third-party appraisals of our properties.


Question 1: For Arrived residents with enough equity, is there going to be an option to liquidate and "buy out" the property they live in?

Question 2: What kind of stability can the residents expect? In particular, can the portfolio offer some stability in rents after moving into a property or do renters still have to worry about rents being jacked up x% a year ad infinity? Similarly, is there any risk of being not "renewed" on a lease (i.e. portfolio decided to liquidate the property)?


Re Q1: It's not a requirement of the model and the majority of our Residents are not planning on staying in the same property for more than 3 years. We can support buying out the property they live in if they wanted though.

Re Q2: We include a fixed monthly rate for two years and a rental cap for future renewals in the lease agreement.


How do you making money? Is it just capitalizing your fund for a specific timeframe (the lease period) and you essentially take a management fee? Is it essentially a REIT of the properties that people are leasing?

What happens to the house at the end if the period? The description wanst very clear on that.

The big one: what happens if the fund doesn't make enough and has to close up from another market downtown?

Interesting idea, but more technical description would need useful for us finance geeks.


How do you make money? - We make money from fees for managing the the real estate fund and properties, currently 1% of AUM (assets under management) and 10% of rent.

What happens to the home at the end of the period? - At the end of the initial lease term, residents have the option to renew their lease, move to a new Arrived home, or move out of the platform. At that point they can either continue contributing to their account or "cash out" and use the funds they've accrued. We haven't built in an option to buy the specific home outright although it's likely an option we'd support.

What happens if the fund doesn't make enough or there's another market downturn? - Good question and we think a lot about downside protection. Typically a fund "not making enough" is based on the fund not being able to pay it's debt service payments. To protect against this and a possible market downturn right now, our fund owns the title to the homes and we aren't taking on debt. So our fund should be resilient through market changes compared to a leveraged fund.


Why does your website hide your fees? Are you ashamed of them, are they very high and scammy, or is the small print so small that I can’t read it?

We plan to add them to the website. Our fees are fairly standard, we make money from managing the fund and rental properties, 1% of AUM (assets under management) and 10% of rent.

Thanks, and please do add them. Sites that are up-front with their fees and much more trustworthy in my eyes. If the fees aren't shown, it is often a sign that there's a nasty reason why.

Can you show more clearly how the financials work?

Your web forms break when passing along the valid ‘+’ sign in an email address, converting ‘+’ to ‘ ‘.

What's your team's background and area(s) of expertise?

Who gets the benefits of appreciation on the home?

It's shared across the owners of the fund. All parties receive their equal share based on amount invested. This is also true for the risk of any price declines.

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


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.


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

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

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.

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.

3 years ago, I would heavily encourage people to do it because it is cheaper than building something people don't want and it gets things moving. These days, it's a familiar pattern that sparks cynicism.

Agreed, seems like spam

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.


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

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.

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.

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?


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


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?


Lots of products solve an emotional need. Here you have people feeling angsty they aren’t buying when they keep hearing “home prices are increasing!!”, but they can’t buy today.

So here’s a company that says “here rent with us and we will apply some amount toward a home purchase”

Also remember that a lot of people DONT consistently invest / save. So a service that invests 7% of their rent for them seems like a good deal, even if the rent is say 10%-20% higher than market


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.

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


That’s a pretty large one- in my area (small city suburbs) there are very few good SFHs on the rental market compared to the purchase market.

It's also amazing to sort of tricks people do to force themselves to save money, having it part of a bill you have to pay seems to help. Heck, a 30 year mortgage mostly works this way, you mostly part interest every month, but still stock away a little principle


To reply to my own question: I suppose it's also possible that the process of each investor choosing a property they want to live in for the fund to buy, and then occupying the house that they also have some equity stake in, will result in higher quality properties and better returns than a traditional reit.

No dividends to tax as ordinary income? I'm curious how all the taxes work out and whether this counts as rent for tax purposes.

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.


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

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.


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.


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?


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.


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.

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.

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.

> 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.


You may find my post in this thread useful.

https://news.ycombinator.com/item?id=20683615


This looks like a lease option with extra steps.

Curious what happens in the event the company folds?

Great company name.

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.


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


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.




Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | Legal | Apply to YC | Contact

Search: