Rolling out a new way to value your Arrived investment.
We are very excited to introduce updated Property Share Prices for existing Arrived rental homes! Share Prices allow you to track the appreciation of your property investments over time, similar to how you track your stock portfolio.
Share Prices for all Arrived investments start at $10/share when a property is initially funded. 6-months after the IPO date for a property, we’ll use 3rd party estimates to update the values for each property. Then we’ll continue to update the share values each quarter.
Visit your Portfolio Page today to track that long term property value appreciation along with the cash dividends portion of your overall returns.
You’ll also be able to view the most recent Share Price and annualized dividends for every property in the Arrived portfolio in our new Historical Performance page!
Keep in mind that Share Prices are intended to reflect the current value of the property. While real estate prices have tended to consistently appreciate over the long term, they may fluctuate more in the short term depending on the local housing markets.
Read on to see the details about how Share Prices are calculated and our initial findings from the first set of new values.
In reviewing the inaugural set of Share Prices, there are a few key learnings for investors.
Appreciation Takes Time
One of the biggest factors in appreciation is purely the amount of time since the property’s IPO. This makes logical sense – If you purchased a property last week, it’s unreasonable to think that the value of the underlying real estate has changed dramatically.
It takes time for a neighborhood to see noticeable changes in property values. Unlike the stock market, the real estate market simply doesn’t see big daily, weekly, or even monthly swings. That lack of volatility is a huge reason that investors love real estate, particularly compared to the stock market.
The housing market tends to move slowly and steadily, but in an upward direction over the long term. As such, the first Share Prices for Arrived properties will usually be at or just above $10 per share – the initial starting value for all Arrived Property Shares. That, along with wanting our share prices to catch up to upfront fees, is also why we wait 6-months from IPO to start re-valuing the shares.
As time goes on, the property values will continue to change with the market. If a neighborhood appreciates significantly over several quarters, that will start to be reflected in the share prices.
Knowing this, the first set of Property Share Prices make a ton of sense. Properties that IPO’d 12 months ago have appreciated more than properties that IPO’d 7 months ago.
Here’s the average appreciation for all Arrived properties grouped by the IPO dates. In general, the properties that IPO’d earlier have higher appreciation than more recent IPO’s. More recent properties are still at or near $10 per share because the market has changed meaningfully from when those properties were purchased.
You can view the Share Prices for all 51 properties on our Historical Performance page. Note that we decided to include updated Share Prices for properties that launched 4 months ago. Going forward, we’ll start to re-value properties after 6 months.
Long term investors tend to see the best returns! Continually investing each month and being patient is our favorite strategy for investing in real estate.
Importance of diversification
When you analyze the Share Prices for the first 51 Arrived properties, it’s clear to see that the homes are appreciating nicely! Some homes are up big and some homes are seeing more moderate growth. We’ll continue to post the new Share Prices each quarter so investors can monitor the performance.
It’s also clear in analyzing the results that diversifying is a must for investors! 50 of the 51 properties are at or above the initial $10/share price. If you had randomly picked properties, you’d have done quite well! Rather than selectively investing in 1 property, it’s certainly beneficial to diversify across a host of properties so that you don’t have all your eggs in one basket.
Learn more about The Importance of Diversification.
It’s really hard to pick the “best” property from any given property drop. Instead, it’s better to focus on building a diversified portfolio. Of course it’s still early to truly analyze the appreciation results, particularly for more recent IPO’s, but the importance of diversifying is clear.
Different markets have different return profiles
Location, location, location! Everybody knows that location is a major key to a property’s performance.
Rental homes earn from income and appreciation, but it isn’t always a 50/50 split. Some markets will have most of the financial returns come from dividends, and some will have the bulk of returns come from appreciation.
With the introduction of Share Prices, investors will be able to track that unrealized appreciation to monitor investment performance. Before this new feature we were only showcasing the dividend amounts, which didn’t paint the full picture of returns on properties and markets in good areas that have appreciated nicely.
How are Share Prices calculated?
Share Prices are reflective of the overall value of your investment. As a reminder, when you invest in a property on Arrived, you’re really buying shares in an LLC that owns the property. The Share Price values include the value of all the assets and liabilities owned by the LLC.
Our Investments team uses 3rd party property value estimates to approximate the current value of the property. These professional data sources estimate the value of the home, and then our investments team does a manual review to make sure there are no extreme outliers in the data.
That new property value is added to the balance sheet for the LLC. The biggest asset the LLC owns is of course the property, but there’s other valuable assets like the cash reserve. We also factor in the liabilities, like the loan balance and accrued property taxes. The result is an estimation of the total equity investors own in the LLC.
We also make some adjustments for the upfront fees involved in the investment! The Arrived service fee and the 3rd party costs of investment are meant to be for an investment period of at least 5 years. Accordingly, we pro-rate these costs so that the share price reflects only the prorated fees up through that point in time.
What else can I do with Share Prices?
Soon we’ll be launching a redemption program, where investors will be able to sell shares back to Arrived at the current share price! We’re finalizing the details for this program soon, but in general, this will be a way for investors to get liquidity once per quarter if they’d like to exit the investment.