Do you want to invest in cash flowing short term vacation rentals, like what you find on Airbnb? Find out whether Arrived Homes Vs Here is the right fit to get started for as low as $100.
- An Introduction To The Investment Platforms
- Arrived Homes vs Here – Similarities
- Arrived Homes vs Here – Differences
- Arrived Homes vs Here – Summary
- Read More
An Introduction To The Investment Platforms
Both Arrived Homes and Here are fractional real estate investing platforms. They allow investors to purchase shares of rental homes for a low minimum investment.
Purchasing shares of properties on either platform gives investors a chance to profit from both the appreciation of their shares, as well as regular dividends from the cash flow of the property.
Both Here and Arrived Homes oversee the management responsibilities of the real estate, enabling a completely passive investing experience.
Arrived Homes vs Here – Similarities
While there are important differences between the two platforms, there are a lot of similarities in their investing experiences.
Arrived Homes vs Here – Differences
In a lot of ways the basic structure and the “pitch” from each platform is quite similar. However, the execution is where these two become much more differentiated.
The Property Management Model
One key difference between Here and Arrived Homes is how the properties are managed. Arrived Homes partners with a third-party organization experienced in the local market. Here manages properties themselves.
It’s important to note that Here’s self-managed properties are not intended to create fee efficiency for investors:
We and Here generally seek to set these fees to be comparable to prevailing market rates for the management of vacation rental properties in the relevant geographic area. These fees are expected to range from 25% to 40% of the Gross Receipts of the Series.– Taken from page 5 of the offering circular
We’ll explore the differences in property management fees more in the next section.
It is possible that Here could be an exemplary property manager. However, given their limited track record, the third-party property managers Arrived Homes uses may represent lower risk. There is at least more data available on these partners for investors to review and consider.
How often are there new things to invest in? Despite launching later, Arrived Homes has completed more offerings and has had new properties listed more often than Here.
This may be due to strategic differences between the two. Since Arrived Homes works to find a third-party property manager, they are more likely to launch multiple offerings in the same market with that same property manager. Conversely, Here has seemingly tried to debut listing in a much more diverse set of locations.
If you’d like to see where Arrived and Here have had offerings so far you can check out this Google Map. It’s also embedded below. Blue houses are Arrived Homes properties and Black houses are Here properties. This does include offerings from Here which were previewed or launched and ultimately withdrawn.
The Fees Charged
Establishing and operating a short term rental business isn’t free. Operations like preparing tax documents for investors aren’t either. So, unsurprisingly, both platforms have fees. The type, amount, and frequency of fees do differ between platforms though.
The property management fee is a percentage of the gross receipts generated by the property. The amount varies based on each property and is something we will explore in more detail later on.
The asset management fee is 1% of the asset value per year, split into 4 quarterly payments of 0.25%. This is paid from the revenue generated by the property.
The service fee is 10-15% of the property purchase price, plus an additional 10-15% of the costs of repairs and furnishings to list the property. In practice, this has averaged around 15.5% so far.
There may also be additional fees related to ongoing business (e.g. legal fees) or closing costs as part of selling a property in the future.
Arrived Homes (STR) Fees
The property management fee is a percentage of the gross rent generated by the property. The fee amount varies based on the property management partner. The property management fees will be covered in greater detail in the next section.
The AUM fee is 0.5% of the property purchase price, as quarterly payments of 0.125%.
The sourcing fee is paid for finding the investment and preparing it for listing. So far, it has been around 4.5-5.5% of the gross proceeds raised from investors.
There may also be additional fees related to unavoidable business expenses (e.g. legal fees) or closing costs as part of the sale of a property in the future.
How Do These Fees Compare?
Now that we know what each platform charges, let’s take a closer look at how they compare.
Property Management Fees
For properties on Here, they simply charge a percentage of gross revenue per offering. So far, this has been 25% fairly consistently:
The table above is based on data obtained from Here’s offering circular.
Properties on Arrived Homes have a more complex fee structure. To start, Arrived Homes takes 5% of gross revenue.* Then, there’s a base fee and sometimes an incentive fee based on gross rents. For the most part, this puts fees in the range of 20-25%, with a few exceptions.
* While, technically speaking, that is part of their asset management fee, I think it makes sense to include in this section.
Arrived Homes’ property management fees for vacation rental listings so far. Taken from the Arrived website.
If the 5% AUM fee is included in the property management fees calculation, we see that Arrived Homes fees are relatively in-line with Here’s 25-30% fees. However, the Arrived listings that have part of the property management fees based on performance help to limit the downside for underperforming properties.
Asset Management Fee
There are three important differences in these fees between platforms. Since we included the 5% of rents that Arrived charges as part of their AUM fee in the previous section, we have a much more straightforward comparison for asset management fees.
The first important difference is the fee rate. For Here it’s 1% yearly and for Arrived it’s 0.5% yearly.
The second important difference is in how that’s calculated.
Arrived Homes’ 0.5% AUM fee is based on the purchase price of the property. That amount of money will never change for an offering and it is available on the listing page before making an investment.
Here’s 1% fee is based on the asset value of the property. If the property appreciates greatly over time, that means the fee will increase as well. In cases where the property value grows faster than the rental earnings, the amount of dividends from the asset will decrease over time. Additionally, the “asset value” is ultimately up to the Here team, though they state that they intend to use a third-party to obtain the valuation.
The third important difference is in how that fee is paid. Here does not define any special details around this, so the payments are most likely to simply be transfers of cash. Arrived Homes, on the other hand, specifies that the AUM fees (including the 5% of gross rents) be paid as memberships interests of the LLC. Or, in other words, Arrived Homes gets paid in shares of the property.
Just as with stocks, the issuance of additional shares will dilute existing shareholders. This could also result in lower dividends over time if the rent generated by the property doesn’t grow faster than the effect of dilution from shares. On the bright side, that does mean that Arrived Homes will have an increasing financial interest in the success of the short term rental property.
Sourcing / Service Fee
So far, Arrived Homes’ 4.5-5.5% sourcing fee is significantly lower than Here’s average 15.5% service fee.
Example – Blue Ridge, GA
There have been several markets where both Arrived Homes and Here have launched offerings in. For this example, I chose to compare Here’s Series #8 “Tanglewood” offering with Arrived Home’s “The Lakeridge” offering. These are the two offerings closest in price that I could find.
Property Management Fees
Tanglewood has a flat 25% of receipts fee and is managed by Here. The Lakeridge is managed by Southern Comfort and also lists a fee that is 25% of rents. That would make this effectively a draw.
If we include Arrived Homes’ 5% of receipts AUM fee, then the effective fee rate for The Lakeridge is more like 30%. That would give the win to Here.
Asset Management Fees
If we include the 5% of revenue that Arrived charges for its AUM fee in the property management fees, then this is a straightforward comparison. Arrived will charge 0.5% per year of the $565,000 purchase price for the Lakeridge, or $2825. That compares with the 1% per year of the “asset value” for Tanglewood. Since we can’t know how that will be determined over time, we can’t know what the specific payments will be. This is a clear win for Arrived Homes though.
If we instead include the 5% of revenue in this calculation, things look a bit different. If we assume that The Lakeridge will generate about the $12,434 average monthly revenue from AirDNA, that brings us to about $150,000/year in revenue and an additional $7,500/year in fees. In this case, Here’s fees are clearly lower.
For Tanglewood, Here charged a 15.2% service fee, whereas Arrived charged 5.43% for The Lakeridge. This is a clear win for Arrived Homes.
The Information Easily Available To Investors
Before making an investment, everyone should review the information available to them. While both of these platforms have similar offerings, they differ meaningfully in terms of actually finding important information.
Here does a bit of a better job at highlighting the property metrics like lot size and the square footage of the house. It also provides a long and visual list of the amenities – just like what you’d find on an actual Airbnb listing. However, that’s where Here’s advantages in this area end.
On the whole, Arrived Homes simply does a much better job at providing useful, important, and necessary financial information to investors. When looking at a potential investment, some of the most important questions are things like:
- What are the potential returns?
- What are the fees?
- How long is the holding period?
Arrived Homes provides all of this information in a very easy to understand manner.
Here does not. You can find the property management fee in the FAQ section for the listing. There is some general data about property appreciation in the area and about short term rental performance in that market (which Arrived also shows). If you want to try to model things yourself, be prepared to search through the 50+ page offering circular filed with the SEC for more information. There is also nothing on the listing about the target holding period.
Can You Exit Early?
It is important to remember that real estate is a hard asset that can’t easily be bought and sold like shares of stock. Investments on both platforms are also intended to be long term (potentially 5-15 years). If you feel you may want to exit early, then it is possible that neither of these platforms are a good fit for you.
That having been said, you can exit an investment made on Here early. However, if you exit prior to a two year holding period, you will not get your full investment back.
Arrived Homes is also working on a redemption program, but they are still awaiting qualification from the SEC. Until then, you cannot exit early and we do not know the details of what the early exits will look like.
Arrived Homes vs Here – Summary
Both platforms offer the opportunity to profit from the appreciation and cash flow of short term rental properties for a low minimum investment.
In order to do this and keep everything passive for investors, both platforms charge multiple different fees. The amount and structure of fees differs between the two without one being obviously better than the other.
These platforms also have strategic differences in how they build offerings. Here manages their own properties, while Arrived Homes tries to find great third party partners for the rental market. Arrived has built out a larger amount of listings around a few core markets in the Sunbelt. Here is trying to source listings in a wide variety of locations from Florida to Alaska.
Arrived Homes does a better job at providing important information to investors in an easy-to-access manner. Arrived also has a longer track record from their previous single family rental offerings. However, Arrived does not currently have a way to exit an investment early, while Here does.
Overall, both platforms are worth checking out. Which platform is best for you may simply come down to who has the most desirable listings. That having been said, Arrived Homes’ longer track record, heavy funding, and experienced property management partners likely make it a better place to get started.
Arrived Homes Overview
A detailed introduction to Arrived, including the fees and a walkthrough of using the platform.