Welcome to Arrived’s Q3 2023 review! Let’s review the dividends and appreciation of the 284 Arrived properties operating during Q3 2023.
In Q3 2023, investors earned $890k in dividend income, an increase of approximately $100k from Q2 2023. In total, 271 properties paid out dividends with annualized yields ranging from 2.0% to 9.9% on single family residential properties and 2.4% to 5.2% on vacation rentals.
*Calculated by dividing the latest dividend for a single share this quarter by the $10 initial offering price and multiplying the result by 4, the number of quarters in a year.
*As of Q3 2023, 326 properties have IPO’d. Of these, 284 properties are operational, paying at least one dividend by the end of Q3 2023. Of the 284 operational properties, 13 are not receiving dividends this quarter (click here to learn more about how dividend amounts are calculated).
Occupancy
Arrived closed Q3 2023 with a stabilized occupancy rate of 89.9%* for the single family residential properties in operation during the quarter – this was helped by 56 new move-ins during in Q3. It’s also worth noting that the average term on these 56 leases was 21 months, and 79.6% leased above our forecasted rent.
*Stabilized Occupancy includes homes that are occupied or are 90+ days rent-ready from their initial improvements (single family residential properties only). A property may be removed from stabilized if significant impairment outside of the ordinary course of operations requires material action for an extended period.
Dividends
Dividends earned can vary by investment. In Q3 2023, single family residential properties earned between 2.0% and 9.9%, with a 3.9% average. Vacation rentals averaged between 2.4% and 5.2%, with a 4.4% average..
*The dividend range does not include the 13 properties not receiving a quarterly dividend due to specific circumstances, such as 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. See the individual property pages for any updates on the current status.
You can view the dividends for each property on our Historical Returns page.
The annualized dividend for each property is calculated by taking the Q3 dividend and extrapolating it out for an entire year.
Building a diversified portfolio across markets is a great strategy to get exposure to different real estate markets and earn passive income.
Below is a visualization of the current annualized dividend rate calculated as a function of the initial $10 share price across all of our properties mapped over the number of months owned.
The chart here shows the combined realized dividends and unrealized appreciation of single family residential properties. Please note that vacation rentals aren’t included in this chart as they are still awaiting valuation.
It’s evident that in the first six months, properties have lower total returns because they have only received dividends and don’t have an appreciation update yet. However, approximately half of the properties have positive returns from around six to fifteen months. After 15 months, almost all the properties have positive total returns.
This chart highlights the importance of diversification and dollar-cost averaging in the real estate market. Predicting the best-performing property in a cohort at IPO is challenging, so diversifying and buying shares of different properties can be an impactful investment strategy.
Share Prices and the Current Market
Share Prices are a way to see the value of your investment change over time, much like you would track a portfolio of stocks.
In Q3 2023, we updated the Share Prices for 205 properties, including 185 properties receiving an updated share price from 3 months ago and 20 properties receiving their first share price since their IPO 6-9 months ago.
For the 185 properties receiving an updated share price, the range of share price change was between -20.1% to 9.5%. That resulted in an average share price decrease of -1.0% in Q3.
For the 20 properties receiving a share price for the first time, share prices ranged between -9.9% to 11.7%. That resulted in an average share price decrease of -0.5% in Q3.
We see some interesting insights if we compare total share prices through market shifts over the last several quarters:
- Q3 2023: 64% of properties decreased in share price, while 36% increased with an average share price decrease of -0.1%.
- Q2 2023: share prices increased for 90% of properties with an average share price increase of 2.4%.
- Q1 2023: 65% of properties increased in share value, while 35% decreased with an average share price increase of 1.8%.
These signals serve as a reminder that, while share prices react to the current market in the short term, real estate performs best as a long-term investment, all while investors continue earning dividends through rental income.
Below is the average Q3 Share Price categorized by the number of months owned for each property.
*Share Prices for single family residential properties are updated six months after the initial property funding, using estimates provided by third-party sources. Vacation rental properties are updated 12+ months after initial funding and every quarter thereafter.
Vacation Rental Performance
As of the end of Q3 2023, we have 33 bookable vacation rental properties, 9 of which became bookable during the quarter. Here are some highlights from the quarter for this asset class:
- $481k+ gross booking revenue across all operational vacation rentals
- 22 total vacation rental markets as of Q3 2023
- Q3 2023 ended with 287 ratings and an average rating of 4.87
- New markets: St. Augustine and Lake Ozark
*Our guest rating is a weighted average for all bookable vacation rentals from the property’s bookable date to the end of Q3 2023.
*These figures include only stabilized IPO properties. All figures are unaudited and subject to change.
Q3 Vacation Rental Occupancy and Owner’s Revenue
Arrived has transitioned from reporting owner’s revenue for vacation rentals through quarterly financial performance reports and shifted to GAAP (Generally Accepted Accounting Principles) reporting on gross bookings revenue. This transition aims to enhance accuracy and align our reporting methods with audited and reconciled filings submitted to the U.S. Securities and Exchange Commission (SEC).
This change signifies a strategic shift in our reporting approach, and any past references to owners’ revenue in quarterly reports should be considered outdated. While we strive for accuracy in our reporting, users are encouraged to cross-verify this information with official SEC filings and other relevant documentation to understand Arrived’s financial performance comprehensively.
In Q3 2023, there were 33 vacation rentals in operation. The gross booking revenue and average guest rating for each rental are given below. Gross booking revenue is reported before any deductions for the property management fee, operating expenses, as well as repairs and maintenance expenses.
Some properties in Q3 2023 — such as The Sugarcreek — generated lower gross booking revenue over the quarter than anticipated. Arrived utilizes property management partners to provide on the ground service for some vacation rentals. While we strive to ensure our PMs adhere to the highest standards, we may on occasion need to transition to a new partner. These transitions can result in temporary lower gross booking revenue. In Q3 2023, Arrived transitioned to a new PM for some of our vacation rental properties, including The Sugarcreek.
You can see more about this transition here:
As we reflect on Q3 2023, it’s evident that the upswing in interest rates has begun to constrain growth in some markets. . This impact, however, has been relatively subdued due to the extremely low housing supply.This highlights both the ever-evolving dynamics of the real estate market and the growing importance of making strategic decisions in residential investments.
Reiterating our investment thesis, we continue to advocate for investing in newly constructed homes rather than existing ones. Based on our experience, builders have shown a stronger willingness to engage in transactions, unlike resale sellers, who might be less accommodating or open to negotiation. This approach, when coupled with our targeted focus on homes closer to an entry level price, positions us well for strong leasing and future appreciation. It’s our belief that these homes are less sensitive to economic fluctuations compared to their more expensive counterparts.
It’s becoming increasingly clear that the residential real estate market is evolving. Gone are the days of a broad bull market where most residential investments could deliver favorable returns. Instead, we find ourselves in what can be described as a “stock picker’s market.” Success in this environment will be defined by meticulously selecting the right geographies, price points, and asset profiles. Ensuring we remain attuned to these nuances will be critical to our success as real estate investors.
We’re so grateful for the trust you place in Arrived to help achieve your investment goals and look forward to a strong finish to 2023.
