How to Value Your Arrived Investment
Arrived property 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.
Beginning six months after escrow closing, we use third-party estimates to update the values for each property. Single family residential Share Price values are updated beginning at 6+ months. Vacation rental properties are updated beginning at 12+ months after initial property funding. All properties are updated each subsequent quarter.
More details specific to vacation rental share price calculations will be added after the first quarterly update and may differ from single family residential calculations. Tracking share prices is only part of how you can build wealth with Arrived. The rental income paid out quarterly is separate from this topic and not included in share prices.
Visit your Portfolio Page today to track the long-term property value appreciation and 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 on our Historical Performance page.
Remember that share prices are intended to reflect the property's current value. While real estate prices typically appreciate consistently over the long term, they may fluctuate more in the short term depending on the local housing markets.
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 buy 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 third-party property value estimates to approximate the property’s current value as well as a manual review to ensure there are no extreme outliers in the data.
That new property value is added to the balance sheet for the LLC. The LLC's biggest asset is the property, but there are other valuable assets like the cash reserve. We also factor in the liabilities, such as the loan balance and accrued property taxes. The result estimates the total equity investors own in the LLC.
We also make some adjustments for the upfront fees involved in the investment. This includes the closing, offering, holding costs, and Arrived sourcing fee. Arrived investments are designed 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.
How are Vacation Rental Share Prices Different?
A few key differences exist between our vacation rental share prices and single family residential share prices. While single family residential share prices are updated beginning at 6+ months after the initial property funding, we update vacation rental share prices beginning at 12+ months.
In addition to the different update cadences, we have found that both asset types perform differently, particularly at the beginning. When analyzing vacation rental share prices, it is important to remember that they require high initial costs to start operations and a significantly longer ramp-up time to start generating income.
Unlike traditional single family residences that often start producing income within 45 days, vacation rentals can require 3-5 months before becoming booking-ready. The property needs to be designed, furnished, and sometimes renovated during this time. Additionally, staff recruitment and training (cleaning, repair and maintenance, photography, etc.) are required to prepare a property for operations. Once the property is ready to be booked, it also takes time to climb Airbnb search rankings, optimize dynamic pricing, and maximize the occupancy rate.
This may lead to a common trend of initial Share Price reduction followed by a recuperation period over the lifetime of the investment. This is because the Share Price of each property takes into account its property value and cash balance, which is reduced by the initial expenses.
Ramp time delays and the higher initial fixed costs for vacation rentals lead to a steeper version of the typical investment J-curve. As a result, the initial phases of vacation rentals often experience a much higher initial decline in share price performance than single family residential properties. While share prices react to the market in the short term to show a rough valuation of the property's value, the expected hold time for vacation rentals is five to fifteen years, compared to the estimated five to seven years for single family residences.
Appreciation Takes Time
One of the biggest appreciation factors is the time since the property’s IPO.
It takes time for a neighborhood to see noticeable changes in property values. Unlike the stock market, the real estate market doesn’t see big daily, weekly, or 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 upward 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 for six-months from IPO to start re-valuing the shares.
As time goes on, 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.
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.
You can view the share prices for all properties on our Historical Performance page.
Importance of Diversification
In the simplest terms, diversification refers to spreading your money out in different markets, across different asset types, and with various investment strategies.
There are some significant benefits to diversifying your investment portfolio. When you “spread the wealth” as an investor, you spread risk between multiple types of investments. This is also true in real estate investing, where investing in multiple single family residential, vacation properties, or the Arrived Single Family Residential Fund can help balance your portfolio.
Learn more about The Importance of Diversification .
Different Markets Have Different Return Profiles
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 most returns come from appreciation.
With the introduction of share prices, investors can track that unrealized appreciation to monitor investment performance.
What if my Share Price Is Negative?
There are a few potential causes for a share price dropping below the initial $10 value.
Lower Cash Reserves
Given that the Share Price is calculated using all the assets and liabilities owned by the LLC., if the cash reserves have become reduced, the share price will be reduced as well. The cash reserves can be affected by things like servicing loans, vacancy while the property is initially marketed to investors, or repairs and maintenance costs.
Lower Property Value
The property value has decreased per a third-party valuation estimate. These professional third-party data sources estimate the home’s value, and then our investments team does a manual review to ensure no extreme outliers in the data. If the property value is estimated to be lower than the purchase price, the Share Price will reflect that and be reduced.
Pro-rated Upfront Fees
The share prices also include adjustments for the upfront fees involved in the investment. The Arrived sourcing fee and the other upfront investment costs are meant to be for an investment period of at least five years. Accordingly, we structure these costs so that the Share Price reflects only the prorated fees up through that time.
While share prices react to the current market in the short term, we maintain that real estate performs best as a long-term investment, all while investors continue earning dividends through rental income.
