| 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 |