If you’ve been looking for a way to buy shares in single-family rentals, Ark7 offers a great option with low investment minimums.
A relative newcomer, Ark7 blends the fractional property ownership of Arrived with the liquidity and secondary market of Lofty. In fact, they do you one better: there’s no convoluted cryptocurrency involved, unlike Lofty’s real estate investing platform.
Here’s how Ark7 works and why over 30,000 investors have bought shares through the real estate company so far.
Ark7 Review at a Glance
Minimum Investment: $20
Prospective Returns: 5–15%+
Fees: 3% acquisition fee, 8–15% property management fee
My Take: An easy, polished, low-cost way for non-accredited investors to buy fractional shares in many different rental properties.
What Is Ark7?
Ark7 is a real estate crowdfunding platform that lets you buy fractional ownership in multifamily and single-family rental properties. That includes both long-term and short-term vacation rentals, although the latter are only available to accredited investors.
It starts with Ark7 finding and buying properties, leasing them out, and offering shares for sale on their marketplace. New property shares are priced at $20 per share. Ark7 retains a 1–10% ownership interest in each property, and sells the rest of the ownership in the form of shares.
Once the initial shares have been sold, and after a one-year waiting period, the shares start trading on a secondary marketplace. You can buy or sell shares at pricing you set.
When you buy a share in a property, you’re entitled to receive both rental income as distributions and appreciation as the property rises in value.
How Ark7 Works
After creating an account, you can browse available properties on Ark7’s marketplace. That includes both new property offerings and properties trading on the secondary market.
The platform features detailed information about each property, from the local real estate market to nearby schools to financials. The latter includes a breakdown of acquisition costs and fees, the cash flow numbers from rent to operating expenses, historical and projected appreciation, and more.
After a minimum holding period of a year, you can sell your property shares if you like. Ark7 offers a secondary market where buyers and sellers set the prices they’re willing to pay or accept for their shares.
You can invest in property shares on Ark7 through a self-directed IRA. In fact, Ark7 partnered with IRA custodian Millennium Trust Company to make IRA investing seamless (more details below).
Review of Ark7 Advantages
If it seems like Ark7 comes with plenty of pros, it does. Here are a few reasons I like Ark7 and have invested in properties on it myself.
Low Minimum Investment
Everybody has $20. And if you don’t, you have bigger problems than wondering how you’ll add real estate to your investment portfolio.
Snark aside, the low minimum investment makes it easy to diversify your real estate portfolio. You can invest as little as $20 apiece in many different properties, which helps spread and reduce risk.
Ark7 currently owns properties in seven different real estate markets, and continues to expand.
Non-Accredited Investors Allowed
You don’t have to be rich to invest in property shares on Ark7. (If you did, they’d set the minimum investment a lot higher than $20.)
Non-accredited investors can invest in long-term single-family rentals. Unfortunately, only accredited investors can invest in multifamily rental properties and short-term Airbnb rentals.
Real estate investments? Awesome. Being a landlord? Less fun.
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Liquidity & Secondary Market
Investors can buy and sell shares on Ark7’s secondary market, so you’re not stuck holding properties for five or more years like so many real estate investments. The secondary market works like a stock exchange: sellers set an asking price and buyers offer a bid price. When the two overlap, a transaction takes place at that share price.
However, shareholders do need to hold them for at least one year before they can list shares for sale on the secondary market. But a one-year hold still makes Ark7 a rare short-term real estate investment.
Minimum holding period aside, this liquidity lets you diversify your real estate investments without the strong correlation to the stock market that REITs have. Read: true diversification.
Transparent Fee Structure
Ark7 charges a 3% sourcing fee to cover their expenses when they buy a new property.
After that, they only charge for in-house property management fees. These vary from 8–15% depending on the property, with long-term rentals typically costing 8–10% for property management and short-term rentals costing more.
Built-In IRA Investing
You can open a self-directed IRA on Ark7’s platform, as either a traditional IRA or Roth IRA account.
To serve as your IRA custodian, Ark7 partnered with Millennium Trust Company, the same custodian that powers Fundrise IRAs. For their IRA custodian service, Millennium charges $100 per year per property, capped at a maximum of $400 per year. They waive this fee if your total IRA account balance exceeds $100,000.
With a self-directed IRA, you can invest in almost any other type real estate investment as well. Read more on investing in rental properties with an IRA, and on how to invest in real estate with a 401(k).
Polished Web Interface & Mobile App
When you log into the Ark7 dashboard, it’s clean and simple. You can easily browse properties and click on each to view the details about it.
For mobile-first users, Ark7 offers a mobile app with full functionality. It’s intuitive and easy to use.
Bank-Level Security & Encryption
Ark7 is quick to boast about their digital security features. As well it should keep a close eye on security, given that you connect your bank account to it for funding investments and receiving payouts.
As real estate investment platforms go, it’s extremely secure.
Short-Term Rentals & Multifamily Available
Beyond long-term rental properties, Ark7 also offers short-term Airbnb rentals and multifamily rental properties. That adds more ways to diversify your investments.
For accredited investors, that is. Sadly, non-accredited investors can typically only buy shares in single-family homes used as long-term rentals.
For all those advantages, Ark7 comes with its fair share of cons, too. Make sure you understand all the risks and disadvantages before investing on Ark7’s platform.
Limited Track Record
Founded in 2018, Ark7 has bought and traded a few dozen properties. To my knowledge, they haven’t sold any properties yet.
But that’s the beauty of the secondary market — they don’t have to sell any properties, ever. Whenever you want to liquidate your shares, you can, regardless of Ark7’s plans to list the property for sale.
Restricted Access for Non-Accredited Investors
Non-accredited investors can buy shares in long-term residential properties, but not short-term rentals or multifamily properties. The latter are restricted to “Ark7+” members, who have verified their accreditation status.
That often leaves them with few options for investing, raising the next point.
1-Year Minimum Holding Period
Make no mistake: the one-year minimum holding period for property shares is far shorter than the usual length of time investors own real estate. That goes for owning rental properties directly, investing in real estate syndications, and other real estate crowdfunding platforms.
But it still removes liquidity for the first year, unlike other investing options like stocks, bonds, of Concreit.
Limited Property Selection
At any given moment, there are only a handful of new properties available for sale on Ark7’s marketplace.
At the time of writing this Ark7 review, there are four initial offerings on long-term rentals available for non-accredited investors, plus two properties listed on the secondary market. There are seven new share properties listed on Ark7+ for accredited investors, and six properties listed on the secondary market for these investors.
That said, there are many properties that are still incubating in their first-year holding period, and are scheduled to hit the secondary market in the coming months.
I’m a huge fan of automation in my savings and investments, where practical. Many real estate crowdfunding platforms, such as Fundrise, Groundfloor, and Streitwise, allow various forms of automated investing. That includes recurring transfers and automatic investments.
Ark7 does not offer this automation, which I understand – you want to be able to pick and choose specific properties based on their financials and the market. But it’s still worth mentioning.
Ark7 Review: How It Compares
The two most direct competitors are Arrived and Lofty, which also offer fractional real estate investing in rental properties.
But each comes with a significant drawback compared to Ark7. Arrived does not offer a secondary market for buying and selling shares – you’re stuck with your property shares until Arrived sells the property. Arrived also doesn’t maintain any equity interest in properties; they sell off all of it in the form of shares.
Lofty does offer a secondary market, but when you sell property shares, you get paid in a cryptocurrency. That means you have to go through the laborious process of converting that niche cryptocurrency into a more mainstream crypto coin, and then convert it again to U.S. dollars. Talk about friction.
And, of course, you can buy fractional ownership in apartment complexes and other commercial properties through real estate syndications. The minimum buy-in is dramatically higher: $50–100K if you invest by yourself, or $5K if you invest through a real estate investment club like ours. Bear in mind that real estate syndications also don’t offer any liquidity. But you can typically earn much higher returns, often 15–30% instead of the 5–15% you’re likely to earn on Ark7, Arrived, and Lofty.
Should I Invest in Ark7?
If you like the idea of investing small amounts to buy fractional ownership in individual properties, Ark7 is in many ways the perfect platform.
It offers monthly income and strong liquidity, at least after the first year. It’s open to non-accredited investors, and you can invest with as little as $20. That makes it easy to diversify and spread your money across a wide range of properties.
But if you’d only consider a real estate investing platform that’s been around for a decade and done hundreds of property deals (like Fundrise), you may not feel comfortable with Ark7’s limited track record. Others may prefer the instant diversification of buying shares in real estate funds, rather than individual real estate properties.
Personally, I started small with Ark7, but I like the platform and am gradually growing my portfolio of properties there. Consider it one more option for passive investment in real estate, offering solid potential returns with none of the headaches of property management.♦
Does Ark7 appeal to you as a real estate investor? How do you find the range of investment options — enough to build a diversified portfolio?
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About the Author
G. Brian Davis is a real estate investor and cofounder of SparkRental who spends 10 months of the year in South America. His mission: to help 5,000 people reach financial independence with passive income from real estate. If you want to be one of them, join Brian and Deni for a free class on How to Earn 15-30% on Fractional Real Estate Investments.