Founded in 2020, Flock Homes is a real estate company and fund operator empowering landlords to exit from their rental properties through the 721 exchange.Through Flock Homes, real estate investors can use the 721 exchange to exchange their single-family, duplex, triplex, or quadplex rental properties for ownership in Flock’s fund without triggering capital gains taxes. While in Flock’s fund, investors benefit from continued access to steady cash flow and residential real estate appreciation, without any responsibilities of managing rental properties.
Where did the 721 exchange originate?
721 exchange refers to Section 721 of the US Internal Revenue Code, the same tax code that stipulates the commonly utilized Section 1031 (also known as the 1031 exchange). Section 721 was established in 1954 and has been used for decades by institutional investors to minimize taxes on real estate. Flock Homes has pioneered a platform that empowers individual landlords to access the same benefits of the 721 exchange. See our How It Workspage for more details.
Once I join Flock, do I still own my home?
No. Once you join Flock, title of your homes is transferred over to the fund and you now own equity in Flock’s diversified fund. As a result, you retain all of the benefits of real estate ownership, including access to cash flow and appreciation potential. However, you do not hold liability for managing any singular home.
What kind of homes can I contribute to the Flock fund?
Flock’s fund accepts single-family, duplex, triplex, and fourplex rental homes. All rental homes that join Flock’s fund must meet our financial return requirements. Homes with lower mortgage balances (generally, less than 50% of the home’s value) are more likely to be accepted into the fund. To see if yours qualifies, click here to submit your rental homefor an evaluation and our team will connect with you to discuss your offer.
How do I earn as a client of Flock’s fund?
With your ownership in Flock’s fund, you have the ability to access cash flow from the rental income collected from the fund's portfolio of homes, and you continue benefitting from potential real estate appreciation based on the price performance of the homes in Flock's fund. You also transition into a fully passive approach to real estate investing, which has given Flock clients back countless hours of time and invaluable peace of mind. All operations of the homes in Flock’s fund, including leasing, repairs, and even HOA payments are fully managed by our team of professionals.
How does Flock help me minimize my taxes?
The 721 exchange allows you to defer substantial capital gains and depreciation recapture taxes you might otherwise trigger in a traditional sale of property. Following the minimum hold period, you can also access greater cash flow quarterly and better control your tax liability by liquidating Flock equity over time. Finally, Flock equity also benefits from a step-up in tax basis upon inheritance (read this for a detailed explanation on the step-up in basis), which can provide your heirs significant tax savings when they choose to liquidate their equity. We recommend you consult with your tax advisor, attorney, and/or the IRS website to understand how Flock can complement your personalized tax planning.
About Flock Homes
What is the relationship between Flock Homes and Flock’s fund?
Flock Homes is the General Partner of Flock’s fund (Flock Homes OP LP). In other words, Flock Homes acts as the manager of the fund, which is collectively owned by all of the investors who have contributed homes to the fund.
What experience does the Flock Homes team have?
The Flock Homes team encompasses decades of investment and management experience from the largest real estate institutions in the world, including J.P. Morgan, State Street Global Advisors, and Progress Residential, and has used their expertise to help 100+ landlords retire from real estate through Flock Homes. Learn more about the team here.
What happens if Flock Homes goes bankrupt?
Flock Homes (our company and General Partner to the fund) is an independent entity from the Flock fund, which contains all of the high-quality income-generating assets collectively owned by the investors, including yourself. As a result, as long as a fund administrator is in place, the fund can continue to operate. In the unlikely case Flock Homes were to go bankrupt, another large institution, such as a REIT or a private equity firm, could acquire the portfolio’s homes, and you would be issued equity or cashed out. Alternatively, Flock could sell the homes in a bulk transaction(s) or one-by-one for cash proceeds, which would be returned to you.
What is Flock’s historical performance?
Flock has met or exceeded its cash return target to investors every quarter since inception.
Is Flock regulated by the SEC?
Yes, Flock’s fund is regulated by the SEC and we file a Form D annually. You can find our filings on the SEC website here.
Compare & Contrast
What is the difference between the 721 exchange and the 1031 exchange?
Many real estate investors utilize the 1031 exchange to sell their home for proceeds, and use those proceeds, tax-deferred, to purchase other investment real estate. With Flock Homes, investors can use the 721 exchange to seamlessly exchange their homes, tax-deferred, for direct ownership in Flock’s managed real estate fund. With a 1031 exchange, investors commonly continue to be active investors and operators of real estate properties. With Flock, the 721 exchange enables investors to take a long-term, passive approach to real estate investing.
What is the advantage over hiring a property manager?
A good property manager can offer some relief from your rentals, but as long as you hold title, you hold outsized financial and legal liability for any downside, including vacancies, repairs, evictions, and even uncontrollable disasters. By owning equity in Flock’s fund, your risk is diversified across hundreds of institutionally managed homes - you’re not liable for any single property. Our team manages absolutely everything, including leasing, repairs, and HOA payments, for every home in the fund. Because we are accountable for the long-term performance of the fund’s homes, our incentives are also closely aligned with yours.
What is the advantage over selling my house and buying shares of a REIT?
Depending on your ownership history, you could trigger thousands in capital gains and depreciation recapture taxes when you sell your rental homes. Instead of buying shares of a REIT and investing with significantly reduced after-tax proceeds, Flock Homes allows you to earn from a fund with tax-advantaged proceeds. The difference in returns can be substantial. Furthermore, Flock’s fund is purpose-built for long-term-oriented, retiring investors. Our platform also provides unparalleled reporting transparency. If you’d like an assessment of your estimated Flock returns, click here to submit a rental address, and one of Flock’s Real Estate Advisors can provide you with a complimentary evaluation and a demo.
Flock's Portfolio
What kinds of homes are in Flock’s fund?
Flock’s fund contains the same types of homes that Flock acquires: single-family rental homes, duplexes, triplexes, and fourplexes that meet Flock’s financial return requirements. Visit our portfolio pageto view the homes that are in Flock’s fund.
How does Flock Homes operate the homes in the fund?
Flock Homes operates all homes in the fund as long-term rentals. We have a local team in every market where we own homes, complemented by third-party property managers that we actively manage. We believe local, responsive, and knowledgeable property management delivers the best experience for residents, the community, and ultimately, the fund clients.
How does Flock Homes determine the value of the fund?
The fund’s value is refreshed every quarter using a combination of automated valuation models (AVMs) and third-party appraisers. Every home in the fund is required to be appraised by a third party appraiser once every 24 months.
Will Flock Homes ever sell the homes I contributed to the fund?
Flock’s goal is to own and operate homes on a long-term basis as single-family rentals. That being said, our fiduciary duty is to generate the best returns for the fund and its investors, and from time to time, we will strategically reposition individual assets to optimize fund performance. In these situations, Flock Homes has historically utilized 1031 exchanges where possible to preserve tax efficiency for contributors.
Transaction Process
How do you determine your offer prices?
Flock’s goal is to provide fair-market value offers on all rental properties. We will only transact on homes that meet our return criteria and support the performance of the fund. Our offers are determined through an industry-standard underwriting process, incorporating leading AVMs and market comparables, based on property characteristics such as configuration, location, and condition. We perform formal inspections on all prospective homes before finalizing our offers.
Can Flock acquire homes with a tenant?
Yes. Flock Homes can accept homes that are occupied or vacant. If the home is occupied, we will honor the existing lease and work with the resident to renew once the lease expires.
Can Flock acquire homes with outstanding mortgages?
Yes. Flock Homes can acquire homes with outstanding mortgages, however, homes with lower mortgage balances (generally, less than 50% of the home’s value) are more likely to surpass Flock’s acquisition criteria for the fund. At close, Flock Homes pays off your existing mortgage with your lender, and the value of Flock equity you receive will be tied to the remaining value of your equity.
Can I receive cash?
While we are not a cash buyer, we do offer limited cash at close on a case-by-case basis. Click here to submit a rental address for an evaluationand a Flock Homes Real Estate Advisor will connect with you to discuss available options.
What fees does Flock Homes charge?
Flock Homes charges investors two simple fees: a one-time onboarding fee of 6% and an ongoing annual management fee of 1%. The onboarding fee is deducted from the value of your received equity in Flock’s fund, and the ongoing management fee is collected from the net operating income of the fund. Investors typically do not need to separately provide cash to transact or own with Flock. Unlike many other funds, Flock does not charge a performance fee. Read our Fee Documentfor more information on our fees.
What happens with my rental homes after closing?
The title of each rental home is transferred to Flock’s fund, of which you are now an investor. After closing, we will perform necessary value-add renovations, repairs, or maintenance to maximize long-term earning potential. We continue to lease them out as long-term, single-family rental properties.
Client Experience
What returns should I expect from Flock?
Flock’s fund targets an 8-12% internal rate of return to its investors based on the performance of the portfolio of homes in Flock’s fund. This return encompasses 1) income generated by the portfolio’s rental activity and 2) appreciation of your equity based on the price performance of the portfolio’s real estate. For many Flock clients, the peace of mind and countless hours they reclaim is an invaluable benefit.
How do I access cash flow?
Cash flow is paid quarterly. You can receive it as cash or equity in the fund. Historically, cash received by investors in Flock has also benefitted from favorable tax advantages.
What access do I have to the portfolio and my financial performance?
Upon joining Flock’s fund, you will gain access to your personalized online Client Portal, where you will have full detailed reporting on your financial performance. You also gain full visibility into the fund’s financials and real-time asset-level activity, such as individual leasing, renovations, and more. To preview the portal, click here to submit your rental address for an evaluationand one of Flock's Real Estate Advisors can provide you with a complimentary demo.
What communications will I have with the Flock team?
We strive to provide you with a white-glove and collaborative ownership experience. You’ll have a direct line to Flock’s Client Advisor. Additionally, we hold quarterly investor calls to report on portfolio performance and strategy and quarterly Clients’ Forum meetings discuss our performance with you live.
Will I still receive depreciation from my stake in Flock?
Yes. If your contributed property had an unclaimed depreciation balance, you will continue to receive depreciation.
How do I liquidate my equity?
After a minimum hold period, your equity can be redeemed for cash directly with Flock, subject to the terms and conditions of the fund documents. Your equity can be redeemed all at once or spread out over a number of years to reduce potential tax liability. Just like selling investment properties, redeeming your equity for cash can be a taxable event.
Can I pass my Flock equity onto my heirs?
Yes, with significant tax advantages. Like a traditional rental property, Flock equity ownership benefits from a step-up in tax basis upon inheritance, which can grant your heirs substantial tax savings when they eventually liquidate. Additionally, the flexibility afforded by owning equity in Flock’s fund rather than one illiquid property makes Flock an attractive estate planning instrument. However, we recommend you consult with your tax advisor, attorney, and/or the IRS website for personalized advice on your situation.