Short-term rental funds?

Question

Have you ever heard of short-term rental funds? These funds would pool money from investors, buy and convert homes into short-term rentals and then return rental revenue to the investors. Any idea how they might be structured? I'm interested in how this is done on a small scale, but mostly on how it could/or could not be done on a large scale. Thoughts?

Andy Thoms · Answer

The AirBnB short term rental fund is an interesting space right now for real estate investors. The yields on AirBnB property investments can be very favorable, 2X to 4X gross yields. Adding this asset class mix to a traditional long-term rental portfolios can help to diversify your holdings and income streams. That said, you need to have real passion for skills required to run a SFR "hospitality" business to succeed. I am actively buying-fixing-managing AirBnB units and in the early stages of creating a private offering for a short term rental fund I am seeking an alliance or partnership with someone who has capacity and experience in raising funds through accredited investors who can manage the fund raising and investor relations side of the business, while I focus on strategic acquisitions, stabilization, and management/operations. Thanks for messaging me if you are interested!

Alex Concepcion · Answer

One of the reasons I love STR's is the chance to blend your lifestyle and investing goals. With an effective management process in place, it's easy to just swoop into your own property for personal use.

But this is definitely an industry that's rapidly evolving. I would do a lot of research before moving forward. STR investing has a very different approach than traditional investing

As for a fund, Equity Residences does something like this.

Mark Kelley · Answer

Hey @Mickey Kropf. It's been a while since TSF. Hope everything is going well for you and Andrew. Looks like you all are getting traction at Rented.com. That's great!

Patrick V. · Answer

Hi Percy,

I focus on the midwest...resort towns, Great Lakes, etc. Although seasonal (spring/summer/fall or summer/winter depending on area), in certain towns the returns are great. Less restrictions and competition as well compared to Southeast, islands, etc.

Patrick V. · Answer

I was thinking of doing something along these lines...If an investor wanted to invest in vacation rentals but didn't have time or experience to find properties, I would serve various roles to facilitate and manage the investment. For example, I would utilize my experience to identify the best area for an investor, then find  or design and build a VR. I would then manage the property. Investor would supply the capital, and we would split ownership and income 60/40 or something like that.

Jon Latorre · Answer

@Dj Larsen STR's have great potential if done right and I think trying some "new dog" tricks might be beneficial to your portfolio! Congrats on taking the plunge.

It sounds like you're going for more of a B&B feel as opposed to a true short term rental to me. 5 bedroom lakefront homes in Tahoe have the potential to bring in big bucks with regards to rental revenue. Does the home have a shared kitchen or just the commercial kitchen in the separate building?

Would love to connect and talk more! Sent you a colleague request.

Dj Larsen · Answer

We love the promise of STR (short term rental) returns, but have zero experience.  We have been focused on long-term MF rentals in destination locations, in the hopes of reduced vacancies, higher monthly rents, and enjoying our asset tours.  As an "old dog" I am comfortable (trapped) with what we know and fearful of what we don't.  So, we did some research (staying in ABNB sites and talking with managers and owners - very enjoyable).

So we purchased a distressed 5 bedroom house with  a commercial kitchen in South Lake Tahoe.  We will have a great retired couple (long term tenant) provide the hospitality and day to day care in exchange for a deeply discounted rent to live by the lake.  We will have 4 rooms with baths to rent out at $70/night until we can figure out what the market really is for this property.  If all goes we we will convert the commercial kitchen (separate building) into a bunk house with a bath.  If it does not go as planned we will go back to what we know BRRR it.

We will kick-off our STR experiment in June.  Would love to get input from STR pros or feedback from others doing it, or tying to diversify into STR's.

Francisco Arango · Answer

@Andy Thoms I have 4 units in Hawaii and am about to put in offers on 4-7 more units in different states. I'm doing this with my own money and a partner to show proof of concept and business model to potential investors later on down the line. I'd like to share with you my strategy and get your thoughts on it.

I don't have the skill set to create a fund so I am also looking for someone that can partner with me and handle that side of the business. I'll prove the business with my own money, I just need someone to be good on the funding side. I would like to raise 50M but start with just 5M with the option to get 45M more if I execute well on the 5M.

Short-term rental funds?

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