Any STR / vacation operators who have raised outside capital?

Question

Hi - my name is Allen Meringolo; I am apart of a group called Pothos Capital that owns and operates STRs in southern White Mountains of NH. My group is syndicating money for our next deal.

Has anyone else here syndicated for STR? If so, a few questions for you:

• What is your overall strategy? Buy and hold?  
• How do you think about your exit strategy if you have one? Who is buying your property?
• How do you think about regulatory risk?
• Do you go big on renovations and value add? Say bigger than you might on a traditional MFH investment?

In general, would love to connect with anyone who has gone through this process. Thanks in advance.

• 
•

Jefferson Brown · Answer

Hi Allen!

We do syndications for our properties as well and I have to say its a very new thing.  As soon as you start syndicating you are dealing with the SEC and have to do things by the book or you will land yourself in jail.  The SEC is the only sector of law that does not care if you did something innocently, if you break the law you get sacked.  If you murder someone on accident you get a lesser penalty than someone who did it intentionally but not in securities law.  That said, there is a right way to do it if you hire the right attorney and pay them a small mountain of money.  You're asking a lot of great questions but it would take me more time than I have to answer all the questions in this thread so feel free to DM me!

Alex S. · Answer

I'm trying to learn more about syndicating as it relates to STRs as well.  In some ways, it is no different than syndicating LTRs, but you are right to dig deeper into the unique risks/rewards.

Thus far in my research the answer to all of those questions is "it depends."

I just finished reading "Raising Private Capital" by Matt Faircloth and he has multiple suggested deal structures to study.  At the end of the day, different investors will want different things, but having some options in your hip pocket might help to guide the conversation.

As far as regulatory risk, my opinion is that you MUST have a backup option if your STRs are regulated out of business.  Even if that option is to sell.  Medium-term is an option in some areas, or even furnished long-term.  The regulatory environment is just so dynamic at this point that a backup strategy should be included in any syndication agreement.

We typically add value through renovation, but there are other ways.  Buying in the path of growth, turning a 4-plex into 5+, improving management, etc.

John Underwood · Answer

I prefer to do the work myself and not split the profits with a group.

Brian T. Grooms · Answer

Good question and what about for the debt portion? Are you working with Local Banks?

Alex S. · Answer

Totally agree, commercial zoning is very helpful!  I am negotiating a deal right now that is mixed-use/commercial (medical office on bottom floor, nice apartment on top).  I feel little to no risk of regulation hitting the STR on the top because "hotel/motel/BnB" are included in the permitted uses.

Cody Z. · Answer

Following

Allen Meringolo · Answer

Thanks for the reply, @Alex S. May check out Raising Private Capital, appreciate the reccomendation on that.

Good point on the backup strategy. The deal we are looking at marginally works at long-term but thankfully is zoned commercial and the town we are has STR by right in all zones so I feel comfortable.

Any STR / vacation operators who have raised outside capital?

Most Popular Reply