Investors look to buy homes to use as Airbnb rentals
Investors looking for yield in the frenzied US real estate market are exploiting a new strategy: building massive portfolios of homes for rent on Airbnb.
A recent filing reveals that Dublin, Ohio-based ReAlpha is looking to spend up to $ 1.5 billion, including debt, to purchase short-term rentals on an unprecedented scale.
The money would be enough to buy around 5,000 homes, CEO Giri Devanur said in an interview.
Emboldened by a post-pandemic travel boom and in search of better returns than they can get in hotels or apartment buildings, other companies are leveraging the strategies employed by disjointed entrepreneurs who have built small portfolios of short-term rentals and have helped Airbnb Inc. increase for ten years.
Plans to purchase giant rental pools would mark a shift towards a consumer experience with Airbnb that is more like a hotel stay.
But it comes as record home inventories drive up prices for average buyers and Wall Street investors.
“The business model has been proven successful, and now the opportunity is to do it at scale,” said Scott Shatford, CEO of AirDNA, which provides data and analysis to the industry. “People don’t know how to deploy capital fast enough. “
Devanur, who went public with enterprise software company Ameri100 in 2017, said he wanted to open up access to real estate investing by allowing ordinary people to buy fractional ownership of short-term rentals on the market. application of his company.
ReAlpha plans to use artificial intelligence software to rate real estate listings and make quick decisions on how much it is willing to pay.
The company will target markets such as Dallas, Miami and Austin, Texas, where it can acquire 100 to 500 homes. And he’s exploring ways to buy homes at a discount when a federal moratorium on foreclosures ends.
“We talked to a bunch of banks where we can buy hundreds of properties at a time,” Devanur said. “We can analyze thousands of properties in a minute. For us, it’s all about technology.
The rise of Airbnb over the past decade has inspired a generation of entrepreneurs who buy, furnish and manage small-scale vacation rentals.
Larger companies have also sprung up, often focusing on managing properties rather than owning them. In some cases, they branded their offerings, creating accommodation businesses similar to Courtyard by Marriott or Hampton Inn.
Venture capitalists, meanwhile, backed companies that rented apartments to building owners and converted them into a new class of hotels.
One of those companies, Sonder, is expected to go public through a merger with a blank check company later this year.
Yet owning short-term rental homes in remote locations is difficult. This forces homeowners to route house cleaners and maintenance people over large areas.
While long-term leases protect office, apartment and warehouse owners from economic shocks, the hospitality industry does not benefit from such a buffer.
Home ownership won’t be easy at a time when low inventory is pushing up prices and investors like Blackstone Group Inc., KKR & Co. and others are committing billions of dollars to buy single-family rental homes.
Short-term rental investors may focus on different types of homes than regular buyers or Wall Street homeowners, but capital is pouring into residential real estate. from all over will make houses more expensive to pass, to visit, to arrive before.
For Airbnb, the arrival of larger and more sophisticated investors could be a blessing, even if it contradicts the company’s efforts to market itself as a way for travelers to discover new places like local residents.
Large investors represent a potential source of new listings and may come up with a product that will appeal to people who enjoy the comfortable uniformity of hotels.
An Airbnb representative declined to comment.
The growing appetite for short-term rentals will attract tens of billions of dollars in the years to come, said Sean Breuner, whose company, AvantStay, manages branded properties offering concierge services.
She also operates a brokerage firm to help investors find real estate.
“This is the last remaining asset class with a return remaining,” Breuner said. “We believe there is a huge opportunity for institutionalization. “