Brokerage fees and a share of the profits are all Andes STR takes from investors hoping to buy short-term rental properties. The rest seems easy – at least on the investment side.
Sebastian Rivas is the CEO of Andes STR, a rental management and short-term investment company. Rivas believes the future of housing lies in short-term rentals as remote workers discover a more fluid way of life, settling where they want while maintaining jobs.
The Houston-based company doesn’t just invest in vacation rentals; it also makes them available to individuals or small investors as investment properties. The individual owns the property, while Andes STR takes care of the rest.
Andes STR and WEG Capital recently announced they have raised $25 million funds to buy single-family homes aimed at the short-term rental market with a focus on the Orlando, Florida area for its year-round demand for Airbnb-style accommodations.
CO: How does investing with Andes STR work?
Sebastien Rivas: We use our proprietary machine learning technology to find the best properties that will be the most profitable, and this algorithm works remarkably well. Then, assuming the investor – the client – agrees with the investment, we execute everything on their behalf. So we will buy the property from them, find them financing, furnish and manage everything. So it’s almost like buying a single-ownership REIT. It’s like a fund, but you own everything.
What markets does Andes STR target for its clients?
We buy and manage many different types of assets. Thus, single-family homes, multi-family buildings, condos, townhouses, small hotels; we are very agnostic as to the type of ownership, the type of asset. What really matters to us, however – and this is one of the strictest requirements – is the underwriting process. This means that in any market we open and operate in, we need to have a strong thesis on this. We have to be convinced that it is a good investment, because we sell investments, don’t we?
We don’t just manage properties. That’s not what we do. We also manage properties, but that’s not what we do. Part of that thesis is location, so some places like Toronto, for example, we like downtown condos, really good assets. They work great. Most people who go there are the most willing to pay for accommodation. Highly efficient, high returns, low risk, very optimal.
Can you give an example of another type of market in which you invest?
Orlando, for example, is the opposite [of Toronto]. So condos and multifamily don’t do very well in general; there’s too much. But big houses, they’re great. So in Orlando, we love Orlando for several reasons. But besides in Orlando, we love single-family homes.
How does the investment process work for your clients?
We have three products. One of them is for individual investors. The vast majority of people only buy one [property]. And then we have what’s called separate managed accounts, and it’s basically small funds that we do for a select group of people. So let’s say you’ve saved some money and you want to bring your parents, your brother, your friend over and all of you create a vehicle, and we handle everything for that vehicle. And it’s like having a personalized fund. Then the third is that we usually also work with big asset managers to launch funds, and it’s the one that was highlighted in the Wall Street Journal recently.
There is a comparable difficulty between getting a mortgage for a house you will live in and a rental property. How does your company handle some of the paperwork with lenders?
If we talk about individual investments, we first talk with the investor. We create an investor profile and then determine if that investor has better access to debt than we can offer. If we find that their terms are better than we can get, we sort of take over and start working with their bankers. More often than not, we can get them better terms. So at that time we have a network of partner lenders who give us preferential terms because they basically know the results we get. They know we manage the property and they know we only choose the best performing asset, so it’s less risky. Therefore, they can give us better prices.
When it comes to using apps like Airbnb, are there any concerns about the stability of Airbnb as a business, and how does that affect you?
There are, but it’s very muted, and the reason for that is when we market or list those properties. We are what is called “multi-homers”. And that means we have homes on many different platforms. For example, in Toronto, the best platform is not even Airbnb. It’s actually booking.com. It is the most profitable. In Orlando, VRBO is very big. Galveston, Texas is actually Airbnb. There are over 500 of these platforms, of which at least five are huge. So if something happened to one of them, it wouldn’t change much.
Mark Hallum can be reached at [email protected].
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