This vacation home listed on Airbnb could belong to Wall Street

Investment firms are buying more vacation homes, aiming to cash in on growing demand from tourists and remote workers.

Most vacation rental homes are owned by small landlords who list their properties on websites such as Airbnb. Inc.,

but the number of financial firms investing in the sector is growing.

New York-based investment firm Saluda Grade is launching a venture with short-term rental operator AvantStay Inc. to buy about $500 million worth of homes, the companies announced Tuesday. Saluda Grade said it was also looking to increase its debt by selling mortgage bonds backed by its homes to investors, the first vacation rental mortgage securitization, according to the company.

Andes STR, a startup that buys and manages short-term rental homes on behalf of investors, also recently signed a deal with Chilean investment firm WEG Capital to buy approximately $80 million worth of properties in the United States. United, said Andes.

These investors are betting that they can get higher returns if they rent homes by the night rather than the year.

Low interest rates have made it more attractive to borrow and buy traditional rental homes, inflating house prices and making it harder for new buyers to make a profit. This has prompted some institutions and wealthy families to seek out darker corners of the real estate market where competition is tighter, investment advisers say.

Some are turning to investments in vacation homes, where demand has increased in many places during the pandemic as more people choose to work in remote locations and leisure travel has intensified during the pandemic. last year.

“There’s a lot more yield available in the short-term market,” said Saluda Grade managing director Ryan Craft.

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It’s the latest sign of how the pandemic is changing the way people work and live, and how real estate investors are looking to find new ways to profit from these changes.

Saluda Grade targets homes within driving distance of major population centers, Mr Craft said. His company will buy the homes and AvantStay will manage them for a fee.


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But while vacation homes can offer higher returns, they also pose challenges for investors. Mortgages are typically more expensive and harder to get for short-term rentals than for owner-occupied homes, said Giri Devanur, CEO of reAlpha Tech Corp., a startup that wants to pool money from small investors to buy short term. rental houses.

Buying properties one by one takes time, making it difficult to invest large sums. A number of cities have tightened restrictions on short-term rental listings, and more may follow.

“Regulatory risk is a huge issue,” said Sebastian Rivas, CEO of Andes STR.

AvantStay CEO Sean Breuner said the vacation rental industry may follow a similar path to single-family rental homes, which have attracted increased investment from private equity firms and others. finance over the past decade.

Companies such as Invitation Homes Inc.

bought thousands of rental units in the years following the 2008 financial crisis, helping to drive up property values ​​and attract lenders. “We see the same thing happening in the short-term rental space,” Mr. Breuner said.

Write to Konrad Putzier at [email protected]

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