Short-Term Rental Investment Funds to See More Action This Year Expect More Short-Term Rental Investment Funds This Year

25.08.2023 - 13:56 / skift.com / Srividya Kalyanaraman / This Year

Exactly a year ago Skift reported private equity chasing investments in short-term rentals and vacation rentals. At the time though, a short-term rental real estate investment trust (REIT) seemed distant. 

In October last year, luxury vacation rental brand Wander launched what it called the industry’s first vacation rental REIT named “Atlas” — with an attempt to attract investors with high yield-passive income promising eight percent annual returns and 14 percent targeted total return.

More an exception rather than a rule, a hospitality REIT-like trust for short-term rentals is yet to become mainstream. But short-term rentals are definitely growing as an asset class for deep and shallow-pocketed investors all alike. And the number of companies selling short-term vacation rentals as an attractive investment opportunity is on the rise — Pacaso, Voyax, Here — to name a few.  This shouldn’t come as a surprise as U.S. short-term rental owners, investors and hosts generated over $62 billion in 2022.

The newest entrant with an offering is reAlpha, an real estate technology and investment company, which launched its fractional ownership platform for short-term rentals on Tuesday. The first vacation rental available for investing on its platform is a five-bed, 4.5-bath property located in Orlando, Florida. Fractional co-ownership of vacation rentals is not a new concept — German startup MYNE does it in Europe. 

Those in the industry expect a lot of cash to come into short-term rentals this year, with falling home prices and rising mortgages.  And await many more REITs. 

February, which is known as a low-demand month, saw short-term rental guests tally 12.9 million nights stayed this year — up from 18 percent last year. And the revenue per available room rose by four percent to $183 million, according to AirDNA analysis. 

And the macroeconomic climate is favorable too —  retail sales in the U.S. rebounded in January, and this bodes well for the short-term rental industry. Consumers still have the confidence to spend, and a lot of them are prioritizing travel — future stays bookings were up 15 percent in February compared to last year.

“Short-term rentals are the most robust way to invest in real estate today,” said Corey Ashton Walters, founder and chief executive officer at Here, a Miami-based vacation rental investment company. “ And we want to unlock the ability for everyone to invest in the sector.”

Walters takes pride in his company’s offering being available to all investors without accreditation — with minimum investment amount being $250. The platform, Walters said, has 85,000 users on its platform and the property value ranges from $400,000 to $900,000. And there can be anywhere from 500 to 1500