Investment firms take aim at short-term rentals

Saluda Grade, WEG Capital picking up high-demand portfolios

New York /
Feb.February 15, 2022 10:00 AM

From left: Sean Breuner, chief executive officer, AvantStay; Ryan Craft, chief executive officer, Saluda Grade (AvantStay, Saluda Grade, iStock)

Short-term rentals aren’t just for mom-and-pop owners anymore: Wall Street has taken notice of the market and are getting in on the game.

New York-based investment firm Saluda Grade is starting a venture to buy approximately $500 million worth of short-term rental property in conjunction with AvantStay, the Wall Street Journal reported. The firm will target acquiring properties within driving distance of population centers; AvantStay will manage the properties.

“There’s a lot more yield available in the short-term market,” Saluda Grade CEO Ryan Craft told the outlet. The company will also raise debt by selling mortgage bonds backed by the homes, which it claimed is the first vacation-rental mortgage securitization.

Saluda Grade isn’t alone. Startup Andes STR inked a deal with Chile-based investment firm WEG Capital to buy $80 million worth of short-term properties in the United States, according to the Journal.

The rise in investor interest follows sustained demand for short-term properties due to factors like rebounding tourism and remote work, plus the low interest rates that appear to make for strong investments. Local regulations are emerging, however, that could create challenges for investors that will likely need to purchase the properties on an individual basis.

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

AvantStay is a strong believer in short-term rentals, basing its company around the concept. The company last year launched a brokerage arm, hiring real estate agents to help customers find secondary homes. At the time of the announcement, the company had more than 600 homes in its portfolio and planned to hire 200 agents within 12 months.

A slew of short-term rental companies made their public debut in recent months. Vacasa, Sonder and Inspirato all went public last year, each trying to capitalize on the surge in demand for stints at vacation properties. Ohio-based asset management company ReAlpha also plans to spend as much as $1.5 billion in the market, enough to purchase almost 5,000 homes.

Early in 2021, short-term rental demand was surging well past pre-pandemic levels, helping investors earn plenty of revenue. Demand for vacation homes beyond the short-term rental market is also strong, as it was 87 percent above pre-pandemic levels last month, according to Redfin.

[WSJ] — Holden Walter-Warner





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