Why should I invest in the short-term rental space and InvestorResidences.com specifically?
We offer investors a long term, straightforward, low-risk investment into a fund of luxury homes while doubling their capital investment in 6-9 years. We apply our industry expertise to identify attractive properties for the highest investment gains while also giving investors access to some of the most desired vacation rental markets at a discounted rate. There are no separate maintenance bills or contractor hassles for you to deal with, no annoyances of dealing with tenants, or carrying costs for investors after closing.
How is this unique from other real estate investments?
We have a unique fund structure, in that we must pay taxes, utilities, and property management fees, but our fund does not make any asset management fees, or any type of fee or profit, until you have doubled your money. This makes us highly motivated to double your capital over time, and we are doing so with very low leverage (0-25% average loan to value across the fund). Each property is insured and cash-flowing since we do no ground-up construction.
What is the deal structure?
You would be investing into a fund structure, so your returns come from all 10 properties in the fund. Once you get a 2x return through cash flows and/or stays, you will then receive an annual lifetime vacation benefit. This is unique as most funds only give you a 6-8% preferred annualized return and then take 20-50% of profits when they sell the asset, that is not our model.
How much equity is needed to get started in the Fund?
Minimum investment of $25,000 but there are incentives for investing more and we believe, on average, our investors will most likely put in $225,000 a piece.
How do the nights that you get from the portfolio work?
For every $25,000 you invest, you'll receive one night, at a discounted rate, to stay at any of the properties in your Fund portfolio.
For example: if you invest $50k you get to stay 2 nights, if you invest $100k you can stay 4 nights a year. The nightly rate we would have rented those nights out for counts towards your 2x return that you will get.
If there is ever a case in which you do not stay at the property because you get busy or forget to, and you invest $175k, you will get back $350k in cash to get your 2x return.
If you, however, stay at the property the full 7 nights a year you can with a $175k investment, we would look how much those 7 nights were being sold for on AirBnB, and that counts towards your 2x return. The nights do not roll over, you decide whether you want your 2x return in the form of cash or partially through nights used. If over 7 years you use $11,000 of nights at the properties you would only need to get paid $339,000 instead of $350,000 to get your 2x return.
How does the lifetime vacation benefit work?
As another benefit of investing, investors will receive a “lifetime vacation benefit” that will remain in place for as long as InvestorResidences.com, LLC owns the properties. Investors will continue to receive access to the properties in their original Fund and have a dollar credit available to spend every year at those properties even after they have been redeemed and doubled out of the asset. This benefit allows you to further maximize your participation in the Funds as we grow our network. Investors will also gain access to properties in Funds, outside of their original investment Fund, once all investors have been redeemed out of those other Funds. As a recap, once you have gotten a 2x return in the Fund, you are out of the Fund as an equity investor, but you retain this vacation credit based on how much you initially invested and that credit can be used in the Fund you invested in, and in any other houses in our network in the future which have gotten investors their 2x or targeted return.
What size/location are these going to be?
4+ bedroom properties that sleep 12-17 people. Locations will be shown via the Pitch Deck.
What is the company’s track record of successful investments, specifically STRs?
We currently have a long-term rental property on the vacation island of Key Biscayne, Florida, and a 4 plex that is being rented out as a short-term rental asset. The property in FL is worth $3.5M and we purchased it for $1.7M. The 4 plex is worth $1.65M and we purchased it for $850k. That said, both have done well in this very positive market. We also have a Park City property we purchased late in 2021 for $1.05M that is worth $1.45M, 9 months post-purchase. We have four real estate licensed professionals on our team at our sister organization Family Office Club. With their expertise, we were able to get a 31.1% discount on price per square foot basis and secure a $200k reduction in the sales price of the Park City property.
What type of returns are you projecting?
12% IRR with a conservatively estimated cash flow of 7-9% plus long-term appreciation. This will help investors hit their 2x return through refinancing or sale of 2-3 of the 10 properties. On average though, over the holding period, we expect to produce a 12% a year return.
Are these values add plays?
Yes, we add value, but we do not conduct major renovations or avoid anything requiring permits if we can help it. We may have one out of 10 houses that is a firehouse, cabin with acreage around it for expansion, or special type of property like that, and one that may have land for an extra house/cabin or ADU to be put there, but if we can't find these then 0 of the homes will be a heavy value-add. We do expect painting, lighting, furnishing, hot tub, etc. to be needed at just about every one of our homes. In addition, every home will be equipped with 70 inch T.V.s. We will furnish using a Pottery Barn wholesale connection and/or that same level of quality furniture. We aim to make each destination feel very nice, and create a fun experience for family reunions, multiple friends/families to meet up at, etc.