2019 (Two years of R&D)
My passion for STRs started in 2019. We were in the process of acquiring and developing land for Build-To-Rent communities, which at the time was a brand new trend. Build-To-Rent offered some incredible opportunities. More than anything it was the natural next step in the market cycle as it was an extension of new construction and institutional investors loved it. As a developer, I love Build-To-Rent as we are not only able to develop the land but we are able to control the product, meaning we can create Build-For-Rent and Build-For-Sale communities as the market demands.
While buying land & developing Build-To-Rent communities, my focus turned toward the emerging STR asset class. At the time Airbnb & VRBO were simply channels where homeowners could list their primary or second home and make a little extra money. It hadn’t yet become what it is today – an opportunity for investors to buy & rent an investment property with an attractive cap rate of 7%+ and at times incredible cash flow.
In pursuit of understanding the product and opportunity, I started on what has now been a 4-year journey of learning everything I can about STRs. Every quarter, starting in 2019, my family and I would select a new destination for a trip and we would rent a vacation rental. Once there I would interview local real estate experts, vacation rental managers, and as a family, we would evaluate the amenities and whether or not we would want to come back. This is the same methodology I use before I invest in any real estate asset class. This experience solidified and gave me the confidence to start investing in vacation rentals.
With two years of R&D and with the new movement COVID created, I knew it was time to invest in STR’s. COVID completely changed the vacation rental industry and officially put Airbnb and VRBO on the map. People started traveling more and learning firsthand that they could not only work remotely but achieve that work-life balance they always dreamed of.
2021 (Two years of investing experience)
One of the best experiences we had as a family was at Lake Norman, North Carolina. So naturally that is where we started investing. I began purchasing properties in Lake Norman in 2021. Lake Norman is surrounded by beautiful lakefront homes.
Here is what our experience in Lake Norman has taught us:
- Water. When it comes to real estate, water-front property is resilient. No matter the risk, people love to be near it. For me, this was another compelling reason to invest there.
- Build on what’s there. You don’t have to build to make money. This was one of the first mistakes I made. Since I strongly believed and was invested in the concept of Build-To-Rent, my initial strategy was to build vacation rentals. I quickly learned that I didn’t need to. There were several opportunities on the lake with existing assets that could be improved or optimized.
- Prioritize Amenities + Space. We learned that every market is unique and that amenities are extremely important and need to be considered based on the destination as well as competing inventory. To stand out, we learned that all our homes must have a pool and at least 5-6 bedrooms.
- 60% Occupancy. There needs to be a long enough season to achieve the right occupancy for the year. Lake Norman has a fairly long season and gives us the 60+ percent occupancy that we desired.
- Right Partnerships. Above all, the greatest lesson we learned was that we needed the right partners. We needed the right team to help us underwrite the opportunity and the right vacation rental manager. With STRs, you could argue that your vacation rental manager is the most important relationship you’ll ever have.
Today, we are more clear on the type of properties we will continue to acquire.
Acquiring a Short-Term Rental Portfolio
We recently acquired a portfolio of 142 short-term rental properties.
We’ll share the details of this acquisition with investors in the fund in the coming weeks.