Investors hunting for returns in the frenzied U.S. real estate market are tapping a new strategy: building massive portfolios of houses to rent out on Airbnb.
A recent filing reveals that Dublin, Ohio-based ReAlpha is seeking to spend as much as $1.5 billion, including debt, to buy short-term rentals at an unprecedented scale. The money would be enough to purchase roughly 5,000 homes, Chief Executive Officer Giri Devanur said in an interview.
Emboldened by a post-pandemic travel boom and searching for better returns than they can get in hotels or apartment buildings, other firms are building on the strategies employed by the scrappy entrepreneurs who built small portfolios of short-term rentals and helped drive Airbnb Inc.’s decade-long rise.
Fast decisions
Devanur, who took enterprise-software company Ameri100 public in 2017, said he wants to open up access to real estate investing by letting regular people buy fractional ownership of short-term rentals on his company’s app.
ReAlpha plans to use artificial intelligence software to evaluate home listings and make fast decisions on how much it’s willing to pay. The company will target markets including Austin, Dallas and Miami, where it can acquire 100 to 500 homes. And it’s exploring ways to buy discounted homes when a federal foreclosure moratorium ends.
Higher prices
Short-term rental investors can focus on different types of homes than regular buyers or Wall Street landlords, but the capital pouring into residential real estate from all corners will make houses more expensive to come by.
For Airbnb, the arrival of larger, more sophisticated investors could be a blessing, even if it contradicts the company’s efforts to market itself as a way for travelers to experience new places like local residents. Large investors represent a potential source of new listings, and may offer a product that appeals to people who like the comfortable uniformity of hotels.
A representative for Airbnb declined to comment.
Growing appetite for short-term rentals will attract tens of billions of dollars in the years to come, said Sean Breuner, whose company, AvantStay, manages branded properties that offer concierge services. It also operates a brokerage to help investors find real estate.
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