This article was submitted by Wander. Read our Editorial Guidelines for more information.
Short Term Rentals (STR) is the fastest growing segment in the hospitality sector and has been gaining market share over the years. A confluence of factors such as strong travel spending by Americans, rising consumer preference for experiences, and remote working is expected to support an 11% CAGR growth in the STR market by 2030.
Investing in vacation rentals has become increasingly popular, given the recent increase in STRs. Historically, however, the only way for people to invest in this asset class for steady income and capital growth was by resorting to the time- and capital-intensive process of purchasing and managing a single or portfolio of vacation rental homes. In this article, we’ll explore the fundamentals of REIT investing, the benefits of investing in vacation rental REITs, and Revolve REITThe first and only STR REIT that can help you get the benefits of STR investing without all the hassle.
How do REITs work
REIT or Real Estate Investment Trust was established in 1960 by the US Congress to create an investment vehicle that would facilitate investors to pool capital and make large investments in assets that would otherwise be out of reach. Since then, REITs have become widely used to access real estate.
REITs are also widely used because they provide tax advantages that benefit the REIT and its investors. Unlike most corporations, REITs do not have to pay taxes at the corporate level which generally enables the REIT to reinvest more capital and make higher distributions to investors who are not taxed twice.
However, REITs must meet strict standards set by the IRS to maintain their classification, including:
- Distributing 90% or more of your taxable income in dividends each year.
- Have at least 75% of its capital invested in real estate assets or cash.
- Receive at least 75% of your gross income from real estate assets such as rent or interest.
Investing in public REITs can be a great way to get exposure to real estate, but investors aren’t limited to investing only in public companies. There are also private REITs. Private and public REITs are very similar in the way they operate, except that private REITs are not publicly traded on a major stock exchange, making them less sensitive to public market volatility.
While private REITs offer real estate-backed stability, historically strong returns, and the ability to invest in property without the hassle of asset management, private REITs may be best suited for long-term investors who need immediate access to their invested capital. is not required. , In other words, REIT investors need to be comfortable with a lack of liquidity.
The lack of liquidity compared to public REITs also means that private REITs are generally limited to accredited investors – individuals or couples who meet income or net worth requirements or are under special financial employment status as defined by the SEC. Come
Changing the way you invest in short term rentals
Historically, the only way to invest or access the short-term rental market would be to purchase a home or portfolio of homes and rent it out. However, this often comes with the time- and capital-intensive responsibility of occupying, managing, and maintaining the properties.
With the growth of the STR segment, there is a growing need for alternative ways to invest in vacation rental homes, and that’s where REITs come in.
As mentioned, REITs have existed for several decades as a common way to finance various real estate types, from residential to commercial projects. Commercial REITs, for example, pool assets to buy commercial real estate, such as hotels, office buildings, restaurants and more, in exchange for a share of the investors’ profits in the form of dividends and capital appreciation.
However, REITs did not exist as a means of funding the development of projects in the STR segment – until Now,
Wander Atlas REIT Inc. (“Wander REIT”) is introducing a new form of ownership in a new asset class, STR, as the first and only institutional-grade short-term vacation rental investment product.
Wander REIT: A pioneer in short-term rental investing
Revolve REIT It’s the first vacation rental REIT that allows accredited investors to own a piece of high-end vacation rental homes across the US
if you are unfamiliar Wandering, it is an industry-leading vacation rental platform that combines the quality and stability of a luxury hotel with the privacy, comfort and location of a vacation home. Wander’s carefully crafted portfolio of modern high-end vacation homes are located in inspiring locations, equipped with designer furnishings and amenities, and equipped with smart home technology, state-of-the-art workstation and fitness equipment, and even guest access Equipped with Tesla for. , By owning or controlling every link in the chain: home, management, marketing, proprietary app, booking engine and 24/7 text-based concierge, Wander is uniquely positioned to deliver a superior guest experience.
This year, Wonder launched Revolve REIT-The first and only institutional-grade vacation rental investment product. Wander REIT is a leader in the institutionalization of the short-term rental asset class by implementing institutional standards in its investment process, portfolio management and capitalization strategies. This sophisticated approach to the industry allows Wander REIT to effectively manage risk and deliver attractive returns to investors.
The Wander REIT offers accredited investors diversified exposure to the STR market with recurring tax-advantaged income and special investor benefits. It currently targets an annual dividend of 8%, paid quarterly and a total annual return of 14% including capital appreciation.
Below are some of the benefits that can help you better understand the product and investment opportunity:
- Above market return potential Versus other established real estate asset classes. A major advantage of investing in vacation rental REITs is the potential for above-market returns. Because vacation rental properties are typically rented out on a short-term basis, they can generate more rental income than traditional long-term rentals. This means that investors in vacation rental REITs could potentially earn a higher dividend yield than other types of real estate investments.
- diversification. Another advantage of vacation rental REITs is the diversification they provide. By investing in a portfolio of properties, investors can spread their risk across a variety of geographic locations and asset types. This can help reduce the impact of a single property experiencing a downturn or vacancy. In addition, private REITs such as Wander REITs generally have little correlation to public equities.
- recurring income A third advantage of vacation rental REITs is that they are a great source of tax-advantaged passive income., So that you can keep more of what you earn.
- capital appreciation, As the value of the assets in the portfolio increases, so does the value of the REIT. Additionally, if the management company successfully increases occupancy and rental rates, it can also increase property valuations and increase returns for investors.
- Inflation protection. Inflation is not only felt at the supermarket or gas station. The cost of renting out real estate also goes up, which can make private REITs an effective way to protect the value of your money from inflation. Income and asset appreciation can also help offset some of the worsening effects of inflation.
- Easy to invest. Finally, vacation rental REITs make it easy to invest in STR. They take the day-to-day hassle out of property management by delegating marketing, maintenance and booking responsibilities to professional management companies. This can be especially attractive to investors who do not have the time, expertise or desire to manage their own properties. Wander REIT takes this a step further and makes it easy to invest with just a few clicks.
To learn more about Wander REIT, visit wander.com/reitWhere you can review investment materials and see how the Wander REIT might fit into your portfolio. You can also find all legal disclosures and risk factors associated with Wander REIT on our website.
Summary of Key Terms
- Structure: Private, non-trading REIT
- Target Investments: Upscale single-family homes to be converted into wander-quality vacation rentals
- Price per share: $10
- Minimum Investment: $2,500
- Target Annual Dividend: 8%
- Targeted Total Return: 14%
- Delivery: Quarterly
- Management Fee: 0.65% on GAV
- Investor Suitability: Accredited Investors Only
- Tax Reporting: Form 1099-DIV
This article was submitted by Wander
Wander is the industry leading vacation rental platform. Now we’re introducing Wander REIT – the first and only institutional-grade vacation rental investment product.
Unlock access to this rising asset class and invest in the best vacation rentals.
Note by BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BigPockets.
