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It’s no secret to anyone that the home rental market has skyrocketed over the last ten years.
More and more people turn to sites like Airbnb and Vrbo, opting to stay in someone else’s home rather than a hotel.
They want quainter locations and more unique experiences. There was a time when home shares were often less expensive than hotels, but people were willing to spend more if the property and its amenities were worth it.
After all, why should we stay in boxy hotels? Can we stay in a beautiful, unique house for the same price?
Dive Into the Home-share Market
Savvy buyers started purchasing houses and apartments with the sole purpose of using them as short-term vacation rentals.
This was no accident.
Vacation rentals are responsible for 160% more revenue on average than traditional long-term rentals. Who needs to be a landlord when you can be a host?
With investment in decor, renovated appliances, and Instagram-worthy scenery, homeowners could depend on a steady influx of guests. The better the house, the higher the price.
Seems like a simple way to secure a new income stream, right? Well, yes, and as many vacation real owners will understand, no.
Property management is famously complex, especially when dealing with short-term guests.
They’re total wildcards. Whether they’re making a mess, throwing a party, or just talking your ear off with questions, guests are frequently a liability, both to homeowners’ properties and time.
For many of these home shareowners, this is a second job. Time and effort are already limited. If the so-called passive income of home rental ownership isn’t actually all that passive, is it still worth it?
It’s a good question and one that the rental company Here is hoping to solve. Founded in 2021, a new take on the rental industry has already raised an impressive amount of capital and interest from the start-up investment sector.
This is how it works.
Passive Income That’s Actually Passive
Everyone wants a piece of the home rental market, but not everyone has the time to manage a property.
Here’s proposal is to treat vacation rentals more like stocks. Unless you’re on the trading floor or glued to the market index, you probably aren’t too in the weeds when it comes to your stocks.
As a shareholder, you’re invited to learn more about the inner workings of the business you’re invested in once annually, and that’s just as a measure to assure you things are on track.
Learning More About Passive Income Is a Good Thing
It means you can capitalize on a business’ success without doing much. If you buy at the right time, keep an eye on how business is moving, and sell when the indicators are telling you to, you can increase your net worth without much effort.
That’s especially true when you invest in low-risk index funds.
The idea behind Here is to bring some of that passivity to the rental market. You don’t need to know the lock-box code, wifi password, or even interact with the guests.
Think about Here as your stockbroker. They handle the management of the property and its upkeep. As part-owner for as many shares as you purchase, you receive a portion of the rental sale when the property hosts guests.
Once you’ve made the purchase, it’s 100% passive. Here handles guest communication, property upkeep, and risk assessment.
As far as the rental industry goes, it’s a game-changing idea.
A service like this can make passive home rental income accessible to just about anyone, so long as they have the initial investment dollars. Here owns the properties, its shareholders reap the rewards.
What’s more, Here is approaching the purchase of these properties with a high-yield mentality.
They’re looking in locations with proven track records of consumer interest in short-term vacations. The focus is on long-term return, so these properties will only increase in value as time goes on.
A higher value means a higher rental price. We’re sure you know what that means for home shareholders.
Home Ownership in Shares
What’s interesting to us about Here is how they’re approaching the marketplace for these rental properties. You can see the effect of the crypto-market, app-based stock exchanges, and NFTs at play here. Here’s app looks like a mix between Airbnb and Robinhood.
When you browse through, you’ll see a selection of rental properties you can choose to invest in. Here offers a variety of properties, so users can purchase shares much like how they would stocks, depending on their criteria of value.
For its part, Here uses a range of valuation models to establish a baseline resale number for each property. This helps potential investors gauge the perceived or future worth of the stock. These models rely on an algorithm that sources several factors, like comparing other properties in the neighborhood, the renovated condition of the home, and the state of the home sales market.
When you find a property (or properties) that you want to invest in, you essentially become a shareholder. You are interested in a series of Here LLC, which owns the house.
As such, you’re entitled to receive quarterly cash distributions of the property’s net rental income. You are also eligible for potential tax benefits normally associated with direct property ownership, like depreciation and expense write-off.
In short, you’re a homeowner. You just don’t have to do any of the things homeowners typically have to do.
This is Here’s genius and why we think it was chosen as one of the winning pre-seeds of Mercury Raise Round IV, which connects new start-ups with investors.
Here handles on-the-ground management of the property, renovating and updating rooms that require it as well as fixing structural issues. It ensures that the property is at the forefront of the increasingly competitive rental market by installing new flooring, smart home features, and updated appliances.
No property makes it to Here’s app until it has undergone a scrutinous review or initial investment. In other words, it makes sure that the property will stand out at the top when vacationers are looking for somewhere to stay.
That’s just the upfront work. Here manages booking guests and confirming they get access to the property. It makes sure it has necessary items like toilet paper, towels, and soap. It maintains cleaning schedules and handles any issues with guests as they arise.
Here solves the biggest headache regarding rental ownership. So much so that we’re not sure that many people considering investing will miss owning the entire pie.
The slices, however narrow or wide they may be, are worth it, especially when shareholders start to diversify.
A Home Host Turned CEO
Like many startup founders, Corey Ashton Walters came up with the idea for Here after running into a problem that Here helps solve.
Walters assumes a familiar persona in today’s start-up world. He’s a college dropout, a serial entrepreneur, and he’s already built a successful company in the real estate world. His first company, Homeworthy, reinvented the antiquated brokerage process to help bring more capital to sellers.
In 2015, Walters decided to list his Brooklyn apartment on Airbnb. The value was clear. Guests regularly travel from all over the world to New York, so the need for a rental property in the area is unlikely to falter.
The need far outgrew what Walters could manage. Working with guests and maintaining the property became too difficult with a full-time job already demanding much of his time.
He removed the listing and spent the next five years thinking about why the homeowners’ vacation rental market is taxing. Surely there could be an easier way to benefit from short-term rental income.
In 2020, those years of thinking culminated in Here.
It started small. What if a rental property owner could outsource its management? What if a rental property owner could share ownership with friends or family? Or like-minded investors? Or anyone? What if people approached rental property ownership like stocks?
From Here to There: The Future of Rental Property Ownership
As it approaches its first birthday as a company, Here, with Corey Ashton Walters at the lead, has drummed up an impressive amount of interest from the venture capital world and retail investors with over 10,000 investors on the waitlist to join Here. The company is building its app and has already opened it to early access.
We’re excited to see how Here grows and its effect on the vacation rental industry. We have a feeling we’re going to be hearing a lot more about Corey Ashton Walters shortly.
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