Airbnb started out as a place where owners could rent out rooms and more in their own private residences to earn a bit of extra income, but it quickly evolved into something a little more specialized: a platform where a large part of the inventory became listings of those who owned property primarily as an investment vehicle. Now, an American startup called Here is announcing funding to create a democratizing twist on the provider side of that equation: a platform that allows people to become fractional investors in these vacation rentals, starting with stakes as low as 100. $.
Here secured a $5 million seed round led by Fiat Ventures, with participation from Joe Montana’s Liquid 2 Ventures, Mucker Capital, Basecamp Ventures and Cooley, bringing the total raised to date to $7 million, including including a first funding round earlier this year. Here we are using this latest injection of capital to invest in market growth, user growth, and product. It will make real estate acquisitions for the platform using debt raised separately from this equity.
Corey Ashton Walters, founder and CEO of the Miami, Florida-based startup, said when Airbnb was preparing to go public in 2020, he was looking for new ideas for a business in the real estate industry. He was inspired by real estate investment portal Roofstock and art investment platform Masterworks to create a new startup that allows retail investors to “own shares” of a vacation rental home with even an investment of $100.
“Vacation rentals are an investment opportunity that historically was only available to the wealthy. Here has created a transparent and simple way for everyday investors to participate in this market, and support their mission to ‘Opening this opportunity to everyone was an easy decision,’ Adam Nash, CEO and co-founder of Daffy and former CEO of Wealthfront, said in a statement, who is an angel investor in the company.
To be perfectly clear, Here is not timeshare: you cannot book time off to stay in the property as an investor; it is simply investing in the property to earn dividends from other tenants and potential property sales.
Partial investment in houses next to others is also not an entirely unique idea. There are other startups, like US-based Pacaso – which has raised over $1.5 billion to date according to Crunchbase – and Mexico-based Kocomo, which allow you to have partial ownership of a vacation home. And in the United States and other markets, there are REITs, trusts where investors support real estate games.
The twist here is the low barrier to entry, $100, versus potentially thousands of dollars on the other platforms.
Fractional investing has been a very strong theme in the fintech world, where it’s used by neobanks and others to give users a way to buy fractional shares in premium stocks that might otherwise be too expensive. Others like Rally have taken the idea and applied it to the world of collectibles.
Here’s the model that works like this: the company acquires a property and makes it “season rental ready” through its own investments. Then he lists it in an IPO to investors at a price that includes all those expenses. All properties adhere to the rule of $1 = 1 property stock. Once all the shares are sold, Here places them on various vacation rental portals like Airbnb, Homeaway, and Booking.com for staycations. It then pays quarterly dividends to investors from the profits made by that property during the period.
The goal is to hold a vacation rental for five to seven years and then resell it on the market. Shareholders will receive payments based on their respective ownership stakes. The company deducts maintenance fees from dividends and final appreciation before the money is released to investors.
So how does Here make money? Ashton Walters said the company charges a supply fee of 1% to 10% depending on the purchase price – similar to a realtor’s fee – when a home is listed for investment. The company also charges a 1% annual asset management fee on the property. He also owns a minimum of 1% ownership to have “skin in the game,” so other investors can invest with confidence.
Here officially opened its portal to the public earlier, and it has listed three properties in Bear, California, Clearwater, Florida and Gatlinburg, Tennessee, with a fourth going live shortly. Currently, it has over 30,000 registered users on the site, including 1,000 active investors. Ashton Walters said a list usually has 400-500 seats for investments, so it’s difficult to accommodate all users.
To comply with regulations, the company mentions all investment variables in its SEC circular. Before launching the property for investment on Here, the company acquires it and submits the offer to the SEC for approval. Each property is owned by an LLC, which protects investors from personal liability in the event of default in payment or bank repossession.
There are some things investors should consider when investing on Here. The company says it uses a mixed equity and debt financing model to acquire homes. Although it buys some properties outright, it has a mortgage component in others. Here claims that all such information is disclosed on the offering page and the official offering circular.
There is a question of investment returns when the housing market crashes. Here he said he intends to hold out indefinitely in the event of a downturn. “The idea is not just to survive a recession, but to thrive through it,” he said. The company also noted that often when house prices fall, rents rise, so it hopes properties will generate more cash flow for investors during the recession.
The company is ambitiously aiming to expand its lineup of offerings to launch 70 to 100 properties in 20 vacation destinations like New York’s Hudson Valley and Pennsylvania’s Pocono Mountains over the next year. It also plans to launch its own competitor Airbnb where it will list the properties it owns for members and the general public in the future.
“We have halted ad spend for the past 60 days because we don’t have enough supply to meet demand. Our last ad sold out in five hours. Short-term rentals are having their breakthrough moment. be recognized as an asset class, so our goal is to capture the market and become a trusted brand in this space,” said Ashton Walters.