Fractional ownership should not be confused with the long-standing concept of timeshare. Still ready for the sales pitch?
A Miami-based startup aspires to make investing in vacation rentals almost as easy as buying individual shares of public companies.
New company Here filed with US regulators this month to soon offer an investment product that allows investors to buy “shares of ownership” in vacation rentals – but not the right to stay in the properties – for as little as $1.
“Investing in vacation rentals is more for the wealthy or professional property managers,” said Founder and CEO Corey Ashton Walters. “We want to remove the barriers.
Fractional ownership should not be confused with the long-standing concept of timeshare or vacation ownership. The startup model does not give investors the right to stay in a vacation rental. Fractional ownership is purely an investment vehicle that aims to generate annual returns.
By contrast, timeshare startup Pacaso, founded by former Hotwire co-founder Spencer Rascoff, allows people to become co-owners and occasional visitors of luxury homes. Still, the stock price for a Pacaso house can start in the hundreds of thousands of dollars, while Here expects to have a lower bar to reach.
The startup Here plans to allow investors to buy shares in properties with a holding period of at least five to seven years. Each share is entitled to a proportionate annual “net profit” reduction on the monthly reservation revenue generated by the rental.
Stocks also promise an investor a proportional percentage of any appreciation in the property.
Investors will have to pay taxes on their share of the investment, similar to shares in the income of an estate or trust.
Here has applied to have its shares classified by the U.S. Securities and Exchange Commission under Regulation A (or Reg A), which allows for an expedited IPO process for small companies. This is how actions are generated. Here plans to file serial changes every time it adds new properties.
The company said it has 20,000 potential real estate investors on its waiting list. Earlier this month, he said he raised venture capital to operate. Backers included Liquid 2 Ventures, Mucker Capital, Bragiel Brothers, Alumni Ventures and Gaingels.
The company’s staff includes Keith Breon, who helped his brothers Eric and Scott at Vacasa for many years, and Caleb Olthoff, who was previously vice president of technology at fast-growing vacation rental service Evolve.
The first property will be in Florida, Walters said.
What if everything goes wrong?
“In the worst case scenario, the asset would be liquidated and you would be returned principal against your stake,” Walters said.
However, more mundane hiccups could happen here, if Pacaso’s story is any guide. Pacaso, a leisure travel product that offers upscale home stays for condo owners, has sparked protests from landlords in residential neighborhoods worried about party home issues, The Wall Street Journal reported.
Here is the filing with US regulators: