A brokerage fee and a portion of the profits is all Andes STR takes from investors hoping to buy short-term rental properties. The rest seems easy – at least on the investment side.
Sebastian Rivas is the CEO of Andes STR, a short-term rental investment and management firm. Rivas believes the future of housing is in short-term rentals as telecommuters realize a more fluid lifestyle, setting up camp wherever they want while still working.
The Houston-based company doesn’t just invest in vacation rentals; it also makes them available to individual or small investors as investment properties. The individual owns the property while Andes STR takes care of the rest.
Andes STR and WEG Capital recently announced that they have raised $25 million single-family home purchase fund targeted for the short-term rental market, with an emphasis on the Orlando, Florida area for its year-round demand for Airbnb-style accommodations.
CO: How does investing with Andes STR work?
Sebastian Rivas: We use our proprietary machine learning technology to find the best properties that will be the most profitable, and this algorithm works remarkably well. Then if we assume that the investor—the client—is fine with the investment, then we execute everything on their behalf. So we will buy the property for them, find the financing for them, furnish and manage everything. So it’s almost like buying a single property REIT. It’s like a fund, but you own everything.
What markets does Andes STR target for its customers?
We buy and manage many different types of assets. So, single-family homes, multi-family buildings, apartments, townhouses, small hotels; we’re very agnostic about the type of property, the type of asset. What we really care about though – and this is one of the really strict requirements – is the signing process. This means that in every market where we open and operate, we must have a strong case for it. We should feel very confident that this is a good investment because we are selling investments, right?
We don’t just go and manage properties. We don’t do that. We also manage properties, but that’s not what we do. Part of that point is location, so some places like Toronto, for example, we love downtown condos, really good assets. They perform super well. Most people who go there are most willing to pay for accommodation. Very efficient, high return, low risk, very optimal.
What is an example of a different kind of market you invest in?
Orlando, for example, is the opposite [of Toronto]. So apartments and multi-family don’t work as well in general; there are too many of them. But big houses are great. So in Orlando, we like Orlando for many reasons. But on top of that, we like single family homes in Orlando.
How is the investment process going for your clients?
We have three products. One of them is for individual investors. Most people just buy one [property]. And then we have something called separate managed accounts, and those are like little funds that we do for a select set of people. Let’s say you have some money saved up and you want to get your parents, your brother, your friend to build one vehicle and let us manage everything for that vehicle. And it’s like having a custom fund. Then the third is that we usually also work with large asset managers to launch funds and this is one that was highlighted in the Wall Street Journal recently.
There is a comparable difficulty between getting a mortgage for a home you will live in and a rental property. How does your company get through some of the red tape with creditors?
If we are talking about individual investments, then what we do is talk to the investor first. We profile an investor and then determine if that investor has better access to debt than what we can offer. If we see that their terms are better than what we can get, we take it and start working with their bankers. More often than not, we can provide them with better conditions. So at this point we have a network of peer lenders that give us preferential terms because basically they know the results that we get. They know that we manage the property and they know that we only pick the best performing asset, so the risk is lower. Therefore, they can give us better prices.
When it comes to using apps like Airbnb, are there any concerns about the stability of Airbnb as a business and how that affects you?
There is, but it is heavily mitigated and the reason is that when we advertise or list these properties. We are what is called “multihomed”. And that means we have homes on many, many different platforms. For example, in Toronto, the best platform there is not even Airbnb. This is actually booking.com. This is the most profitable. In Orlando, VRBO is very big. Galveston, Texas, this is actually Airbnb. There are over 500 of these platforms, at least five of them are huge. So if something happens to either of them, it won’t make much of a difference.
Mark Hallum can be reached at [email protected]