These investors are betting they can get higher returns if they rent out homes by the night instead of by the year.
Low interest rates have made it more attractive to borrow and buy traditional rental homes, inflating property prices and making it harder for new buyers to turn a profit. That has prompted some institutions and wealthy families to look in more obscure corners of the property market where competition is smaller, investment advisers say.
Some are turning to investments in vacation homes, where demand has surged in many places during the pandemic as more people choose to work from remote locations and leisure travel heated up last year.
“There’s a lot more yield available in the short-term market,” said Saluda Grade’s chief executive, Ryan Craft.
It is the latest sign of how the pandemic is changing the way people work and live, and how real-estate investors are angling to find new ways to profit from these shifts.
Saluda Grade is targeting homes within driving distance of major population centers, Mr. Craft said. His company will buy the homes and AvantStay will manage them for a fee.
But while vacation-rental homes can offer higher returns, they also pose challenges to investors. Mortgages are usually more expensive and harder to get for short-term rentals than for owner-occupied homes, said Giri Devanur, CEO of reAlpha Tech Corp., a startup that wants to pool money from small-time investors to buy short-term-rental homes.
Buying properties one-by-one takes time, making it hard to invest large sums. A number of cities have tightened restrictions on short-term rental listings, and more might follow.
“Regulatory risk is a huge problem,” said Sebastian Rivas, CEO of Andes STR.
AvantStay CEO Sean Breuner said the vacation-rental sector can follow a route similar to that of single-family-rental homes, which have attracted a surge in investment from private-equity firms and other financial firms over the past decade.
