A Central Ohio startup has launched a $75 million offering through which everyday investors can buy fractional shares in the $1.2 trillion short-term rental market.
That's a very tiny fraction: The minimum investment is $1,000.
Dublin-based reAlpha Asset Management Inc. is selling shares to the public at $10 apiece, but will not be trading on a stock exchange. It's made possible under Regulation A of the 2012 Jobs Act.
“We’re thrilled to offer Main Street investors access to early-stage investment opportunities,” founder and CEO Giri Devanur said in a news release. “Our proprietary algorithms, partnership network, and stellar leadership team provide an opportunity to make reAlpha a powerful force in the short-term rental market."
Before, companies could raise such rounds only from accredited investors, which are institutions and wealthy individuals. Regulation A offerings are open to "qualified" investors – meaning the investment cannot exceed 10% of a person's annual income or net worth, whichever is greater, or of a company's annual revenue or net assets.
Formed in April, reAlpha raised $6 million in August, led by Crawford Hoying, one of Central Ohio's most prominent real estate development firms. Brent Crawford, the firm's co-founder and principal, is reAlpha's board chairman.
"We were founded on the belief that every person should have the access and freedom to pursue wealth creation through real estate," the investment circular said.
Thousands of investors signed up for a waiting list for the public offering, Chief Marketing Officer Christie Currie said.
The company buys single-family homes, renovates them and lists and maintains them through Airbnb. So far reAlpha owns about 10 houses in the Dallas area and one in Miami.
The company has developed artificial intelligence to comb through the wholesale real estate market – which is typically inaccessible to everyday investors – for properties that are likely to bring above-average investment returns based on dozens of variables including price, structure and the attractiveness of the neighborhood for short-term rentals.
The properties will generate income, and the algorithm determines the optimal time to resell for investment return.
Shareholders have minority stakes in the properties, and have no responsibility for maintaining or renting them. They also get discounts to stay.
To further democratize investment, the company will put 2% of stock sales into a fund that will match the investments of qualified low-income investors dollar-for-dollar to double their shares.
If it sells the full $75 million, reAlpha estimates after expenses of the offering to have $69.7 million for the properties and technology development, according to the offering circular.
Municipal regulation of short-term rentals is one risk to the business model, the circular said.
