A Dublin startup now offers everyday investors the chance to own a slice of the short-term rental market.
ReAlpha Asset Management Inc. has listed the first Airbnb property on its fractional ownership platform: "Jasmine," a five-bedroom townhouse just outside Orlando, Florida.
Halfway through the two-week campaign that ends March 31, it has raised nearly $250,000 toward a $600,000 goal. Shares are $10; the minimum investment is $500, which would be 0.08% of the total. The campaign must raise at least $389,000 or every investor is refunded, according to the offering memo.
Opening up direct investment in the properties was parent ReAlpha Tech Corp.'s "goal from day one," CEO Giri Devanur said in a release.
"We took our time to test and continuously refine our model and technical capabilities to ensure we are able to consistently deliver a great user experience and present attractive investments," he said. "We are excited to finally make our initial property offerings available to the public."
A ReAlpha subsidiary bought the townhouse for $525,000 in February 2022, according to Polk County property records. It's about 9 miles from Walt Disney World and Universal Studios in the country's busiest tourist city.
Check out the slideshow to see inside the nearly 2,300-square-foot townhouse.
Realpha Orlando Airbnb
In the 10 months of ownership last year, beset by two hurricanes, the property made $25,500 in revenue on 47% occupancy, while expenses exceeded $36,000 including mortgage interest, according to a regulatory filing.
If the campaign reaches the minimum, the property will be debt-free, eliminating the interest expense.
Based on an analysis of AirDNA data for similar vacation rentals in the region, ReAlpha believes it can raise the daily rental rate and boost occupancy to 57% for annual revenue of more than $61,000.
The company intends to hold the property for five to six years, collecting the short-term rental income and then selling it at a profit, according to the offering. Investors get dividends from operations and any sale profits in proportion to their ownership.
ReAlpha plans to add a rewards program for fractional owners to get discounts on stays, but is still developing details.
Residents of Massachusetts, Maryland and Hawaii are not able to invest, under agreements with those states' regulators.
ReAlpha developed a machine-learning algorithm to identify properties in busy tourist destinations and score their likelihood of delivering investment returns that meet or beat industry standards. The company's human real estate professionals vet each property and adjust the score, thus "teaching" the algorithm, before making the purchase decision.
ReAlpha raised $9.1 million this year through Regulation A of the 2012 Jobs Act to sell to everyday, non-accredited investors. That investment, with a $1,000 minimum, was in the company rather than direct ownership slice of one of the properties in which it invests.
One of Columbus Inno's Startups to Watch for 2023, the company was started in late 2020 by Devanur, a serial entrepreneur who took his last company public, and a Texas real estate developer, who remains a director but left operations.
ReAlpha has secured several other significant sources of financing, including a December joint venture with a Singapore-based investment firm that eventually could help it build a $500 million portfolio of Airbnb rentals. It also secured a $200 million credit line.
Also, a Luxembourg-based alternative investment group has committed up to $100 million over three years, but only if ReAlpha goes public.
