Democratizing the Short-Term Rental Property Market is a Trillion Dollar Opportunity

Feb 24, 2022

The Rules:

Every week I breakdown startup pitches with the added hook that you can invest whether you’re accredited or not (if you don't know what that means, click here).

I base my review on a 3-minute founder pitch and some light diligence.

My scoring system is not a validation of idea, or grading for likelihood of success. It just means, all things being equal at launch — this startup has these boxes checked.

What I look for:

Founder — ability to lead, sell into and influence a given market
Idea — is it inevitable or solving a BIG problem in a scaleable way
TAM — how big is the total addressable market
Traction — do they have meaningful early traction
Unfair Advantage — do they have a competitive edge

★★★★☆

Company Overview

reAlpha uses advanced technology and experience to help investors invest in short-term rental properties 👉 Check the Charts 📈

Key People: Giri Devanur (Nasdaq IPO experience & former EY Entrepreneur of the Year)

Traction: reAlpha combines the returns from real estate as a powerful asset class with the returns of the short-term rental model. reAlpha gives its members exclusive access to Airbnb properties from the wholesale market with a down payment as low as $2,500. There’s no question how massive the short-term rentals market is and when you mix that with the long-term ROI of investment properties — you have a $1.2 trillion dollar opportunity with revenues near $1bn annually as soon as 2025.

Terms & Takeaway

Invest in reAlpha here 👉 Term Sheet

Security Type: Reg A+

Pre-Money Valuation: $375,000,000

Raised (as of publishing): N/A

Minimum Investment: $1,000.00

Here's what I like: Like last week’s review, reAlpha is raising an equity round via Reg A+ which I very much like… then, there’s the price. A $375M Series Seed 🤯😏

We’ll get to that next.

reAlpha plans to change the short term rental market by replacing sweat equity with modern tech to optimize growth, reach, and influence eliminating the headache and cost of ownership. They plan to generate predictable cashflow through 51% ownership and rental income from each property — having spent a decent portion of my professional career in commercial real estate, I can attest to this being the dream. In fact, in a prior life the goal was to start with a small position in a commercial property, then continually increase allocation by re-investing rents before turning each property into a cash cow, and then before eventually selling at maturity and start again.

This is exactly that, but for residential. Which only a decade ago, residential was a dicey proposition. But in today’s market, with the addition of tech/booking apps and property turnover options — it’s a no-brainer. Just look at Redfin, Zillow and OpenDoor and you know the opportunity; they’ve all transitioned mostly to build-to-rent and reAlpha clearly sees the potential as well.

Here's what I don't love: I have nothing bad to say about reAlpha except for the fact the price is utter crazy-town! The market is as big as it gets. The founding team is excellent. And, the company differentiates itself well by how it goes about funding property purchases and turning fast returns via rentals and management fees.

But, that price tho…

Who should invest and why: Glass half full… the market is so huge that I personally know of companies playing in this space that have gone from $0 to raising hundreds-of-millions of dollars valued at unicorn status within the past 18 months. They’re raising with the backing of massive hedge funds and firms like BlackRock dumping billions into property acquisition and STILL these companies are considered a deal. Perhaps reAlpha can join that list. But for many, the $1,000 minimum and mind-blowing valuation probably prices them out. For value investors, I can certainly understand the resistance. For those that are long-term investors, bullish on buy and build-to-rent; the $1,000 minimum could be worth a shot if you believe in the team and TAM.

For me, I think you have to consider the risk profile, which is heavily dependent on its ability to raise truck loads of capital and trust the market winds. Overall, I think the concept will win, the market opportunity will bear out and this team is very clearly poised to win.

But, that price tho 🤦🏼‍♂️

As always, startup investing is super high-risk, anything can happen.