The fund's property selection process is guided by a straightforward approach. Utilizing the well-established metric of capitalization rate, our goal is to secure properties with a minimum cap rate 10% This involves projecting the property's net operating income from average daily rates and occupancy levels of comparable short-term rentals, and subsequently comparing it to the total acquisition cost. This approach guarantees the profitability of all our properties, ensuring that each deal aligns with the fund's expected returns. Our strategic focus is on identifying or developing unique, amenity-rich properties that not only offer comfort and luxury but also capture the vibrant character synonymous with the city of Austin. Rigorous attention to detail in the selection process is crucial for the fund's success. Our objective is to acquire properties distinguished as premier choices for guests, ensuring year-round occupancy and resilience in the face of industry fluctuation and downturn.
Locate
Through collaboration with ISA's and brokers, we will systematically identify and evaluate potential properties that align with the established minimum criteria of the fund.
Analyze
Assess the property's compatibility as a short-term rental per fund criteria, considering factors like location, expected appreciation, development potential, and more, beyond the cap rate.
Manage
After acquisition, our in-house management team refines the property to meet brand standards. We then list it on multiple channels like Airbnb and VRBO to begin earning revenue.
Exit
The fund strategically evaluates factors such as performance, appreciation, equity, and market conditions to decide the opportune time for property divestment, aiming to secure returns for investors or reallocate capital for new acquisitions.
Financial Plan
The fund aims to achieve a financial milestone by acquiring $20 million worth of short-term rental real estate within the next 24 months. With an initial raise of less than $5 million and assuming 20% down payments along with an average of a 7% interest rate on loans, the following projections outline the anticipated outcomes.
$20,000,000
Total Real Estate Purchases
Down Payment
Renovations and Furniture
$16,000,000
Debt Interest Rate
Net Operating Income
Annual Principal and Interest Paid
$4,000,000
$800,000
Debt Assumed
7%
Average Cap Rate of Properties
Managment Expenses
Fund Expenses
13%
$2,600,000
$1,272,000
$416,000
$100,000
$812,000
Annual Profit
Initial Cash on Cash Return
16.9%
60 Month Exit
After 60 months of operation, the fund would liquidate all assets. Assuming an average of 5% appreciation of assets annually, 10% of gross revenue for management fees, 7% of total real estate value for liquidation expenses, and $100k annually for fund expenses, the following projections outline the anticipated return for investors.
$25,525,000
Total Real Estate Value
Initial Equity
$4,000,000
Principal Paydown
$957,000
Total Net Operating Income
$13,000,000
Equity From Capital Appreciation and Value-add
Fund Expenses
Total Amount Returned
$5,525,000
Total Interest Paid
$5,535,000
$500,000
$1,786,000
Liquidation Expenses
Management Expenses
$2,080,000
Annualized Return on Investment
23.1%
$13,581,000
Total Return on Investment
182.9%
