{"id":151995,"date":"2023-05-01T12:56:05","date_gmt":"2023-05-01T18:56:05","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=151995"},"modified":"2024-02-27T10:05:53","modified_gmt":"2024-02-27T17:05:53","slug":"short-term-rental-reits","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/short-term-rental-reits","title":{"rendered":"Short-Term Rental REITs: What They Are And How You Can Invest In Them"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC7381636233\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p><em>This article is presented by Wander. Read our&nbsp;<a href=\"https:\/\/www.biggerpockets.com\/editorial-guidelines\" target=\"_blank\" rel=\"noreferrer noopener\">editorial guidelines<\/a>&nbsp;for more information.<\/em><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\"><a href=\"https:\/\/www.biggerpockets.com\/guides\/the-ultimate-guide-to-short-term-rental-properties\" target=\"_blank\" rel=\"noreferrer noopener\">Short-term rentals<\/a> (STRs) are the fastest-growing segment in hospitality and have been gaining market share for years.<\/span><strong><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/strong><span data-preserver-spaces=\"true\">A confluence of factors like robust travel spending from Americans, increasing consumer preference for experiences, and remote work is expected to support 11% CAGR growth in the STR market through 2030.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Given the recent growth of STRs, vacation rental investing has become increasingly popular. Historically, however, the only way for people to invest in this asset class for a steady income and capital appreciation was resorting to the time and capital-intensive process of buying and managing a single or portfolio of vacation rental homes. In this article, we will explore the fundamentals of REIT investing, the benefits of investing in a vacation rental REIT, and&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/wander.com\/reit\/?utm_source=BiggerPockets&amp;utm_medium=organic&amp;utm_campaign=Sponsored_blog_post_20230430&amp;utm_content=REIT_and_STR_education\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Wander REIT<\/span><\/a><span data-preserver-spaces=\"true\">, the first and only STR REIT that can help you reap the benefits of STR investing without the hassle.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">How REITs Work<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">REITs, or Real Estate Investment Trusts, were established by <a href=\"https:\/\/www.sec.gov\/files\/reits.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">U.S. Congress in 1960<\/a> to create an investment vehicle that would allow investors to pool capital and facilitate a larger investment in an asset that would have otherwise been out of reach. Since then, REITs have become widely used to access real estate.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">REITs are also widely used because they offer tax advantages that benefit the REIT and its investors. Unlike most corporations, REITs don\u2019t have to pay taxes at a corporate level which generally enables REITs to reinvest more capital and make higher distributions to investors that aren&#8217;t subject to being taxed twice.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">However, REITs must meet strict standards set by the IRS to maintain their classification, including:&nbsp;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Distributing 90% or more of their taxable income in dividends each year.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Have at least 75% of its capital invested in real estate assets or cash.&nbsp;<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Derive at least 75% of its gross income from real estate assets like rent or interest.<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">Investing in public REITs can be a great way to get exposure to real estate, but investors aren\u2019t limited to investing in public companies. There are also private REITs. Private and public REITs are very similar in the way that they operate, except that private REITs are not traded publicly on a major stock exchange, making them less sensitive to public market volatility.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">While private REITs offer real estate-backed stability, historically strong returns, and the ability to invest in property without the hassle of property management, private REITs may be best suited to long-term investors who don\u2019t require immediate access to their invested capital. In other words, REIT investors need to be comfortable with the lack of liquidity.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This lack of liquidity compared to public REITs also means private REITs are generally limited to accredited investors \u2013 individuals or couples who meet income or net worth requirements or fall under a special financial employment status as defined by the SEC.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Changing the Way Short-Term Rental Investing Works<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Historically, the only way to invest or access the short-term rental market would have been to buy a home or a portfolio of homes and rent it out. However, this often comes with the time and capital-intensive responsibility of driving occupancy, managing, and maintaining properties.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">With the growth of the STR segment, there has been a growing need for alternative ways to invest in vacation rental homes, and this is where REITs come in.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">As mentioned, REITs have been around for several decades as a common way to fund various real estate types\u2014from residential to commercial projects. Commercial REITs, for example, pool investor assets to purchase commercial real estate like hotels, office buildings, restaurants, and more in exchange for a share of profits to investors in the form of dividends and capital appreciation.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">However, REITs, as a means of funding the growth of projects in the STR segment, didn\u2019t exist\u2014until<\/span><em><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/em><span data-preserver-spaces=\"true\">now<\/span><em><span data-preserver-spaces=\"true\">.&nbsp;<\/span><\/em><\/p>\n\n\n\n<p><a class=\"editor-rtfLink\" href=\"https:\/\/wander.com\/reit\/?utm_source=BiggerPockets&amp;utm_medium=organic&amp;utm_campaign=Sponsored_blog_post_20230430&amp;utm_content=REIT_and_STR_education\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Wander Atlas REIT<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;Inc. (\u201cWander REIT\u201d) is pioneering a new form of ownership in a new asset category, STRs, as the first and only institutional-grade short-term vacation rental investment product.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Wander REIT: A Pioneer in Short-Term Rental Investing<\/span><\/h2>\n\n\n\n<p><a class=\"editor-rtfLink\" href=\"https:\/\/wander.com\/reit\/?utm_source=BiggerPockets&amp;utm_medium=organic&amp;utm_campaign=Sponsored_blog_post_20230430&amp;utm_content=REIT_and_STR_education\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Wander REIT<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;is the first vacation rental REIT to allow accredited investors to own a piece of high-end vacation rental homes across the U.S.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you\u2019re unfamiliar with&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.wander.com\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Wander<\/span><\/a><span data-preserver-spaces=\"true\">, it\u2019s an industry-leading vacation rental platform that combines the quality and consistency of a luxury hotel with the privacy, comfort, and space of a vacation home. Wander\u2019s carefully curated portfolio of modern high-end vacation homes is located in inspiring locations, appointed with designer furnishings and amenities, and equipped with smart home technology, state-of-the-art workstations and fitness equipment, and even a Tesla for guest use. By owning or controlling every link in the chain: the homes, the management, the marketing, the propriety app, booking engine, and the 24\/7 text-based concierge, Wander is uniquely positioned to deliver a superior guest experience.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This year, Wander launched&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/wander.com\/reit\/?utm_source=BiggerPockets&amp;utm_medium=organic&amp;utm_campaign=Sponsored_blog_post_20230430&amp;utm_content=REIT_and_STR_education\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Wander REIT<\/span><\/a><span data-preserver-spaces=\"true\">\u2014the first and only institutional-grade vacation rental investment product. Wander REIT is pioneering the institutionalization of the short-term rental asset class by applying institutional standards to its investment process, portfolio management, and capitalization strategies. This sophisticated approach to the industry allows Wander REIT to manage risk effectively and deliver attractive returns to investors.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Wander REIT offers accredited investors recurring tax-advantaged income and diversified exposure to the STR market with exclusive investor perks. It\u2019s currently targeting an annual dividend of 8%, paid out on a quarterly basis, and a total annual return of 14%, inclusive of capital appreciation.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Below are a few benefits that can help you better understand the product and investment opportunity:&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong><span data-preserver-spaces=\"true\">Potential for above-market returns<\/span><\/strong><span data-preserver-spaces=\"true\">&nbsp;<\/span><strong><span data-preserver-spaces=\"true\">vs. other established real estate asset classes.<\/span><\/strong><span data-preserver-spaces=\"true\">&nbsp;One of the key benefits of investing in a vacation rental REIT is the potential for above-market returns. Because vacation rental properties are typically rented out on a short-term basis, they can generate higher rental income than traditional long-term rentals. This means that investors in vacation rental REITs can potentially earn higher dividend yields than they would with other types of real estate investments.<\/span><\/li>\n<\/ol>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1118\" height=\"669\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/05\/Screenshot-2023-05-01-at-2.14.30-PM.png\" alt=\"STR Yield vs. Other Real Estate Segments (Q1 2023) - Newmark\" class=\"wp-image-151997\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/05\/Screenshot-2023-05-01-at-2.14.30-PM.png 1118w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/05\/Screenshot-2023-05-01-at-2.14.30-PM-300x180.png 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/05\/Screenshot-2023-05-01-at-2.14.30-PM-1024x613.png 1024w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/05\/Screenshot-2023-05-01-at-2.14.30-PM-768x460.png 768w\" sizes=\"auto, (max-width: 1118px) 100vw, 1118px\" \/><figcaption class=\"wp-element-caption\"><em>STR Yield vs. Other Real Estate Segments (Q1 2023) &#8211; <a href=\"https:\/\/www.nmrk.com\/storage-nmrk\/uploads\/documents\/va-market-survey\/Newmark_VA_North-American-Market-Survey-1Q-2023.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Newmark<\/a><\/em><\/figcaption><\/figure>\n\n\n\n<ol class=\"wp-block-list\" start=\"2\">\n<li><strong><span data-preserver-spaces=\"true\">Diversification.<\/span><\/strong><span data-preserver-spaces=\"true\">&nbsp;Another benefit of vacation rental REITs is the diversification they provide. By investing in a portfolio of properties, investors can spread their risk across different geographic locations and property types. This can help reduce the impact of any one property experiencing a downturn or vacancy. In addition, private REITs like Wander REIT typically have lower correlations to public equities.&nbsp;<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Recurring income.<\/span><\/strong><span data-preserver-spaces=\"true\">&nbsp;A third benefit of vacation rental REITs is that they are a great source of tax-advantaged passive income<\/span><strong><span data-preserver-spaces=\"true\">,&nbsp;<\/span><\/strong><span data-preserver-spaces=\"true\">so you can keep more of what you earn.<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Capital appreciation<\/span><\/strong><span data-preserver-spaces=\"true\">. As the value of the properties in the portfolio increases, so does the value of the REIT. Additionally, if the management company successfully increases occupancy and rental rates, this can also lead to higher property valuations and increased returns for investors.<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Inflation protection.<\/span><\/strong><span data-preserver-spaces=\"true\">&nbsp;Inflation isn\u2019t just felt at the supermarket or gas station. The cost of renting real estate also tends to go up, which can make private REITs an effective way to protect the value of your money from inflation. The income and property appreciation can also help offset some of the deteriorating effects of inflation.&nbsp;<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Easy to invest.&nbsp;<\/span><\/strong><span data-preserver-spaces=\"true\">Finally, vacation rental REITs make investing in STRs easy. They eliminate the day-to-day hassle of property management by passing on marketing, maintenance, and booking responsibilities to professional management companies. This can be particularly attractive to investors who do not have the time, expertise, or desire to manage their own properties. Wander REIT takes it a step further and makes it easy to invest with just a few clicks.&nbsp;<\/span><\/li>\n<\/ol>\n\n\n\n<p><span data-preserver-spaces=\"true\">To learn more about Wander REIT, visit&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/wander.com\/reit\/?utm_source=BiggerPockets&amp;utm_medium=organic&amp;utm_campaign=Sponsored_blog_post_20230430&amp;utm_content=REIT_and_STR_education\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">wander.com\/reit<\/span><\/a><span data-preserver-spaces=\"true\">, where you can review investment materials and see how Wander REIT can fit into your portfolio.<\/span> You can also find all legal disclosures and risk factors associated with Wander REIT on our website.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Summary of Key Terms<\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Structure: Private, non-traded REIT<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Target Investments: High-end single-family homes to be converted into Wander-quality vacation rentals<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Price per Share: $10<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Minimum Investment: $2,500<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Targeted Annual Dividend: 8%<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Targeted Total Return: 14%<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Distributions: Quarterly<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Management Fee: 0.65% on GAV<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Investor Suitability: Accredited investors only<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Tax Reporting: Form 1099-DIV<\/span><\/li>\n<\/ul>\n\n\n\n<div class=\"wp-block-group border border-gray-200 p-6 rounded-md has-slate-50-background-color has-background\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n    \n  <div \n    id=\"segemnt-view-event-block_624f52525847f\" \n    class=\"  \"\n    x-intersect:enter.once=\"\n      analytics.track('DoorLoop Blog Sponsor View', {\n        referrer: 'https:\/\/www.biggerpockets.com\/blog\/short-term-rental-reits',\n              })\n    \">\n    \n  <\/div>\n  \n\n\n<h3 class=\"wp-block-heading has-text-align-left mt-0\"><strong>This article is presented by Wander<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-full is-resized is-style-default\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/05\/500x500.jpg\" alt=\"\" class=\"wp-image-152000\" style=\"width:377px;height:360px\" width=\"377\" height=\"360\" title=\"\"><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<p>Wander is the industry-leading vacation rental platform. Now we\u2019re introducing Wander REIT\u2014the first and only institutional-grade vacation rental investment product. <\/p>\n\n\n\n<p>Unlock access to this ascendant asset category and invest in the best of the best vacation rentals.<\/p>\n\n\n\n<div id=button-custom-event-block_63c9a33918e17 class='button-custom-event'>\n      <a href=\"https:\/\/www.wander.com\/reit?utm_medium=blog&#038;utm_source=BiggerPockets&#038;utm_campaign=sponsoredarticle\" x-on:click=\"window.analytics.track(&#039;Sponsored Blog CTA Click&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/short-term-rental-reits&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\" rel=\"noopener\">Learn More About Wander<\/a>\n  <\/div>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\"><\/div>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>You might know about REITs, but do you know about STR REITs? Read more to find out!<\/p>\n","protected":false},"author":613662,"featured_media":152536,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7363,7119],"tags":[],"class_list":["post-151995","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-reits-passive-investing","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/151995","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613662"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=151995"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/151995\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/152536"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=151995"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=151995"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=151995"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}