Passive STR Investment – 50+ Unit Property in Philly (Cash Flow Driven)

[Kyle Visher]

Hey BP community,

I’m working on a deal structure that could be a good fit for anyone investing in STRs or looking for passive exposure to multi-family real estate.

We’re helping structure a master lease takeover on two buildings in Philadelphia combining for 75+ multifamily units in downtown Philly. The properties are fully furnished, licensed for short-term rental, and currently operating under a different manager. The plan is to bring in a stronger operator with upgraded systems and better track record.

The incoming operator is a VC-backed STR company doing around $8M in annual revenue with 29% Operating Margin. They've built out their own ops platform and are currently active in 9+ properties in the Philadelphia area.

This is not a property acquisition or traditional equity raise. Investors take over the master lease position and receive all net operating income after operating costs and rent. There is no reliance on an exit or asset sale as returns are driven by cashflows generated from the STR operation.

The total upfront cost is roughly ~$1M across both properties where the investor finances the security deposit and an operating and rent reserve for the STR operator. At the end of the lease term, remaining funds from these reserves and the security deposit (90% of invested capital) are returned to the investor.

The base case assumptions are ~34% IRR and a 3.1x MOIC over the life of the deal (5-year lease with the option to extend for another 3 years). It's fully passive. The operator runs everything day to day, and investors have the ability to replace the operator if they underperform.

The deal is being sourced through Ryse, a YC-backed fintech marketplace that connects capital to real estate operators. Ryse isn’t the operator, but run the diligence and structure these deals on behalf of the operators. (For full disclosure, I work for Ryse)

We’ve had interest from a multi-family office that has committed capital to similar projects in the past, and we’re now looking for a few investors in the $100K to $500K range to complete the raise.

If this sounds like a fit or if you're curious to learn more, happy to share a 2-pager and model. 

DM me or drop a comment.