Short Term Rental Portfolio Valuation Question

[Sean Baker]

Good afternoon:

I'm working with a group of investors to create a short-term rental portfolio. Our strategy is to create the portfolio, get it cash-flowing and then potentially divest as a portfolio. My question is how to think about future value. I have experience with private equity and commercial M&A where we use an EBIDTA multiplier to value an acquisition. Is anyone using a similar valuation model for real estate portfolios that are cash-flowing or are all of these straight real estate transactions based upon residential valuation methodologies? Example: I'd love to use annual cashflow or EBIDTA equivalent and a multiplier on that to increase the portfolio value above residential market value. Am I crazy?

[Evan Polaski]

@Sean Baker, your challenge is that you are trying to make a real estate move out of an operations play.  In Airbnb, the real estate isn't where value is created, and therefore the premium you are trying to create is lost at the "divest".  Your operations are what create value, not the house.  Divest yourself and remove your operations, and now the house is back to a house like the one on either side of it.