Wall Street Financiers Agree with Real Estate Investors

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It doesn’t exactly roll off the tongue: this new real estate “first” reported on by the Wall Street Journal recently. It was the kind of ‘break-through’ that sounded like it belonged in a footnote to an investment banker’s annual report. Nonetheless, for one segment of Journal readers who also happen to be real estate investors, the topic and the phenomenon it described confirmed the wisdom of their investment.

The “first-ever” topic was “the first vacation-rental mortgage securitization.” This is a debt-raising innovation just launched by a short-term rental operator (AvantStay Inc.). What could be of interest to investors is that it serves as convincing proof that the short-term rental industry is becoming “a thing”—at least in financial circles.

Short-term rental real estate has already long been a consequential segment of the rental world, but for many consumers, it may have seemed to be a minor footnote. Outfits like Airbnb, Vrbo, or HomeAway.com seemed to be the exclusive preserves of isolated individual vacation homeowners looking to profit from short term stays by budget-conscious vacationers. But demand has been expanding, in part due to pandemic-spurred changes in workplace mobility. Vacationers are being joined by increasingly mobile workers and consultants. And now major real estate investors are, according to the Journal, “angling to find new ways to profit from these shifts.”

For landlords who are already profiting from short-term tenants, their lead is being increasingly followed by New York investment firms. As the Journal headlined, “That Vacation Home Listed on Airbnb Might Be Owned by Wall Street.” To underscore the point, AvantStay announced a new co-venture with investment firm Saluda Grade to buy “about $500 million of homes.” That first-ever securitization will raise the cash. It’s more confirmation of the potential value that residential real estate has always offered local investors.