Hi everyone,
I hope you enjoyed last week’s issue on Finlete, the company that lets you invest directly in minor league athletes.
Today, we’ll be wandering (sorry) through some of America’s most luxurious vacation homes, with one of the newest private REITs in town — Wander.
Wander gives investors access to the first and only vacation rental REIT.
If it seems to you like new real estate startups are coming in hot & heavy these days, you’re not alone.
Here’s a recap of companies we’ve explored:
- Last year we looked at RAD Diversified, a Reg A REIT
- Last month we explored Cityfunds — an index-like fund for entire cities, from Nada
- Last Sunday I authored a piece on student housing
- Investment.com is a pre-launch platform for fractional real estate
- Then there’s Fundrise, the “OGs” of Reg A real estate.
- Finally we have real estate tokenization companies like RealT and aggregators like RealBid
Whew! There’s a lot going on.
But Wander is another unique addition to the mix. They’re a Reg D REIT focusing on holiday rentals.
Let’s find out more
Table of Contents
Summary
- Type: Private vacation rental REIT
- Accreditation: Accredited investors only
- Geography: US and the UK accepted. Some other nations may be accepted too.
- Minimum investment: $10,000
- Investment horizon: 7-8 years
- Link: https://www.vpdae.com/redirect/a4xbi2w2eonqnx2u1evq6ec7m9
Vacation rentals
Everyone knows interest rates are going up, and nobody knows how high they’ll go.
This sucks for first time/would-be homeowners, but is pretty good for income-producing assets like office spaces, apartments and warehouses.
But what about vacation rentals?
Airbnb, for example, continues to show what an excellent asset short-term rentals can be. The so-called “Airbnbust” was baloney. Airbnb’s CEO Brian Chesky said they’ll need “millions more hosts” to meet customer demand over the coming years.
But let’s be honest. While some vacation rentals are great, just as many are utter crap. There’s nothing like showing up for your holiday and being greeted by unmade beds, cockroaches and other horror stories.
Alternative accommodation sites like Airbnb or VRBO are ultimately a marketplace, like the eBay of vacation homes. Hospitality isn’t for everyone. Some hosts are pros, others try to go pro, but end up waaaay out of their depth.
This pisses off renters, who want a consistent experience that doesn’t ask them to do fifty things before they check out.
Memes aside, vacationers choose homes over hotels for a reason! They just want their vacation rentals managed by experts.
And that’s where Wander comes in..
What is Wander?
Think of Wander as a travel brand that combines the quality of a luxury hotel, with the space and privacy of a vacation home.
Yes, you can have it both ways. Consistent attention to detail, wide open spaces, and privacy,
That means no more taking out the trash for previous customers, or “Wi-Fi” that’s hidden behind a paywall (yep, this is a real thing).
Wander opened up their slate of luxury vacation rentals in February 2022 and have seen 3,600+ nights booked at a 90+% customer satisfaction rate. (For comparison, Airbnb’s hovers around 55%.)
And when I say luxury, I mean it. Just take a peek at some of these insane locations on offer:
The homes look over jagged cliff-faces (don’t bring kids!), are nestled among rolling hills, or provide access to your very own private coast.
Wander’s team
Wander is led by CEO John Entwistle. HIs first foray as an entrepreneur came with Coder, a platform that transitioned software development to the cloud.
This landed John and his co-founders a spot on Forbes’ 30 under 30 after their open-source software was downloaded more than 6 million times.
The rest of the 50-strong team comprises property managers, interior designers and real estate experts.
Jake Kelley (from Morgan Stanley Real Estate) is the team’s Head of Capital Markets.
Mechanics
Wander handles everything itself. This way they can ensure the perfect experience for their customers.
- Acquisitions. Wander’s properties need to be in unique, high-demand locations. In the middle of a forest, or on the outskirts of a stunning lake.
- Design. Once the property is secure, the designers get to work. Modern outfittings, luxury amenities (as many showers as possible is a common theme) and smart products galore.
- Booking. All bookings are managed through the Wander website or mobile app. A massive tick for me is that guests can split their bookings directly in-app. So there’s no need to fumble around splitting money 11 ways.
- Property Management. Wander has a dedicated team for each property to keep it in tip-top shape.
- Tesla. It’s pretty common for high-end hotels to offer their guests a Tesla to cruise around in. Well, Wander has taken note and is doing the same. Every single vacation rental comes with a Tesla snuggled in the garage!
This is a fairly resource-intensive process, so Wander are a lot slower to scale than Airbnb, which outsources its hosts and properties to anyone who can be bothered. But it also means the holiday experience is a world apart.
Wander REIT Launch
After just a year of planning and $1m in spending, Wander is releasing a first-of-its kind fun — a private vacation rental REIT.
It comes with all the benefits of a REIT (dividends, no management, smaller barrier to entry) paired with a high-flying short-term rental asset class.
Best of all, it’s a private REIT fund. So the whims of the stock market have a lower correlation to share prices.
The REIT is registered as Wander REIT, Inc and is a Reg D REIT (rather than a Reg A offering). This is why it’s only for accredited investors, and they were able to get to market quicker (just like we did with ALTS 1).
The portfolio
So far, five of Wander’s top-rated holiday homes are packaged into the REIT, with more to come.
The properties are spread across some of America’s finest locations:
- A surfside beach in South Carolina
- A glass house sitting among the Orford Cliffs
- 5 acres in California’s Anchor Bay
- Golf courses and beach walks in Oregon
- Hit the slopes in Truckee, California
The total value of these bad boys is $14.5 million ($2.9m per property, so very high end)
How the Wander REIT works
Investors can head over to the Wander REIT page, create an account and get pre-approved for investment.
Money raised from investors is used to acquire new properties for the REIT.
Wander REIT will distribute at least 90% of the income generated from the five (and counting) properties. Distributions are deposited quarterly into each investor’s bank account.
All the while, third-parties are tasked with updating the REIT’s NAV on a monthly basis to determine its share price.
Wander REIT reserves the right to sell its properties at any time. The profits may be re-invested, or distributed to investors.
Target returns
Wander REIT offers accredited investors the opportunity to earn a targeted 8% annual dividend and 14% annual return – a moderate equity appreciation of 2% per year over seven years.
Of course, vacation rentals are all about yield. On that front, Wander is aiming for 8% in annual dividends. The total projected return of 14% is a combination of rental income and property price appreciation.
Wander pays Wander REIT a monthly rental on the properties, based on a combination of factors, and Atlas returns the majority of this income to investors as the projected 8% annual dividend.
Nothing outrageous, but about double the average yield from public REITs.
Liquidity
One downside to Wander’s REIT being private is liquidity.
REITs are a classic solution for diversifying into the illiquid real estate market. But because Wander’s isn’t a public fund, investors can’t just trade it like a stock.
The investment horizon for Wander’s REIT will likely be 7-8 years, at a minimum. Eventually, the team plans to accept “share redemptions,” where investors can sell their holdings via the Wander Investor Portal. There’s no timeline for when this feature will come into play though.
Who can invest?
Wander REIT is limited to accredited investors only.
Investors from the US and the UK are welcome.
Beyond this, there aren’t any specific restrictions on location. Wander will treat each potential investor on a case-by-case basis.
Fees
The Wander REIT is a separate legal entity from Wander. Wander REIT owns the properties and Wander provides the management services for the properties (upkeep, guest experience, back-office support).
Wander REIT leases the properties to Wander under an agreement where the REIT pays Wander a 0.65% annual management fee (this reimburses Wander for the services they provide).
In addition, Wander receives 20% of returns above the 8% threshold – this helps encourage Wander to keep the occupancy rates high and the guest experience top-notch. When guests are happy customers, both Wander and REIT investors are rewarded.
How does Wander REIT stack up?
Liquidity
Not fantastic
Look, it’s real estate. This ain’t a particularly liquid asset class, and this one in particular has a long holding period.
In the future, Wander will look to usher in a REIT share redemption feature, but this might be years away. Don’t go into this one looking for instant liquidity.
Returns potential
Great
We’re super bullish on short-term rentals as an asset class, and the vacation market is hotter than ever.
8% in annual dividends may end up being a conservative target.
REIT portfolio
Incredible
The properties in the Wander REIT are insane.
The only drawback is that Wander are way slower to scale than Airbnb, because they have to do everything themselves. It might take them months (or years) to fully build out their portfolio.
Accessibility
Not bad
Only supporting accredited investors is a bit of a whack, but given that, the $10k investment minimum for real estate isn’t too shabby.
Plus, Wander is accepting investors from the US, UK and other countries on a case-by-case basis.
Closing thoughts
I can’t get over how gorgeous some of the vacation rentals listed on Wander. When these guys say they’re buying up luxury vacation properties, they mean it.
We’ve been a fan of short-term rentals for a couple of years now, and not much has changed. These guys provide an awesome opportunity to get into a under-utilized asset class with very little correlation to the stock market.
And while you’re at it, why not spend a night or two at the properties you’ve invested in. A “try before you buy “type deal.
At the very least, you’ll get to drive a Tesla for free.
Disclosures
- Wander is an Alts sponsor; this was a paid deep dive.
- We do not own any shares of Wander through ALTS 1, nor do we have any personal vested interest in the company.
- I’ve never stayed in a Wander property (but am salivating at the thought)
This issue is a sponsored deep dive, meaning Alts has been paid to write an independent analysis of Wander. Wander has agreed to offer an unconstrained look at its business & operations. Wander is also a sponsor of Alts, but our research is neutral and unbiased. This should not be considered financial, legal, tax, or investment advice, but rather an independent analysis to help readers make their own investment decisions. All opinions expressed here are ours, and ours alone. We hope you find it informative and fair.
