Can you believe it's December 1st already?! Where has the year gone? Mid-November means some very important stuff is right around the corner.... turkey, Santa, and my personal favorite : assessing your investment portfolio's performance this past year.
When it comes to the latter, zeroing in on "how you did" is a tricky matter. As we discussed recently, the biggest question when evaluating your portfolio or even your Financial Team is "Compared to What?"
Am I measuring myself against "The Market" or against my neighbor? What is "the Market"? Are we talking about the S&P, the DOW, the Nasdaq, Global, Domestic, Small Cap, Bonds, Emerging Markets, etc, etc.
Heck, what about all the investments out there that have nothing to do with paper assets? Are you in Real Estate, precious metals, natural resources, art, wine, collectibles, private placement funds, etc, etc? The list is limitless.
As we've mentioned before, having more "what's" to compare your portfolio to is the key to being active in your financial future vs. passive. In today's newsletter, we offer you some performance metrics about an asset class that we're particularly bullish on.
The Vacation Rental (VR) Industry
Unless you just returned from a 5-year hiatus in the Himalayas, you've probably noticed that Vacation Rentals have been making local, regional, and national headlines for some time now.
In a nutshell, the emergence of vacation rentals as a viable place to lay your head when traveling for business or for leisure has shaken up the status quo in multiple $100B+ industries, including Hospitality, Travel, Real Estate, and Tech.
The reasons behind this evolution are multi-factorial, and we won't get into those here. But suffice it to say, the fact that Airbnb is valued at over $25B, that Expedia just announced its buying VRBO parent company HomeAway for $3.9B, and that most companies now allow employees to expense vacation rentals for business travel has thehotel industry very nervous!
What this means for our investors... and for you!
Whether it was good luck or good foresight, we were fortunate enough to see the writing on the wall nearly 5 years ago, when we began investing in vacation rentals. Since then, we've raised 2 Investment Funds that focus exclusively on this booming niche.
Success in the VR industry at a large scale is not easy, and requires considerable hands-on management, streamlined workflows, and a constant finger on the pulse. Competition is heating up as new mom and pops enter the marketplace daily, adding additional static (and sometimes confusion) to the traveler's experience. In the right hands of a professional and innovative manager however, the VR space still pencils well.
Typically we reserve our performance analysis only for investors in our specific deals(i.e. they see their returns in the quarterly statements we send). However this month we felt that sharing our returns would be helpful to our broader audience as you ask yourself the "compared to what" question in the coming weeks.
Now, before we share our returns, its important to understand the goals of our Vacation Rental investment strategy back when we started. The goals were 3-fold:
- Identify an opportunity that was about to get REALLY BIG based on clues in the news and macro-economic trends
- Offer folks an investment diversified from the Stock market that was rooted in "real assets" (meaning the underlying asset had intrinsic value)
- Target a solid, long-term cash-flow play that offered double digit returns over a medium term (i.e. we wanted to hit a stand-up double not a grand slam)
We share the above because one of the most important parts of raising private capital is to match the goals of the Fund with the goals of the investors. When these do not align, confusion and disappointment may ensue.
Show me the numbers!
It's important to note that the data above is not intended to opine that investing in vacation rentals is better than investing in the stock market. To make such a claim would require gobs of additional data, a definition of what "better" means, and most importantly a much longer time horizon. Who knows, over a 10 or 20 year period, the "market" might kick vacation rentals' butt.
What matters here is that for at least 3/4 of 2015 our investors have another benchmark against which to compare all their other holdings. And for 2015 at least, vacation rentals appear to be offering investors considerable beta, meaning that when the Marketzigged, vacation rentals zagged, and that's always a good thing because it means you're better diversified.
As we enter the often frenetic holiday season and you stop to think about your finances, your future, and ..... your options.... be sure to ask yourself "Do I have enough 'Compared to What's' to make a good assessment?" If the answer is "No" take a more active role in expanding your investment horizons.
Join the Club
In early 2016 we'll be launching our next investment opportunity. If you're interested in receiving an advanced copy of the business plan please let us know by completing our 30-second signup form here (works great on mobile devices):
Until then, happy holidays... we have much to be thankful for!