Week 1 ~ Tokenized Airbnb Properties
Short-term rental property cash flows for the Average Joes
Overview
Airbnb rentals have been all the rage for a couple years now — a trend that’s only been exacerbated by the COVID-19 work-from-home landscape. With tropical regions carving out a wide lane for themselves among WFHers (looking at you, Miami), Airbnb listers seem to be sitting on a golden ticket. Naturally, this leaves opportunistic investors wondering how to get a piece of the action.
Long Answer? Organize a group of like-minded investors, pool your capital, form an LLC, acquire properties in hot areas, handle management and operations, market and promote the listings, maintain books and cash flow distributions for all LLC members.
Short Answer? Buy security tokens and collect a portion of the cash flows, seamlessly.
Value-Adds
Property Owner (Token Issuer)
- Can sell off as many tokens as the owner deems fit, in exchange for immediate liquid capital
- The owner would collect a lump sum from the initial token sale and partial cash flows from the remaining ownership
- Useful for owners with other capital intensive projects in need of liquidity
- Can structure the tokens to be retired at a certain date (with a premium, for example) to recoup full ownership down the road
Investor (Token Holder)
- A more seamless method of crowdsourcing for the rental property, especially for those unable to acquire a full investment property
- Diversified investment opportunity that can be used to target geographic areas, trends, and hedge against traditional investment drawdowns
- Tokens have the capability of daily cash flow distributions; great for frequent dividend-seeking investors
It’s found that Airbnb has an economic impact of over $33 Billion in the United States alone (source). Private investors are taught to look for enormous addressable markets, and funnel that further into companies that have a capture on said market. Given that Airbnb officially went public via IPO in December 2020, investors are now presented with two options — participate in the platform through common stock ownership, or participate through the rental service itself.
A tokenized Airbnb property would offer middle ground between these two options. Investors who would rather capture rental cash flow distributions than hold shares of corporate stock BUT prefer the ease of real-time trading are best suited for security tokens. As the landscape transitions from legacy investments (stocks, bonds, gold) to more dynamic opportunities (digital assets, ETFs, pre-IPO shares, crowd-funded real estate), investors are always on the watch for diversified choices. Owning security tokens for a month-long Airbnb in South Florida during the COVID-19 pandemic could be a very useful hedge against the macro economic backdrop. Largely uncorrelated with traditional markets, Airbnb Property Tokens would enable investors from all over to add to their portfolios and enjoy some of the winnings currently reserved for fortunate property owners.
The impulsive rebuttal is: Wouldn’t property owners want to keep full ownership? Especially during a time of such rapid increasing demand?
The answer, much like anything, lies in the context and the needs of the asset owner. If an owner is renting out spare rooms in a main house then it’s very likely they will be retaining full ownership, and would see little reason to tokenize part of their property.
However, if perhaps somebody holds a second property strictly for rental income, this could be a chance to expand their horizons. Selling tokens would generate a lump sum amount (# Tokens x Price per Token) of capital, which can then be used however the owner sees fits. Maybe it’s for personal use, maybe it’s for other investment opportunities, maybe it’s to buy tokens in properties in other cities to further capitalize on the same trend… the reasons are unique to any owner.
The deciding factor comes down to: Will this lump-sum of capital via initial token sale generate returns desirable enough to forgo the traditional bank financing process? If so, then this owner would be wise to avoid taking on more leverage and simply accept the lump-sum of liquid capital in exchange for a portion of property ownership.
What to do with this?
For those feeling compelled to get directly involved in a tokenized Airbnb… there is certainly some labor that lies ahead. While I’m not currently aware of any tokenized Airbnb properties (drop a comment and correct me if I’m wrong though!), the concept has now been depicted and can be brought to life with the proper resources.
To any Airbnb property owners out there who see value in tokenizing even a portion of their properties, head on over to @Security Token Advisors and check out the magic.
To any interested investors? Keep your eyes open, as we all know how quickly the digital assets field moves. In the meantime, keep tabs on similar projects leveraging security tokens.
More coming next Wednesday 1/20/21!
Disclaimer: This is not financial advice and should not be interpreted as such. Please do your own research on investments and financial decisions before partaking in any ideas depicted in this publication.
