Techvestor is a tech-enabled real estate investment firm that offers a proprietary platform for passive investment in short-term rental properties.
Using its 16-point strategy and software, Techvestor locates, acquires, prepares, and manages properties, including maintenance, design, management, renovations, and more.
Techvestor has raised over $60m, owns more than 120+ properties, and is advised by leading players from companies like AirDNA, Realtor.com, and more.
Launched in 2021, Techvestor has built a multi-million dollar portfolio that includes destinations in the Poconos, Scottsdale, Memphis, Blue Ridge, and several Florida locations.
Its proprietary software is a big reason why Techvestor has risen to the top of the short-term rental industry. The system analyzes over 100K properties, 18MM data points, and 250+ select short-term rental markets every month.
The ability to conduct extensive research and development allows it to target new markets for expansion.
Techvestor was co-founded by experienced real estate investors Sief Khafagi and Sabrina Guler. For five years, Sief led engineering recruiting efforts at Facebook, and Sabrina is a former Engineering Project Manager at Apple.
Techvestor has already raised over $60 million. For someone who hasn’t met you yet and your company, Techvestor. Would you mind giving a little bit of the back story?
Sief Khafagi: First and foremost, I’m a father of two beautiful boys and a husband. I’m privileged enough to lead a team in a company here at Techvestor with incredible people. Without them, none of this is possible. Without the investor community that we have now, this is impossible.
Techvestor makes investing in Airbnbs, aka short-term rentals, dead simple. It’s a syndication Regulation D 506(c). You can invest as little as $25,000, which is 90% less than if you’re going to do it yourself and all the headaches that come with it.
Our team leads with team technology and traction, meaning our team comes from Facebook, Apple, etc. We have advisors from companies like AirDNA, which leads the space for short-term rental data analytics.
We have key people in key places. And we’ve done this hundreds of times, so we know what to do and, equally, what not to do. We know where to buy and what product is right.
Most importantly, we use technology and data to guide decision-making at every step of the process, including acquisition and sourcing.
We underwrite 100,000 plus properties on any given month. 96% of the time, the deal sucks, and we don’t buy it, and then we window shop, given how much equity we’ve raised, bringing that to our investor community.
We syndicate across our two funds. One fund is currently open for investment and that’s our STR2 portfolio.
We generate roughly in the range of 8% to 12% target cash on cash projected roughly five-year hold. Then, everything else that you know and love about syndications: tax benefits, bonus depreciation, and everything else that comes with it.
We’re one of the first and largest in the space. We’re trying to institutionalize the world of short-term rentals and make it better for investors, guests, and everyone else in between.
Can you elaborate on the data: 90,000 plus analysis a month? How does that work?
Sief Khafagi: I’m going to make it real visual. Think of if you have a funnel. You’re trying to get some liquid into some other smaller container.
Really, what we’re going to do is map about 257 local markets across the country that we have an interest in. It can be because they made some sort of list, because we know something about it, or because we’re curious.
Then, from there, for every single property that hits the market in that local region, we’re going to underwrite it as a short-term rental. As soon as it hits the MLS, we typically know about it within 15 seconds, and it can be underwritten as a short-term rental. As everything is happening behind the scenes, it’s going to spit out to us: this meets your buy box, or it doesn’t.
Our very simple buy box across the board starts with, “Can I legally do it here, and does it meet my price-to-rent ratio?” And in each market across the country, we have a defined price-to-rent ratio, given our risk profile there.
It’s just like if you’re going to buy Class A or Class C, there’s a risk profile to both– not saying that one is better than the other. From there, anything that meets our buy box is shown in our window shop, for lack of a better word.
Our head of acquisition, Taylor, will actually go through and pick and choose what he likes. “Does this work? Does this work, and do we want to buy it?” Then, of course, the human element comes through because we all know real estate is hyperlocal and humans matter. And he’ll be able to go and evaluate, “This house does not look aesthetically pleasing. So we’re going to have to have our renovation, but it’s going to be a lot higher here than what we maybe initially projected.” Or our revenue costs don’t necessarily support it very accurately; maybe the data quality isn’t super strong.
Our goal is to take that huge large funnel in any given market and export the following: I’m going to use Scottsdale as an example. In Scottsdale, I only want to buy four-bedroom and five-bedroom homes with a pool in these two golden circles within these two sub-markets of Scottsdale that are on a quarter-acre lot or larger, and I have the opportunity to build a fifth or sixth bedroom. Theoretically, that’s the buy box.
Now, you feed that back into our algorithm. And as new properties come, the thing we’re tracking is also physical real estate supply. For us, density matters, economies of scale. So now that I’ve identified what the prime product to buy in this market is, the second question I have to ask myself is, “Can I buy enough of it?” I don’t want to own one and stop. I want to own 50.
How often is that type of product coming into the market? We all know for the last 12 or 18 months, supply has been going down recently. So you want to get a better sense of when those properties come up, we want to go to stack them. And that’s why we build technology.
You’ve identified some markets where you want your technology and your algorithm to do its research. What are the top markets you want to buy in right now?
Sief Khafagi: As I say, 10 of the extensive is always changing. But we’re in Scottsdale, we’re in Clearwater, and the Tampa Metro. We’re in the Poconos in Pennsylvania. We’re in markets like Blue Ridge, Georgia, or in McGaheysville, Virginia. We’re in Memphis, Tennessee, and we’re in Panama City Beach, Florida, to give you a sample there.
And for anyone who’s curious, we open-source our data. I come from the world of tech, where transparency is key. If you reach out to us and book a call with our team and you’re curious, I will send you all our raw data.
The only thing we anonymize is the location. We want to protect existing investors and prospective ones. But you can see exactly how we’re doing on a quarterly basis in real time.
You have said there are two key criteria for the buy box. Number one, is it legal to do a short-term rental?
Sief Khafagi: Yes.
Where does that show up on the MLS? A human can figure it out, but how does the computer figure it out?
Sief Khafagi: A human always verifies it. No doubt about it. And we take every extensive measure to do it. Especially once you’ve been buying a certain area long enough, you know the rules and how things work.
But top line it’s not necessarily on the MLS data, and we don’t only pull in MLS data. Our software doesn’t tell us this is a perfectly legal short-term rental. A bill that passed in Arizona made short-term rentals completely by right unless you’re in an HOA. That’s the bill that passed on the state level.
Another piece of data that we’ll pull in is, for example, in the Poconos, $3 billion worth of revenue taxes go to school’s infrastructure from short-term rentals and is generated in that market because it’s a tier-two destination second home type market. They depend on tourism and travel and this type of mobility. The likelihood that that market ever removed short-term rentals would be devastating. The risk profile of entering a market that already has a defined regulation is a good sign.
So, really, we’re not looking for perfection in data. What we’re looking for is direction, oftentimes. And if we can find that we’re generating $3 billion of revenue here and we can find existing short-term rental regulation rules, that’s usually a good thing. The municipality accepted it, and it’s starting to tax it. And those are things we’re actually a very big proponent of.
On the second part of your buy box, you said it has to have a price-to-rent ratio. What’s the technique in STR? What’s your price-to-rent ratio for short term rentals?
Sief Khafagi: For our portfolio, we typically underwrite somewhere between 17% and 21% gross revenue to purchase price ratio. Our average purchase price is going to be a half million to $600,000 single-family house that’s four bedrooms or larger, typically across the country, with a decent outside space that we can amenitize fairly well.
And that’s going to do somewhere between 100 to 120 grand in top-line gross revenue. Because we understand our unit economics and margin stepping backward, and that’s what we underwrite for.
If I were to look at some of our earlier properties that have a little bit more finished track record across the board, we typically land somewhere between 25% and 30% gross revenue to purchase price. So we’re underwriting conservatively and outperforming on the top line.
Now, let’s talk about AirDNA. I think you’ve said AirDNA; there’s somebody on your team that is from AirDNA.
Sief Khafagi: Jamie Lane, their chief economist, is one of our advisors and a good friend. He definitely leads us with some great insights as well, and he publishes on our blog. AirDNA is the leader by far in the space and one of the trusted partners that we rely on.
Have you seen markets trending down this year? Are you budgeting any markets down this year?
Sief Khafagi: That’s a great question. First and foremost, I think it’s important to remember that AirDNA, and most of the market, is “mom-and-pop,” 99% of them. We hear “mom and pop,” and that excites us as it does with most real estate investors. So when you’re looking at that data, a lot of people look at that data and think, “Things are going down.”
But they’re not looking at it from an institutional eye. That data is factoring in people who run a property for a day and people who have two nights a month available. It looks negative when it goes through and through.
In Q2, across the portfolio, we beat our own projections by 25%, and we’re pacing ahead of revenue by about 23%.
Everything on AirDNA is every owner, whether it’s a property manager, whether it’s someone who’s self-managing, whether it’s a one-bedroom or a 10-bedroom.
Here’s really where the lack of data comes in. If you have a property manager, the property manager is the one that we see the revenue as on AirDNA. The problem with the property management industry is you have a property manager and an owner who don’t have the same incentives.
A property manager is going to go to you and say, “Hey, put in a hot tub; you’re going to drive more revenue.” But what happens if the owner says no or they don’t want to pony up the 12 grand or wire that hot tub? So the property manager can’t actually drive that revenue, and the owner doesn’t want to pay to amenitize it because they don’t understand the business. They’re busy living life, kids, family, work. Totally normal.
Now, for us, we’re the owner, we’re the operator, we are the manager, so there is no red tape. When we’re designing and purpose-building our homes and renovating them to be short-term rentals, those properties are inherently going to outperform the market average just by nature because we are making the decisions led by data. And when you’re making those decisions led by data, the comps set really is yourself, not necessarily anything that’s not in between. Those are things that I would say inherently are going to influence us versus what you see on AirDNA.
Of course, people are going to see things that are going to come down, but we are the leader in that space on an institutional level, so I would expect this to do incredibly well.
How could you not when you have properties like this? Our properties have amenities like pickleball, basketball, mini golf, and outdoor bowling. These are the types of homes that we have, and we don’t buy them like this. We renovate and build them to the standard.
You’re basically taking a mom-and-pop fractured type of industry called short-term rental, and you’d like to raise a lot of retail investor capital by a bunch of these. Then, at some point, they become an institutional scale. What is that business plan?
Sief Khafagi: I’ll give you some real-time data. Recently, I got a call from a large institutional operator. Let’s just say it’s one of the largest institutional operators in the real estate space.
They’re concerned about entering the Airbnb space because they haven’t been able to find a transaction where they can buy 500-plus homes. It doesn’t exist yet.
And I said, “Well, it’s your lucky day–we’re building it.” They asked me how many doors we had. And that’s about 120 or so. And they said, “Well, that’s interesting, but it’s not enough.” Their number was roughly around that 500 door number. They’re incredibly interested in the space.
Most institutions we ran across, none of them want to build it. The risk of building it is that they don’t know how to build it, it’s too slow for them to build, and so they want to buy it. And that’s the value we’re creating for ourselves and for our community of investors.
We’re taking that arbitrage model one by one, Lego by Lego, and doing it here, doing it at scale. And eventually, over time, over the next two, three, four, five, six years, if someone wants to buy a portfolio of stabilized, institutionally operated short-term rentals with financials. I say with financials because most of the mom-and-pops don’t have good financials for their short-term rentals, so you can validate their data.
But they will have financials with us. We’ll have books and records and everything. They’ll be able to buy it with confidence to actually run and execute it with historical data on how to operate it. Because they’ll be able to see what you got for a night, we have data to the tens: How much money do we make on July 4th versus July 6th? You can filter by the property, by the second, when the booking came in, where they go, and by booking lead time; we’ll be willing to answer all those questions because we have it today. But we will be able to provide it to the buyer. So you’re right on the money with where the exit is going.
We firmly believe that we’ll be able to exit in the next four to six years. And that’s generally been the plan and will always be the plan.
The good news for us is that we positioned our portfolio to be flexible. And I think that’s important for any fiduciary of a fund to do.
If we’re generating 8%, 9%, 10%, and 12% cash on cash, and in our worst-case scenarios, we got to hold a little bit longer, I think we’ll be all right.
Separately, all our debt is fixed for 10-plus years. Most of it is fixed for 30.
How did the debt work?
Sief Khafagi: Several partners. It’s not just a single lender, although we have a few that we primarily work with and use. But every single property has its own loan. There’s no cross-collateralization. Everything’s fixed. No floating, no balloons. So, if we needed to hold for a decade, we could. Not saying we will. But if we needed to, we could. And we’re never going to be a forced seller in the meantime.
Have you guys liquidated any ever since you’ve started?
Sief Khafagi: We did. We did a test. We sold eight to the retail market. Just MLS, the mom and pops, and we sold those between a five and a half and a six and a half cap and proved our thesis. Those went like hotcakes, and honestly, it was not something I expected.
We were like, “Wow. This also opened up another opportunity for a business model to exit and do mom and pops.” A lot of people want to buy turnkey real estate; it’s just they can’t find it. And if we can give them a turnkey product with historicals already done out and here’s everything, maybe we’ll even manage it for you for six months, those types of things, now that becomes really attractive as an offer in the marketplace.
