In-Depth Real Estate Investment Reviews
Here promises investors passive income by investing in vacation rentals, the highest-yielding asset class in real estate, but does it live up to the hype? We dove deep into their offering to find out.
Pros & Cons
Makes it easy to invest in real estate with a well designed platform and low entry costs
Gives investors access to Class A properties.
Marketing materials and product design are top notch
Investors can invest as much as they like as long as it's over $100
Expected investment period is 5 to 7 years, with no opportunity to sell
Properties lack documentation for due diligence, and properties are sold to investors for more than Here buys them for
Very short track record with complete lack of past investment performance and investment projections
Only pays rent to investors a few times a year – much less often than other real estate investment options
Figuring out where to invest your money is hard enough. Stocks, bonds, and even crypto all have their places in the modern portfolio, but the most misunderstood asset class has always been real estate.
Over the last few years, several companies have appeared claiming to make it easier for people to invest in real estate by removing down payments, increasing liquidity, and breaking properties up into fractions. In such an environment, knowing who to trust and what you're really agreeing to when you invest is more difficult than ever.
by digging into key areas investors need to know about before going all in: How easy it is to invest, how much you can earn, and how you can get your money back once you've made the gains you wanted.
Full disclosure - we're Lofty, and we're one of those fractional real estate investment companies. We believe that a rising tide lifts all ships, and that providing an unbiased look at other fractional real estate companies through the lens of our industry expertise will help serve both investors and the companies serving them.
Here has positioned itself as a full-service platform to help retail investors invest and own fractional ownership of vacation rental properties. They aim to minimize the time commitment and cost of entry traditionally required to gain access to the vacation rental asset class. They've built their product to help first-time investors get started easily, while helping veteran investors gain access to new markets.
Here allows investors to buy fractional shares of individual vacation rental properties in various tourism-focused markets across the USA, promising better returns than traditional long-term rental properties.
Here is currently available to all U.S. based investors who have a Social Security Number (SSN) or Tax Identification Number (TIN).
They plan to open up investments to international investors in the near future, but as of September 2022, no specific plans have yet been announced.
Here users a "data engine" to analyze real estate, demographic and economic data from across the U.S. to help them identify markets with the best outlooks for gross rental yield.
Some of the data points they look at include:
• Availability of entry-level homes for sale
• Healthy economies with visitor growth
• Household growth
• Rental growth
• Home price appreciation
• Population growth
Here is a new platform. As of September 2022, Here has successfully funded seven properties, with two properties still listed as partially funded.
Here holds title for each of their properties in a unique series LLC administered by Here on behalf of its investors. Here states that this structure allows them or their affiliates to manage property operations and property/asset management, while allowing investors to access economic interest in the underlying property. Investors in turn purchase a fraction of the ownership in the LLC that contains the property of interest.
Here is regulated by both the Securities and Exchange Commission (SEC) as well as the Financial Industry Regulatory Authority (FINRA). Investments in Here properties qualify as a security registered with the SEC. They also maintain a 1% ownership stake in every property – this is meant to signal alignment between the interests of the company and that of its investors.
Here uses Plaid, a robust 3rd party payments system, to integrate investor's bank accounts with their platform to facilitate purchases of property shares.
Ease of Use
Before investing, it's crucial to ask yourself what you're really investing in. It's not always as clear-cut as you might think.
Here allows users to invest in fractions (or "shares") of short term vacation rental properties. Their investments provide two kinds of returns to users — Appreciation Returns and Cash Flow.
Here purchases homes themselves, and then "fractionalizes" ownership of that property into purchasable shares that investors can then buy.
Though there are only nine properties to draw conclusions from, most of the properties available on Here's marketplace are single family vacation rental homes located in tourism-focused parts of America. They're usually located near vacation attractions like national parks, beaches, and mountains.
The majority of their stock seems to be high quality Class A properties — built in the last fifteen years, and located in desirable areas.
Here appears to be following a strategy of broad diversification rather than regional depth. Of their nine properties to date, only a few are even in the same state.
Investors can buy shares of properties starting at $100 USD, which is light-years better than saving for a down payment in the traditional real estate market. Here's minimum investments are amongst the lowest in the fractional real estate investment space, making them an attractive option for those shut out of the traditional real estate market by rising housing costs.
Every Here property contains a full spec of the home, including amenities, home size, a written overview, and estimated first payout date. They also include a self-reported "Market Grade" score where Here ranks properties on attributes like revenue demand and seasonality, but how they arrive at these ranking numbers is unclear.
Here also provides historical financial records for the property and market, but they lack original sources that would allow investors to dig deeper for proper due diligence. Not only that, but some of them appear to be actually incorrect. The Average Daily Rate and Occupancy numbers should be multipliable to calculate a property's overall revenue, but Here's reported Average Revenue appears to be much lower than their reported ADR and Occupancy would suggest.
Here also doesn't publish the amount they bought the property for. Instead, they publish the price they are offering the property to their investors for. They refer to this as the "Offering Amount", and it contains the home's price along with undisclosed figures including debt fees, acquisition fees, initial reserve amount, and other expenses incurred.
According to Redfin, Here's Sabino property was purchased by Here in June of 2022 for $816,000. Here then offered it to investors at a price of $883,283 – over 8% more, with no documentation outlining what "Fees" these were.
Here's product is simple, beautiful, and intuitive. It's easy to browse their properties, and clicking "Buy Shares" pulls users into a simple flow that allows them to invest.
The first time someone invests with Here requires a few additional steps. First, one must connect their bank, complete a more robust investor profile, and confirm their order before completing their investment.
There's really one core reason for investing in real estate: to leverage your current capital to create more capital. When it comes to choosing investing platforms, their expected yield and fee structure are the two core levers that determine how well they do that for their customers
Here properties are cash-flowing, meaning they're designed to produce income from the vacationers who rent them out. But that doesn't guarantee they will pay out on schedule, or pay out as much as one would expect.
Here doesn't project what kinds of rental income their properties may produce. The only documentation on Here's website about prospective rent returns is a simple graphic on their home page that refers only to vacation rentals as an asset class, and doesn't account for the higher risk and operational overhead inherent in vacation rentals.
Not only that, but Here's investment cash flow is full of caveats.
First, they explicitly state that properties might not generate sufficient funds to produce cash flow, meaning investors won't get paid out. This language is likely meant to cover themselves from booking variability in more seasonal locations, but is concerning on its own.
Properties are also unoccupied when they hit Here's marketplace, meaning they aren't yet producing any revenue. Here refers to this period as "Onboarding". The Here team is busy completing any renovations, licensing, furnishing, and marketing asset production during this time. Investors can view the property's "Estimated First Payout Date" on the property page. As of Sept 2022, Here's two available properties are expecting their first payout in May of 2023 – nine months from now.
Assuming rent payments begin being paid out, investors are entitled to their pro-rata share of net booking income from the very first day that the property is rented out by guests and deposited into their Here account. Net income is calculated after Here deducts their Property Management and Asset Management fee. More on that in the Fees section.
Here doesn't pay out rent in the traditional way. They instead pay out something more akin to a stock dividend to investors quarterly, which represents a pro-rated percentage of a property's net rental income.
Due to the magic of compound interest, investments perform better in the long term the more often rent yield is paid out and reinvested by investors. Quarterly dividends like the kind Here pays out mean that Here investors miss out on a bigger portion of an investor's compounding interest than they could if they paid out more often.
As Einstein said, "Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn't, pays it."
Similarly to their property cash flow, Here publishes next to nothing about their properties' expected appreciation. Their homepage and FAQ are curiously lacking in any additional information about this.
The closest thing investors can find regarding expected appreciation is the Financials section on their Property pages, but that data used is actually just broad market-based data for higher end homes in the area. This data only outlines past local appreciation over the last five years and doesn't predict future value. This may provide investors with a somewhat skewed picture, since the pandemic years saw an unprecedented swing in real estate prices, particularly in the rural and suburban areas in which Here gets their inventory.
Because of this, there's significant potential for Here properties to devalue in coming years as the housing market reacclimatizes itself to the post-pandemic world.
Vacation rental properties also carry another major factor in resale value - wear and tear. It's widely accepted that short term rentals are higher impact on a property's flooring, walls, and fixtures. Short term rentals typically have no damage deposit, either. Pair that with a revolving door of renters and higher-end fixtures and furniture to fix and replace as damage occurs, and expenses quickly pile up.
Here makes money in two stated ways, but likely earns on properties before they are made available to investors.
Their fee structure is pretty simple. They charge a quarterly Asset Management Fee of 0.25% on the property's total asset value, paid to Here from the property's quarterly income. Here collects this before property income is divvied up amongst its investors. If the property appreciates, then Here takes a higher percentage. Over their standard five year holding period, a property offered for $600,000 would net Here $30,000 assuming the property doesn't appreciate.
Here also charges a Property Management Fee "based on the gross revenue that a property generates over the lifetime of a property’s operations". Here doesn't say how much this is, but it's also deducted from a property's income before being distributed to investors.
There's also the matter of the difference between the price Here purchases properties for and the price they offer them to investors for. By our calculation, Here adds around 8% to their purchase price. Even if this fee is solely going toward financing, it's still a tax investors are paying to access their shares since Here could have paid cash for properties since they are funded by investors shortly after closing.
This section is usually full of facts, figures, and calculations to help investors better understand their potential returns using this investing platform.
Unfortunately, we cannot offer this in Here's case. Here's lack of documentation and projection data make it impossible for us to make meaningful predictions about return on investment from Here properties.
Here's what would have happened if an investor had invested that $10,000 in other common investment vehicles instead.
You would have earned $3,824.59 in yield if you'd invested that same $10,000 into corporate bonds (which are similarly illiquid) and drawn Moody's long-term average (6.53%).
You would have earned $9,142.84 in yield if you'd invested that same $10,000 into a fund mirroring all 12 equity REIT subsectors (real estate investment trusts) over the last 10 years (13.2%).
You would have earned $10,581.68 in yield if you'd invested that same $10,000 into the stock market and drawn the S&P 500's average yield over the last decade (14.7%).
Here's liquidity policy
One of the most important things to keep in mind when deciding which real estate investment platform to use is to ensure you understand how easy it is to sell your stake when you want to.
In short, liquidity is a way to measure how much control you have over your money after you've invested it. Traditional real estate is illiquid because selling buildings is difficult and time consuming. On the other hand, cash is as liquid as it gets since you can exchange it for goods at any time.
Here's liquidity policy leaves much to be desired. Once investments are made, investors are unable to access or sell those investments for at least five years.
Not only that, but selling investments is not the investor's decision – Here decides when they'll sell properties based on their own financial calculations. They might sell within the 5-7 year window as they expect, but they might sell earlier or later, too.
If you don't want to wait a full 5-7 years for your Here investment to mature, you are fully out of luck.
Here won't buy your shares back from you, and they currently don't allow investors to sell their shares to each other.
Here says they have plans to develop a secondary market that will allow investors to buy and sell shares amongst each other, but they also state that there is no guarantee that this will happen. Even if it does, they state that they'll be able to charge fees determined by them without telling you what you'll be charged before the transaction takes place.
In essence, they have all the control when someone invests in one of their properties.
→ They won't give your money back before they decide to sell the property
→ They'll decide what kinds of fees they'll charge if they ever develop a secondary market
→ They decide when to sell the property you're invested in
Once invested, Here investors are basically just along for the ride.
The Final Verdict
Normally, real estate investment platforms provide enough information for our team to judge the quality of an investment. With Here, this is not the case. They don't publish performance reports about how their properties to date have performed, and they only offer bare-bones projections on how they expect properties to perform into the future. Not only that, but these projections only look at the market as a whole and have almost nothing to do with the property itself and how Here's business model will impact investor returns.
There's very little opportunity to estimate how well their investments will perform, and Here's lack of liquidity locks investors in for the ride no matter where it ends up.
Here's marketing and product design is very strong, and it does well to position vacation rental investment as an interesting and more romantic way to gain exposure in the real estate market. But the lack of evidence as to their investment performance make us think this may be a bit of a mirage.
We rate this opportunity a 1.5 out of 5. Proceed with strong caution.
While you're here, here's why you should try Lofty. Lofty makes it easy to invest in real estate more flexibly than ever. Enjoy $50 minimums, daily rent payouts, and easily sell your holdings with low fees & no lock-up periods. Get started today.
You can reach Here by leaving a note with their Intercom live chat bot on Here.co. They do not provide a telephone number for customer support.
Here's Refer-a-Friend Program pays both referrer and referral $10 in real estate when the referral makes their first investment in a Here property.