What are our limitations on funding?
Many times we get inquiries about what types of deals EquityRoots.com funds. We fund a variety of deals: opportunistic turnarounds, acquisitions, new developments. However, we do have some qualifying criteria to ensure that our hotel investors have the highest quality crowdfunding projects available to them. All projects must be franchised with one of the big three brands. This includes Marriott, Hilton, and IHG. Why is it that we are only picking these three? It’s not to say that other properties and other franchises do not make money or are not worth the hotel investment. They do, but these three brands have a proven track record of customer service, brand standards, and a sense of predictability that corporate travelers have come to expect. It’s the hotel brands that we feel comfortable investing behind and sharing to our hotel investors on our hotel crowdfunding platform. They have a strong brand support that includes central reservation systems working to fill your guest rooms each night.
EquityRoots.com also likes to look at the type of transaction. New development hotel projects from the ground up tend to have longer planning times and disposition periods, but they also tend to draw in higher revenue than a comparable pre-existing hotel upon stabilization. It’s no secret that new hotels often become market leaders, but hotel investors must endure 18-24 months of deferred returns during planning and construction.
Alternatively, existing asset acquisitions are also an attractive proposition because you’re ready to recognize a return on your hotel investment the day after closing. Existing stabilized assets also allow hotel investors to see exactly the income that they’re buying, whereas new development deals are based on projections.
Are there any dollar amount limits on funding?
In short – no. There aren’t any dollar amount limits on funding. This is because hotel crowdfunding utilizes technology as one of the variables in sourcing capital. Oftentimes, the hotel crowdfunding deal itself and the sponsor behind it matters just as much as the merits of the deal. A Hampton Inn in New York City will have no problems raising capital online. The technology department focuses on effective quality search algorithms to make sure that investment opportunities are available to local investors. Interested hotel investors that may be researching how and where to invest in hotels online may find themselves directed to EquityRoots.com’s platform. Again, the market and the deal the sponsor behind it have very much to do with how successful each funding is. With that said, we would expect the New York City Hampton Inn would raise quite a bit more capital than a Hampton Inn in Albuquerque, New Mexico. Other factors matter too, and we look at each submitted project holistically before presenting the hotel crowdfunding opportunity to our hotel investors. In general, the better the flag, brand, sponsor, and market size – typically improve the outcome on the capital raise.