What is PartBNB?
PartBnb is a fractional ownership company that allows you to own a piece of Airbnb vacation rental properties. Unlike other methods of investing in real estate, you only own a percentage of the total property. However, unlike timeshares or real estate ETFs, you are paid a percentage of rental incomes that your property earns on Airbnb. The more shares you own in a property, the more you get paid. PartBnb works as the platform that finds the properties and offers them for sale in shares to potential property investors like you and me.
How does it work?
PartBnb has a team of people in the Caribbean that find properties that would be good short term rental properties. They use their expertise to understand which available properties will be most profitable and have both short and long term value. Then, PartBnb projects out the financials and future returns for a property and they purchase the property at the best price that they can. They use a Caribbean property management company to renovate and get a property ready to list on Airbnb, VRBO or other vacation rental sites, then offer the property up to investors.
Once a listing goes on their platform, it is divided into shares. Unlike a lot of real estate investment funds that pool money and buy a lot of properties, you are able to view all of the details of the individual property you are buying a stake in. They create shares in a rental property by dividing up the total investment into small, equal parts that you can purchase. For instance, if they buy a house for $300,000 and put $50,000 ($350k total purchase price), they would offer 3500 shares at $100 each. The prices and number of shares can be higher or lower, but you get the idea.
When you own shares of a property, you don’t really have to do anything. They manage the Airbnb renters, communication, maintenance, taxes, insurance, and all of the things that make it time consuming when you own your own rental properties. You get monthly payouts based on your share of the profit that the property generated from rental income. To use our example from above, if you spent $3,500 on 35 shares of the $350k property, you would own 1% of the property and get paid roughly 1% of the profits. So if it made $2,000 profit that month, you would get $20 in your account.
Since owning these shares is like actually owning a property, you get the benefit of not only the cash flow, but also the inherent value of the shares. For instance, you would make your $20 per month from the example above, but if they chose to sell the property in 3 years for $400,000, you would also get to participate in the profit from that.
How does PartBnb Make Money?
So this all sounds great, but how do these guys make their money? Obviously, they are a business and they are not providing this service to you for free. They make their money in a few ways.
- Transaction Fees – PartBnb takes a 1.75% transaction fee on top of any shares that you buy or sell. For instance, if you bought $3,500 worth of shares, you would pay an additional $61.25 for this fee.
- ACH/Wire Transfer Fees – If you fund your account with a wire transfer, there is a $5 fee.
- Property Development/Management – It’s a little unclear if they own or are affiliated with Keylobby, the property management company, but they do charge a 15% property management fee. This profit may not go directly to Partbnb, but it’s something to be aware of.
There are no other clear ways that Partbnb is making money, other than perhaps earning interest on capital that is held in your account, though this would have a minimal effect on you as a user. It’s a pretty reasonable deal compared to other real estate investment options. They are not keeping any equity in the properties (as I understand it), they aren’t charging their own management fees, and the fee that they are paying to the property management company is pretty standard for rental properties. Any additional expenses are shown in the Financial Details section of a property, so if there are other costs, you will know about them.
What type of properties are on available?
Partbnb is solely focused on properties in the Caribbean, for now. They may have plans to expand outside of that, but right now that is their core area. They find properties that are attractive vacation destinations and that are priced well in comparison to the rental fees that they can charge. While it’s easy to picture mega-mansions or million dollar vacation rentals, their properties are typically in the $300k range. Most are located in The Bahamas, or New Zealand and are 2 or 3 bedrooms and 2 or 3 bathrooms. They invest in both apartments/condos and houses.
What is the investment minimum?
There is no minimum number of shares that you are required to buy with Partbnb. The minimum investment would be whatever a share is priced at for a property you want to buy, since you cannot buy a fraction of a share. There is, however a requirement that you hold your shares for 6 months before reselling them.
How much can you make?
The obvious answer to how much you can make with Partbnb is that it depends on how much you invest. Most of their properties project a net return of 5-9% and their existing properties have shown an actual net return of 2.5% – 4.6% annually. There are also capital returns that are projected around 5%, so there’s also some longer term upside in the investment. These numbers will surely change as they get become more established, especially as there will likely be changes in rental demand, property prices, and other economic factors.
Is PartBnb legit or a scam?
There is always risk in any investment, especially with property and with relatively new companies. However, all signs seem to indicate that Partbnb is indeed legit. Though the company is registered to a New Zealand resident, they have US-based offices, are a Delaware based company, and are registered under the “Part D” regulation with the US Securities and Exchange Commission. Since they are regulated by the SEC, they are at least held to some standard of accountability. The other comforting part of the investment is that you are investing in real, physical properties and you own a share of the LLC that holds them.
All of this is not to say that investing with Partbnb is without risk. First of all, you are investing in a company that does not have a long history of profit or shareholder returns. They could go bankrupt at any time if not properly run. There is also a risk that the properties you invest in do not turn a profit, which is a risk of any real estate investment. The last risk would be that if the company makes a profit, they may not pay, but there have been no reports of this and it really wouldn’t make sense for the company’s growth aspirations for them to start doing this.
Pros and Cons of PartBnb
- You can invest in vacation rental properties with very little money down.
- You will receive monthly payments from an investment that you make in a property if/when it is profitable.
- It’s a very hands off approach to rental property ownership, with zero management required on your part.
- You are able to buy and sell shares through their platform without physically locating properties to buy or listing them for sale.
- Partbnb gives you full details on the properties you are buying, so you can make decisions on individual properties as opposed to investing in a fund as a whole.
- The platform has very low minimums.
- While originally available only to accredited investors, Partbnb is now open to nearly anyone.
- It’s extremely easy to sign up and get started.
- You can visit/stay at the property you own and you get a 10% discount if you do.
- It’s a young company, so there are not dozens of properties to choose from. Currently, there is one property in the “coming soon” phase.
- Properties are only in the Caribbean, so if you prefer to invest in other regions, Partbnb does not offer that.
- You have to hold your investment for 6 months before selling.
- If you are looking for diversity, you will have to manually buy multiple properties, whereas other funds may automatically allow for a more diverse portfolio.
- Returns may not live up to projections (this is true of any investment).
- You are purely a financial stakeholder in the equation, so if you seek decision making ability or want to control the way the properties are bought, sold, marketed, or managed, you will have to trust Partbnb.
How does PartBnb compare to Fundrise or other platforms?
There are a lot of platforms out there that offer real estate investment with low minimums, just like Partbnb. Platforms like Fundrise offer the ability to invest small amounts in properties and offer similar returns to Partbnb. The biggest differences include:
- Platforms like Fundrise require a $500 minimum investment
- Partbnb lets you invest in individual Airbnb/VRBO vacation rentals, while Fundrise owns larger scale apartment, retail and commercial buildings.
- Fundrise is a general fund that they manage and pay you returns, while Partbnb includes individual properties that you can choose. Fundrise is more diversified, but Partbnb gives you more control.
- Fundrise is larger and more established than Partbnb, but this can obviously change over time.
You can see that there is both promise and uncertainty around the company as an investment. While the returns they are projecting and the concept itself seem pretty compelling, it is a new company that hasn’t proven much. If you feel up for investing with Partbnb, you can get started by going to their website and registering, which is a very quick process. If you end up investing, feel free to let me know about your experience in the comments.