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Double-Digit Potential Returns

Double-Digit Potential Returns

It’s been twelve years since the current management team took control of the Equity Estates brand and home buying strategy. Although past appreciation performance does not ensure future performance, our track record is worth noting along with the success of our sixth Fund, which will sell out this year.

We have been completing our Fund portfolios by buying, renovating, and even building homes. The market inventory influences our strategy, and this approach makes us feel good about the likelihood of enjoying appreciation upon liquidation while investors appreciate exclusive access along the way.

We have the proof, based on third party data sources, that our unique ownership and usage model is proving itself out. Our Funds are on track for double-digit returns.

Investment Model Summary

Equity Estates Versus S&P 500 and US Treasuries

Based on appreciation data from our annual audits, we’ve learned our luxury homes are outperforming the S&P 500 index (9.74%) and growing more than 2x the current U.S. Treasury yield (4.474%).

See below for a few articles that I found in a quick search: 

We appear to be doing even better.

For all residences that the new ownership and management team acquired over the past twelve years, the annual appreciation rate is 11.49% (not including the homes owned less than a year). This puts investors in a position to enjoy a 10.18% Internal Rate of Return.

We hope Fund VI will perform just as well.

10.18% (Equity Estates IRR) > 9.74% (S&P 500 average yearly return over the last 20 years as of 2/28/24)
10.18% (Equity Estates IRR) > 4.474% x 2 (10-year Treasury yield as of 5/13/24)

To be clear, this Equity Estates IRR beats the average S&P 500 return and it’s 2x the current record yield of the 10-year Treasury. Many, including us, believe real estate is a great hedge against inflation, and in our case, the usage and lifestyle component is icing on the cake. (Read my CEO Letter from December 2021 for more details.)

Want to see the proof for yourself? Schedule a meeting with our Investor Relations team. They will walk you through the latest appraisal number of the portfolio.

Big Sky, Montana

How to Measure Equity Estates Returns

Our potential returns can be calculated in two specific quantitative ways. (Not including, of course, our best-in-class care model which helps create priceless memories.)

Part 1: Home Appreciation

How our homes appreciate over 10+ years directly impacts the potential return. The Equity Estates model puts investors first. Upon liquidation, the Fund distributes net proceeds first until investors receive 100% return of their original invested capital, then 80% of any profits thereafter go to investors. An overall three percent annual appreciation should return investors 100% of their original capital contribution. Thankfully, we are doing much better than that.

Part 2: Savings Versus Comparable Rentals

Rental rates for luxury homes have skyrocketed. To make matters even worse, rental home management companies have had difficulty maintaining standards due to labor shortages and shifts in demand. Equity Estates does not rent our homes, so investors get to enjoy them while equally covering the shared costs of utilities, housekeeping, and maintenance. This often results in large savings versus comparable rentals and delivers incremental, intangible annual returns.

We believe Equity Estates is an amazing way to vacation in style and to diversify your portfolio…while achieving the two types of returns outlined above. 

Dropsey Bay, Anguilla

Luxury Real Estate Is Slowing Down, But Not That Much

I often get asked how the real estate market is doing. In short, although it is no longer white hot, it seems to be holding strong after some softening in 2023. Based on the information we continue to monitor; Equity Estates does not anticipate too much more softening in the luxury vacation real estate market anytime soon.

Here are a few related articles to check out:  

There are two main reasons we continue to feel bullish. Supply and demand. Affluent buyers can afford to transact with cash and are relatively unaffected by high mortgage interest rates. Low supply and high demand equate to continued long-term appreciation.

While there is less competitive bidding these days, it’s important to be educated before making an offer because smart buyers need to be prepared to walk away. Fortunately, Equity Estates is well-positioned to buy selectively, manage renovations and new build construction projects, and continue to ride this extended wave of “appreciating” luxury residences.  

Coastal Charleston, South Carolina

Prices Are Increasing For Fund VI

With everything I’ve shared, it should come as no surprise that Fund VI is entering its final phase before sellout. We’ve already selected 8 of the 12 residences intended for this portfolio.

On June 24, 2024, the cost to invest will be increasing. The capital contribution amounts will increase by $15,000 to $40,500 – depending on your investment level.

If you are even interested in learning more about Equity Estates, I’d recommend scheduling an appointment with our Investor Relations Team. I’d challenge you to find a better way to diversify your investment holdings, to share in the appreciation of this amazing real estate, and to create memories with your family and friends for years to come. 

Until next time, safe travels!

Philip Mekelburg
CEO, Equity Estates