The global vacation rental industry is expected to surge by 17% by 2030, reaching a value of over $112 billion. The demand for luxury rentals, which offer privacy, uniqueness, and luxury design, is especially on the rise among travelers.
East Chop Capital is a private equity firm that invests at the intersection of real estate, travel recovery, and the new norm of hybrid and remote work.
We caught up with founders Calvin L. Butts, Jr. and Carrington M. Carter, to gain insights into their company and its goals.
Tell us about the founding of East Chop Capital and what inspired you to start the company.
[Carrington]: Calvin and I started investing in vacation rental homes back in 2014, when we built our first home in the Pocono Mountains of Pennsylvania, a 6-bedroom, 3-bathroom, 2800 sq ft mountain chalet, and launched the Getaway Society brand.
The idea for entering this industry came after I went on several ski trips with friends from college (shout out to Hampton University). Our group of 15+ would stay in large vacation rental homes. After the third trip, I ran the numbers and concluded that the industry had lots of potential, especially with the growth of platforms like Vrbo and Airbnb.
We quickly expanded to Martha’s Vineyard and then to Hilton Head in order to grow our portfolio, buying about $3.5 million worth of real estate in five years. For Martha’s Vineyard, we both knew about the history as an enclave for African Americans, but after Calvin experienced the magic of the Vineyard firsthand following a Sigma Pi Phi Grand Boule’ conference in Boston, we quickly bought some property.
As people learned of our success and inquired about how to invest alongside us, we decided to create a separate private equity firm, East Chop Capital, and launched a real estate fund focused exclusively on luxury vacation rental homes. Through this process, we discovered just how much a vehicle like East Chop Capital is needed in our community.
For our first fund, we raised $4 million from 90 investors, 89% of whom are Black, 11% White, and 18% Women. We are on track to deliver 27% returns, net of fees, which is an outstanding performance for any fund manager, especially for a first fund.
Our firm is named after the East Chop area in the town of Oak Bluffs on the island of Martha’s Vineyard, where we own two homes.
Your firm has been able to raise more than double the amount of capital in less time for its second real estate fund compared to its first. What do you attribute this to?
[Calvin]: We’ve been owners, investors, and operators in this space for almost a decade. Our track record is likely the biggest reason we’ve had faster success raising capital for our second fund compared to our first. For Fund I, it took us three years to raise $4 million.
For Fund II, we raised $9 million in about six months. We’ve sold four properties from our first fund, some at triple digit ROIs, returned over $3 million back to investors, and we’ve done so in this current economic environment. We are pleased with our results, and certainly, our investors are as well.
In addition to our track record, we’ve spent considerable time building relationships and trust over the past nearly five years since we started East Chop Capital. We are hardworking, genuine, honest, and really dedicated to bringing people along on the journey to learn, network together, and of course, build wealth. The relationships and trust that we’ve built, coupled with our communication, transparency, and “building in public” across social media, gives people the comfort and confidence to recommend us to others.
Unfortunately, we haven’t received an investment from institutions or family offices, which is critical in order to scale a business. We know the statistics around the lack of access to capital for minority-owned businesses and are aware of competitors who have received $100+ million in support, despite having less experience. We hope that our track record and continuing to tell our story will lead to larger investments in our firm.
Can you discuss your focus on the intersection of real estate, the rebound in travel, and the future of hybrid work?
[Carrington]: The thesis of our second vacation rental home fund has four key components:
- Real estate as a cash-generating hard asset: Real estate has a well-documented history of generating income and appreciating over time, especially luxury real estate in key locations.
- The rebound in travel post-COVID: COVID is certainly not over, but we are adjusting to living with it as best we can, including traveling. There is still significant pent-up demand to travel and connect with family and friends–birthdays, weddings, new babies, promotions… lots of reasons that people want to celebrate and celebrate together. We feel that experiences will remain a priority over material things.
- The demand for drivable, leisure destinations: Our strategy includes building a geographically diverse portfolio of luxury vacation rental homes, within a six-hour drive of major metroplexes across the country. Drivable, leisure destinations will continue to be a viable option for families and large groups who want to enjoy a vacation and save money by driving instead of flying.
- The future of work in which hybrid is the new normal: You see headlines everyday about companies trying to force workers back into the office. While company policies will vary, for office workers, it appears that the new normal will be 2-4 days in the office, often with an additional week(s) of remote work offered. We are in the early innings of employees discovering, and more importantly acting on, this flexibility to live, work, and travel in ways never before possible. Vacation rentals will play an increasing role in this new life of flexibility as weekend trips turn into a full week, or a one-week vacation may turn into multiple weeks.
What is your strategy for identifying and acquiring luxury vacation rental properties in desirable locations across the US and internationally?
[Carrington]: It’s part art, part science. First, it starts with us. Places that we have visited and enjoyed, or places that we have heard about as enjoyable vacation destinations. Aside from personal insights, often this intel comes from family, friends, investors, and others in our network. Put another way, we listen to customers of luxury vacation rental homes.
Next, we analyze travel reports and other “top destination” lists from companies like Vrbo, Airbnb, Vacasa, Evolve, AirDNA, and media outlets like Travel + Leisure, Conde’ Nast, National Geographic, Travel Noire, CNN Travel, TripAdvisor, Lonely Planet, Skift, and others.
We also track growing metroplexes and look for the surrounding areas that people will escape to for weekend getaways and extended trips. When given the choice, travelers tend to have a strong affinity for beach, lake, mountain, and entertainment destinations.
What are your future plans for growth and expansion in the vacation rental market and in the private equity industry overall?
[Calvin]: With our Getaway Society brand, powered by East Chop Capital, our goal is to own a boutique portfolio of 100-150 luxury vacation rental homes around the world. Buying, building, renting, and opportunistically selling over time to generate returns and build wealth while delighting guests around the world.
Right now we have homes in Martha’s Vineyard, Hilton Head, Orlando, Gatlinburg, the Pocono Mountains, Virginia Beach, and Broken Bow (Oklahoma). We are building two large homes in Orlando: a 12-bedroom, 13,000 sq ft home and a 10-bedroom, 6,000 sq ft home, which we’re calling self-contained resorts.
They’re being built with amenities such as a resort-style pool, bowling alley, indoor basketball court, movie theater, game room/arcade, and fitness center.
We are also building four beach houses along the Texas Gulf Coast in Port Aransas, and two luxury mountain homes in Banner Elk, North Carolina, located two hours outside of Charlotte, and near Beech Mountain, Sugar Mountain, and Grandfather Mountain.
Carrington and I also have a fascination with yachts, and we hope to build this fascination into a parallel business that gives guests a new experience on the water in places where we have homes. I grew up in Savannah around water. We went to Hampton University, which is three-quarters surrounded by water, and loved watching yachts in the harbor. Getaway Yacht Charters had a soft launch last year, with the acquisition of a 54-foot Azimut Flybridge. This business is still in its infancy, but we are excited about its future.
On the private equity front, earlier Carrington mentioned how much a vehicle like East Chop Capital is needed in our community. It was an “Aha moment” for us. Real estate will continue to be our foundation, but under the overall objective of building wealth, we have discovered a unique way to mobilize our community of 150+ LPs [limited partners/investors] to make sizable investments ($100,000 to $1+ million) in other deals.
We are equally excited about this vertical within East Chop Capital, as it perfectly aligns with our commitment to provide the best combined financial, educational, and social returns through curated and vetted investments across various industries.
We’d love to have your support as we continue to scale and welcome the opportunity to host you for a vacation! Please follow us @GetawaySociety and @EastChopCapital on Instagram, Facebook, and LinkedIn, and join our email lists to stay connected about our growing portfolio of luxury vacation rental homes, and other East Chop Capital investments.