Is rental arbitrage a good idea?

Question

Hey everyone I'm a 22-year-old that just graduated from the University of Buffalo, I graduated with a bachelor's in Computer Science, for about 2 years I've been researching and strategizing on how to become financially free as soon as possible. Through a plethora of ways, investing in stocks, developing and investing in side hustles that aren't too labor extensive, and so on.

Lucky for me, I got a job straight out of school through the power of networking, and landed a job in Reston, VA as a software engineer. I noticed the area that I'm moving to (or plan to move to) costs a bit much for buying a house, so I decided that I'll rent for my living spaces, and decided since I don't have a ton of money upfront, I will invest in rental arbitrage where I rent out a space, furnish it and Airbnb the space under some LLC.

I'm not sure if this is a great idea, and I don't really know much about real estate, but I definitely know I want to invest in this path. Any advice, information, and I would love if anyone could give me some insight on the housing market in North VA.

Thank you!

Fakaradin Floyd · Answer

@Richard Elvin

You're right, the side hustle I had was good but I felt like it could not be automated and scaled to the level I want it to be so I stopped doing it at the time.

You make a very good point though i need to build a rapport to get the trust of a landlord. Right now I'm contacting landlords left and right and today actually I'm meeting with someone to discuss their experience with their success in airbnb they said "they'd give me a shot" not sure what it means but they make 7 figures from airbnb arbritage so I'm going to go and connect with them and learn the ins and outs a bit more.

Richard thank you for your insight truthfully I really appreciate you and everyones insight and whatever choice I make you all really helped broaden my view

Richard Elvin · Answer

I hear you! Student debt sucks. My point was more that if since that worked I would be more inclined to try it again vs arbitrage. To get to the point about arbitrage:Why would a LL choose you over a good PM company?PM company:Has insuranceHas referencesHas experience dealing with guestsHas a relationship with cleaners and repairmenProvides a 24/7 emergency response numberKnows the laws inside and out to avoid any nasty daily finesIf you want to do arbitrage, you need to be able to advise a LL why you're better than a good PM company. Or, conversely, start a good PM company. :)

Fakaradin Floyd · Answer

@Richard Elvin well it was in revenue the actual amount in profit was around 15-20k

and....I used it all for student debt 😞

Richard Elvin · Answer

@Fakaradin Floyd If I could make "made about 47k in  12 months" on a side hustle, I would do that and use it for the DP on an STR.

Emmett Burton · Answer

@Fakaradin Floyd

Have to ask yourself what is the worst case scenario in an arbitrage scenario. If STR market tanks then you’d have to assume you’ll sublease it for the remainder of the term to try to back out and eliminate your exposure.

Ika Sargeant · Answer

@Fakaradin Floyd Your rental arbitrage idea is interesting. I read an article somewhere that Airbnb was going to negotiate with large Apartment complexes to allow the tenants to do short term rentals. You can see how if someone is away on the weekend, they can let someone stay there. Tenants still need an agreement with the landlord. But many landlords are reluctant because frankly real estate and renting is fraught with many problems and liabilities. One area that I have thought of are homes that sit on the market for a long time for sale or rent. Perhaps possibility but the complexities of showing and selling/renting all at the same time can make your head spin. But these are the sorts of gaps that people come up with solutions for.

Fakaradin Floyd · Answer

@Tricia O'Brien Hey Tricia!

Amazon FBA is just basically getting products and selling it on amazon, its a bit like Ebay the difference is when you sell an item on Amazon they have alot more features and data for you to work off like whats the sales rank (how well it sells for its category) how much other people are selling that specific item for and so on.

if you ever noticed that amazon sometimes has a seller name other than the products company its usually sold by a sole person.

Amazon fba also does packaging, shipping and so on depending on what you choose.

I'd recommnd going on YouTube and looking up "Amazon FBA" or just doing a quick google search.

I bought and sold books on amazon which is extremely lucrative since books are very cheap or being thrown away by libraries. But I moved from my home state and calmed down on it, its alot more handson than real estate i would say but if done right alot more easier to do and more lucrative upfront. I made about 1k-4k in revenue and made about 47k in  12 months (but most of the revenue was done in 4 months when I was the most active I was a college student at the time) and about  profit wise it was about 10-20% maybe more but usually i reinvested the money. Into student debt or the items i needed to buy.

Yes I just started going about rental arbitrage again I had a new life to start in virginia so Investments took a pause whilst I created a new life in a new state i knew nothing about.

Tricia O'Brien · Answer

@Fakaradin Floyd Hello ! I found this thread from about a year ago , and I was wondering what is Amazon FBA?  How do you make $1K - $4K a month at that?  Are you still trying to do Rental Arbitrage in Virginia? Best of luck to you.

Fakaradin Floyd · Answer

@Matthew it is crazy expensive luckily my salary for my job allows me to get a nice apartment in the range of my budget, my job gives me an extra 10k sign on bonus if i get a house so it's most beneficial for me to get a house if I decide on that route...its just crazy expensive so ill probably invest nearby or in maryland/washington d.c

Fakaradin Floyd · Answer

And thank you everyone, currently I do Amazon FBA which makes me more than 1-4k a month so I'll just focus on that whilst i save up to get a house (after i pay off my debt) im still going to try the rena arbritage if i cant find a nice rental property or vacant lot...its truthfully my last resort