Do's & Don'ts! Rental Arbitrage as a strategy to get started in RE with today's rates

[Jake Mercer]

The Do's and Don'ts of Rental Arbitrage and why I think it is one of the best strategies RIGHT NOW for those getting into real estate for the first time, especially with today's rates and market. I used Rental Arbitrage to get started in real estate three years ago and in my case, I just quit my job last year and have built a 16+ property portfolio since alongside my business partner and team. You can start with your real estate journey without buying property. Here are thoughts that you might want to consider: 

The Do's:

1. 1.) Leverage your expertise, operations and understanding of your market to add vertical services to your business. STR property management, Co-Hosting, Revenue Sharing agreements and Investor partnership agreements to earn equity and profit sharing opportunities as you continue to scale.
2.  2.) Have airtight agreements that protect both you and the owner/landlord. You must have a clear black and white understanding of who is responsible for certain maintenance/repairs and the “quirks” of the house while you arbitrage.
3.  3.) Be intentional with your landlord relationships and arbitrage properties. Use the acronym F.L.I.B and seek deals with Flippers, Long distance Landlords, Investors and Builders! THESE are the people you want to do business with and you will have a better chance of getting a “Yes” from these people. Prove yourself as a reliable tenant and work with them and more of their portfolio. They will want to support you and give you more of their portfolio to be more hands off. 

The Don'ts

1. 1.) Neglect maintenance/operations. Your true test will be how well can you handle the day to day as well as the major operational requirements of the arbitrage business as you scale. Property operations: Deep cleans, air filter changes, moisture issues, hvac maintenance, etc.. Business operations: lease negotiations/renewals, calendar management and pricing strategies, etc..
2. 2.) The rental arbitrage business can be very lucrative but will test you and your ability to implement and delegate  systems/checks and balances/S.O.P’s. Your business and success will rely on your property’s reviews. Decrease in quality, bad reviews can quickly lower your monthly revenue and rate of return.
3. 3.) Get into the wrong deal! Don't JUST use AirDNA's "Rentalizer" tool to analyze a property's income potential. There are many factors not considered in that projection. You need to cross reference Airbnb comparable properties in that market using their reviews, offered amenities, occupancy rates, nightly rates and their offering. Also, utilize rabbu/airdna for market scores, year over year changes on rev, occ., supply/demand and amenity ROI data.

About me - I started with Rental Arbitrage 3 years ago. From scratch. Literally, had $10k to my name and that was it. Zero experience, zero knowledge and unfortunately at the time, not much support. I have hustled and bootstrapped the business until this day. Lots of failures and lots of learning lessons. Since starting in March 2020, I have built 16 a property portfolio alongside my business partner combined with rental arbitrage properties, properties under our management sector, and even properties and land that we have bought of our own. I have worked with investors, quit my job as a fitness instructor last year and we will do a record multiple six figure number of revenue this year. This is by no means to brag but I am living out my vision of being business owner, building long term wealth at a young age through real estate and having the freedoms to create my own schedule and building for the future for myself. Feel free to message to connect and chat Rental Arbitrage/STR/RE! I am also coaching and mentoring others to get started like me. Please message me if you would like to learn more?