LTR - STR Arbitrage Model

[Sharon Freedman]

Hi all. I'm a licensed real estate salesperson and investor who owns some single family houses in an area that attracts people seeking vacation properties, but is not very densely populated. After having some difficulty finding qualified tenants who could afford the rent, a highly qualified tenant approached me asking to lease one of the houses using an STR arbitrage model. It's turned out to be quite a good deal for us both, as they are paying all utilities, some maintenance, and have even contributed to some cap ex in exchange for a multi-year lease. Wondering your thoughts on this, and if you know of any good forums for finding other landlords who might be interested in this model?

[Lindsey Mannix]

Hi Sharon,

If you've found a good and qualified company/person to do the rental arbitrage on your property, that's fantastic! So many that I've spoken with haven't made me feel comfortable enough to hand the reigns over to them. As for connecting with others, if you do a search for 'arbitrage' both on the podcasts and forums here at BP, you'll find quite a few others who have talked about this.

Continued good luck to you!

~ Lindsey

[Bill B.]

Yeah. All the liability with none of the tenant screening. Search BP. You'll find post after post where the STR host is suing the LTR property owner for the rents they lost because the repairs weren't made the same day and their guest cancelled.

Make sure the host is financially very well off so you can sue them personally when they stop paying because your market outlays all STR or at least non-owner occupant ones. (Also find the forum posts about Vegas landlord being fined $100k+ because his tenant did STR arbitrage with it as a non-owner occupant.)

Be careful with multi year leases. Your hand are tied by them but of course the tenant can and will bail at any time. Hopefully a 2-3 year max with 10% per year rent increases?

ps. Make sure you talk to your insurance agent. Your standard landlord policy isn’t going to be valid. 
 
Good luck and be careful.