Airbnb Arbitrage in Austin, TX

[Aaron Daniel]

Planning to try my hand at Airbnb arbitrage. I have never owned or been a host/landlord and am itching to get in the business. Due to limited capital I’m planning to give Airbnb arbitrage a go.

The strategy is to sign a long term lease at an apartment complex that allows their units to be rented as Airbnb’s. I’ve read in Austin this can be legally done by obtaining a license and in fact know a guy who does it.

Curious if anyone has given this strategy a go? Any pointers for a newbie?

Thanks,

AD

[Bill B.]

I’ve never heard of a landlord knowingly allowing this (why would they let people they haven’t screened use their property.) usually this is done by lying or “forgetting to tell” the landlord. 

As long as you have no net worth (so you can't be sued) there's almost no risk to you other than the furniture loss. If the city suddenly outlaws STR or says owner occupants only you just bail on the lease, lose your security deposit and dare them to sue you because you have nothing.

I was going to say I guess you could Airbnb rooms in a place you were living in as a bad alternative to a bad job, but that’s probably not allowed under most leases. This is just bad all around. You’re not building any equity or net worth and you can be shut down at anytime by the landlord or the government. 

[Allen Duan]

Quote from @Bill B.:

I’ve never heard of a landlord knowingly allowing this (why would they let people they haven’t screened use their property.) usually this is done by lying or “forgetting to tell” the landlord. 

As long as you have no net worth (so you can't be sued) there's almost no risk to you other than the furniture loss. If the city suddenly outlaws STR or says owner occupants only you just bail on the lease, lose your security deposit and dare them to sue you because you have nothing.

I was going to say I guess you could Airbnb rooms in a place you were living in as a bad alternative to a bad job, but that’s probably not allowed under most leases. This is just bad all around. You’re not building any equity or net worth and you can be shut down at anytime by the landlord or the government. 

 I know rental arbitrage gets a bad rap in the BP community, but only a bad operator would do it without permission from the landlord. We got started with arbitrage and always partnered with the landlord or property manager. There are reasons a landlord would work with an arbitrage operator. 

That being said, rental arbitrage is not real estate investing. It's a service oriented business that's focused on cash flow with no assets. In the beginning you're creating a job for yourself. But it's possible to scale and turn it into a business where you can move out of the day to day. Depends on your long term goals :)

[Chris Seveney]

Quote from @Bill B.:

I’ve never heard of a landlord knowingly allowing this (why would they let people they haven’t screened use their property.) usually this is done by lying or “forgetting to tell” the landlord. 

As long as you have no net worth (so you can't be sued) there's almost no risk to you other than the furniture loss. If the city suddenly outlaws STR or says owner occupants only you just bail on the lease, lose your security deposit and dare them to sue you because you have nothing.

I was going to say I guess you could Airbnb rooms in a place you were living in as a bad alternative to a bad job, but that’s probably not allowed under most leases. This is just bad all around. You’re not building any equity or net worth and you can be shut down at anytime by the landlord or the government. 

I am wondering how much longer this model is going to last and when it pops if landlords are going to go after tenants really hard (sue) who were arbitraging airbnb. I just do not see this ended well for ALOT of people.

[Allen Duan]

Quote from @Aaron Daniel:

Planning to try my hand at Airbnb arbitrage. I have never owned or been a host/landlord and am itching to get in the business. Due to limited capital I’m planning to give Airbnb arbitrage a go.

The strategy is to sign a long term lease at an apartment complex that allows their units to be rented as Airbnb’s. I’ve read in Austin this can be legally done by obtaining a license and in fact know a guy who does it.

Curious if anyone has given this strategy a go? Any pointers for a newbie?

Thanks,

AD

From one AD to another AD :)

There are so many pointers I can share. First I would say is educate yourself. Second, start connecting with property owners to find one who will partner with you and let you use their property. There are pros and cons of going for large buildings with professional management VS mom and pop owners of SFH or small multi family. 

Let me know if you have specific questions. Happy to help!

[John Underwood]

Do yourself a favor and research this topic on here first.

You'll read from many why this is not a good idea.

[Aaron Daniel]

@Allen Duan - thanks man. I really am looking for some extra cash flow to start. One can make a killing during months of October (Formula 1 race in Austin and Austin City Limits music festival) as well as March (South by Southwest). Also, people tend to come visit Austin in generally due to all the attractions.

If I could even reap $1K profit monthly I'd be very pleased. Make extra +$12k a year and gain experience as a host. This seems like a good entry point as opposed to coming up with 30% down payment for a non-owner occupied SFR.

[Aaron Daniel]

@Aaron Daniel - Also, realizing I didn’t make this clear, but for all saying it is a bad idea, I wouldn’t not do this secretly/without letting the the landlord/apartment complex know. I plan to ask around to different complexes if they allow it, and would obtain written consent before signing any type of lease.

[Nathan Gesner]

Quote from @Aaron Daniel:

@Aaron Daniel - Also, realizing I didn’t make this clear, but for all saying it is a bad idea, I wouldn’t not do this secretly/without letting the the landlord/apartment complex know. I plan to ask around to different complexes if they allow it, and would obtain written consent before signing any type of lease.

 I hate AirBnB arbitrage, but I suppose it makes sense from your perspective. Make sure you study the law, zoning, taxes, etc. Comply fully so you're not giving the business a bad rap or hurting the property owner. And as someone else pointed out, remember that this is a job, not an investment.

[Aaron Gordy]

@Aaron Daniel You should be very careful. What if the landlord allows for it but the city doesn't allow for it? The city of Austin can be very strict with licenses. The city can waylay that business plan quick. Many folks operate under the radar though.