Why STR ownership and STR arbitrage are not comparable

[Don Konipol]

So, I've read, continuously, all the reasons many seasoned professionals on this forum do not recommend STR "arbitrage". However, having owned a small Airbnb rental arbitrage business in NYC back about 7 years ago, I can tell you that despite the problems and risks it can be VERY profitable.

Now, I actually agree with many of the reasons arbitrage may not be a good idea. But, it seems to me that comparing owning STR with arbitraging STR is NOT the point. STR arbitrage is a real estate related BUSINESS, owning STR housing is a real estate iNVESTMENT, albeit if you manage it yourself with a business component.

The STR arbitrage model should actually be compared with other BUSINESSES, not compared with real property INVESTMENTS. Just like we wouldn't compare owning a real estate brokerage operation with investing in say commercial property syndications.

What the arbitrage model should be directly compared to is the "co host" model; the co host provides STR management, but doesn't assume the responsibility for operating losses. Theoretically, the arbitrage business should be more profitable because of the need for greater investment and greater risk. so assuming someone wants to get into STR business without buying property, operating a arbitrage business rather than co hosting should only be considered if there are greater profits, enough to provide a sufficient return on the additional invested capital and offset the greater risk.

My conclusion is that Investing in residential properties in which the property owner chooses to rent short term, and starting a STR arbitrage business, are two different animals. Direct comparison may not be totally appropriate, as the proponents of each likely have different objectives, resources, and needs.

Let me know what you think?