The Good and Bad about STR/Airbnb Arbitrage

[Brian Choi]

I see a number of people posting their stuff about STR arbitrage and making good money. Obviously, it's super easy to see the good sides, but I'm also really curious about some negative things about STR arbitrage. If you've done this, what are some challenges and things that you would have known before? Many thanks in advance!

[Michael Baum]

Hey @Brian Choi, so I can't remember the last time someone posted how good their arbitrage system was working for them here on Biggerpockets. I know there are multiple YouTube and TikTok videos on how awesome they are doing.

I am on the negative side of arbitrage. You don't own anything. It is a job. You will pay more than market rate for a place and possibly a longer lease. You have to pay for all the furnishings and setup. The owner can then decide not to lease to you when it is up and just do it themselves.

You could be stuck with a lease if the area bans STR. You have a lease above market full of furniture. You would need to get a LTR in there at market and hope to lose as little as possible while the lease runs out. Plus you have to store a whole home of furniture somewhere or give it away.

You have to convince an investor to lease to you. Someone who has never done a STR before with the hopes it will be successful. Why would they do that?

I have only recommended someone do arbitrage once. They owns 200+ LTR doors and have a real estate investment company. They can afford to take the hit if it doesn't work. It is an easy sell to another owner. They are already successful with assets to cover the lease if things go south.

That is very rare. Most of the folks who come here to ask about arbitrage don't have 2 nickels to rub together. They see it as a way to make some cash to buy a place. Sounds like a plan. The videos tell them how easy it is and how they have 200 of them and they are netting 5m a month or whatever.

There are videos that tell you the world is flat and to eat tide pods as well.

My 2 cents.