STR / Airbnb Arbitrage

[David Caradonna]

Hey everyone. Has anyone used any air bnb arbitrage companies for their rentals instead of furnishing and managing yourself?

I have a property I'm almost done flipping in Lakeland, FL. It's about an hour away from me so I was curious to see if this would be a beneficial option. 

Any recommendations or advice would help. Thanks!

[Austin Keller]

It can for sure be a beneficial option. I would just make sure you vet the right individuals to help manage and run it. I have a company that specializes in running short-term rentals for our investor clients and we charge a whole lot lower than your everyday property manager.   

[Andrew Steffens]

Hey David

We are a full service PM company right next door in Tampa. Please feel to reach out to talk further about STR locally. I would be wary of them at best. Make them put down a sizeable deposit and guarantee the lease personally. Otherwise you are taking risk with little reward IMO. If there was great cashflow why would you not just furnish and rent it yourself, or hire professional PM?

[John Underwood]

I would use a licensed and insured PM company rather than someone doing arbitrage. Not worth the risk to me.

[Mohammed Rahman]

Hey @David Caradonna - I'm an investor & realtor and don't do any arbitrage myself, but a good friend of mine is involved in projects like this. He tells me that it's very lucrative for him, and he doesn't mind paying a higher lease payment to the actual property owner to account for the risk. 

One thing to consider is that if you do end up leasing it to someone to Air BnB it, you should account for higher wear & tear since the tenants are more short term and the frequency of turnover is higher. 

[Michael Baum]

I am with @John Underwood on this. IMHO, arbitrage is too risky for either party. Get the place ready and hire a PM to run it. Or do it yourself. It isn't that tough once you get things in place.

[Brooklyn McCarty]

Why not try it yourself? You’re going to make more money and once you get your systems in place, you’ll spend less than 30 mins a week on the place. 

[January Johnson]

Quote from @Mohammed Rahman:

Hey @David Caradonna - I'm an investor & realtor and don't do any arbitrage myself, but a good friend of mine is involved in projects like this. He tells me that it's very lucrative for him, and he doesn't mind paying a higher lease payment to the actual property owner to account for the risk. 

One thing to consider is that if you do end up leasing it to someone to Air BnB it, you should account for higher wear & tear since the tenants are more short term and the frequency of turnover is higher. 

Disagree about wear and tear.  LTR folks will destroy a place.  Even "nice" people who "always pay the rent on time" can be filthy pigs.  I've seen it over and over as a REALTOR here.  STRs get cleaned OFTEN and can be maintained MUCH more regularly than LTRs.  (9 years of self-managing experience here - I own 4.)

[David Caradonna]

Thanks everyone! I still haven't decided in full what I'm going to do with the property once its completed. Getting a DSCR loan with terms good enough to make it work proved difficult so we might just be selling it off. Thanks again for all the help!

[Matthew McKee]

I echo everyone else, Pay a PM to manage for you rather than renting it out to someone else, just cuts out the middle man. Some PMs will even fund the furnishings and decorate for you. @matt  

@Matt Osojnicki is the premier PM in my local area, he might have some contacts down their

[David Caradonna]

Quote from @Matthew McKee:

I echo everyone else, Pay a PM to manage for you rather than renting it out to someone else, just cuts out the middle man. Some PMs will even fund the furnishings and decorate for you. @matt  

@Matt Osojnicki is the premier PM in my local area, he might have some contacts down their

 That'd be great. Thanks! 

[Matt Osojnicki]

So much value from everyone's posts here that its hard to go wrong with any option. Here' my 2 cents for what it's worth as a PM who has a client who flips homes.

The STR model requires you to meet specific data points to be successful. For example, a great place to start is identifying how many bedrooms it takes to be successful in your area? I know here in the Boise market studios and 5+ bedrooms outperform the rest of the competition. Secondly, the homes my flipping client flips makes sense for flipping, but not for Airbnb. However, he needed to hold some of them while the market adjusts. They still pay the bills, but he doesn't see huge numbers STR's can produce.

In closing, determining a properties highest and best use can be challenging when there are more factors involved. If you budgeted the project for a flip and you stand to make a profit then that will always be a good choice. However, if your flip just so happens to be everything your market needs for an Airbnb then absolutely hit up a local PM to find out more information! I work with investors all the time so they should be just as spun up on answering all the questions you may have.

Hope this helps and let us know what you decide to do!

[David Caradonna]

Quote from @Matt Osojnicki:

So much value from everyone's posts here that its hard to go wrong with any option. Here' my 2 cents for what it's worth as a PM who has a client who flips homes.

The STR model requires you to meet specific data points to be successful. For example, a great place to start is identifying how many bedrooms it takes to be successful in your area? I know here in the Boise market studios and 5+ bedrooms outperform the rest of the competition. Secondly, the homes my flipping client flips makes sense for flipping, but not for Airbnb. However, he needed to hold some of them while the market adjusts. They still pay the bills, but he doesn't see huge numbers STR's can produce.

In closing, determining a properties highest and best use can be challenging when there are more factors involved. If you budgeted the project for a flip and you stand to make a profit then that will always be a good choice. However, if your flip just so happens to be everything your market needs for an Airbnb then absolutely hit up a local PM to find out more information! I work with investors all the time so they should be just as spun up on answering all the questions you may have.

Hope this helps and let us know what you decide to do!

Awesome insight Matt. You hit the nail on the head as far as my "plan". It's a rapidly appreciating market with A LOT of construction going on over the next year so even though I don't think it's going to kill it as a STR, I think a mid term rental will absolutely keep the bills paid while it appreciates. To be honest, even a long term rental will so I feel like I'm at least covered. And at a worst case scenario, I sell it and call it a day lol.

[Matt Osojnicki]

Sounds like a wrap to me! 
Just one thing to keep in mind. It's expensive to furnish a property for short or mid term rental. May want to consider getting a tenant in if you plan to sell in 6 months. 

Best of luck!

[Matt Osojnicki]

Quote from @January Johnson:

Quote from @Mohammed Rahman:

Hey @David Caradonna - I'm an investor & realtor and don't do any arbitrage myself, but a good friend of mine is involved in projects like this. He tells me that it's very lucrative for him, and he doesn't mind paying a higher lease payment to the actual property owner to account for the risk. 

One thing to consider is that if you do end up leasing it to someone to Air BnB it, you should account for higher wear & tear since the tenants are more short term and the frequency of turnover is higher. 

Disagree about wear and tear.  LTR folks will destroy a place.  Even "nice" people who "always pay the rent on time" can be filthy pigs.  I've seen it over and over as a REALTOR here.  STRs get cleaned OFTEN and can be maintained MUCH more regularly than LTRs.  (9 years of self-managing experience here - I own 4.)

Jan is 100% correct here. I see to many people miss label "turn over frequency" as "high wear and tear". The type of rental doesn't matter. There is still a physical person in your home regardless. The benefit of Short Term is that the property is looked at 6 times a month and not once every six months. HUGE misconception. Because of this, STR's are kept in a "for sale" status for the entirety of its use. Another added bonus in my opinion.

Good to see you again @January Johnson :)

[January Johnson]

Likewise, @Matt Osojnicki!  

[Pandu Chimata]

Quote from @Matt Osojnicki:

Quote from @January Johnson:

Quote from @Mohammed Rahman:

Hey @David Caradonna - I'm an investor & realtor and don't do any arbitrage myself, but a good friend of mine is involved in projects like this. He tells me that it's very lucrative for him, and he doesn't mind paying a higher lease payment to the actual property owner to account for the risk. 

One thing to consider is that if you do end up leasing it to someone to Air BnB it, you should account for higher wear & tear since the tenants are more short term and the frequency of turnover is higher. 

Disagree about wear and tear.  LTR folks will destroy a place.  Even "nice" people who "always pay the rent on time" can be filthy pigs.  I've seen it over and over as a REALTOR here.  STRs get cleaned OFTEN and can be maintained MUCH more regularly than LTRs.  (9 years of self-managing experience here - I own 4.)

Jan is 100% correct here. I see to many people miss label "turn over frequency" as "high wear and tear". The type of rental doesn't matter. There is still a physical person in your home regardless. The benefit of Short Term is that the property is looked at 6 times a month and not once every six months. HUGE misconception. Because of this, STR's are kept in a "for sale" status for the entirety of its use. Another added bonus in my opinion.

Good to see you again @January Johnson :)

 Couldn't agree more. I have short term rental that I manage. It's 100 miles away but I visit the property physically twice a month and do minor maintenance work. I always keep an eye on everything. So in my view, STRS will have less wear and tear compare to the long term tenants. 

Interestingly I have another house in Mountain area, that I am looking for someone to manage the house for Airbnb, like an arbitrage. I got too much on my hands and want someone to run Airbnb for me. 

[Keith Koch]

Greetings! We have a piece of property in a tourist place. Someone built a tiny house and is renting it out on Airbnb.

I can't seem to find anything online that gives examples of agreements that people who "arbitrage" properties that are not theirs on Airbnb.

Can anyone forward me some examples of profit-sharing. Or can suggest some templates or advice as far as negotiating a deal where we get a % of the profits for this. We want to do it peacefully, but we may have to use leverage to shut-it down otherwise.

We are trying to work out a deal where they do profit sharing. They don't seem to be open to the idea and it is creating some tension.

The airbnb is up and running for two months is being rented out consistently. They are only paying a fixed rental amount. We are finding that this is not working for us, as there is a lot of impact on the land that wasn't accounted for originally, like landscaping, road impact, trash removal, and generally just keeping up with things at a guest level.

Thanks!