Profit Margin clarification?

Question

Hello everyone,

I have three STR’s two that are on the furnished finder platform. I am currently looking to expand and gain my fourth that will also go on the furnished finder platform. I want to stay in the Bay Area as I have done research about high demand places and this is one of them that is close to me also. As I’m researching prices, I don’t see how ppl are gaining profit! I see nothing under 23-2500. When I look on furnished finder I see nothing over $3000 that people are charging. So just to be sure, there’s only going to be about a $300 profit right? assuming monthly expenses? I don’t know why this is so hard for me to grasp that such a small amount of profit will be made. Especially because the work to set up is so strenuous

Michael Baum · Answer

Well, arbitrage is a very different thing than investing.

STRs are illegal in Vegas. I would spend some time researching 30+ day stays there just to be sure.

Brooklyn McCarty · Answer

Plus everyone manages differently which will also make a difference

Bruce Woodruff · Answer

Could it be your purchase cost (and mortgage)? With a mo rent of $2500 you should be ok.....unless your mo payment is high....

John Underwood · Answer

Saturation, higher interest rates, higher sales prices all make it more difficult to be profitable.

Dennis Nguyen · Answer

Just curious, how are you searching on Furnished Finder? You shouldn't search based off of what's available now, because those properties are either priced incorrectly or don't have the value that the nurses are looking for. I would search 3+ months ahead and run the comps that way. Good properties get scooped up by nurses 1-2 months before they start their job.

Brian Barch · Answer

1) many people bought at low interest rates and at only have a $1500 mortgage.

2) others are using furnished finder as a way to subsidize the slower months (off season only)

3) a small monthly cash flow can still yield huge long term gains in the form of appreciation, tax savings, tenant debt paydown, and leverage. Cash flow is only one part of the equation

Osazee Edebiri · Answer

Hi Shanai,

I am also here in the Bay. You are thinking MTR - Midterm rental for nurses, which is more than 30 days.

I have friends that have done arbitrage in the past and it concept it should work the same if you get a rental in an area where you have high demand for nurses. It's fairly similar if you are the owner setting up for a midterm rental or if you are a long term renter setting up for a midterm rental.

The challenge I have always had with arbitrage is you don't get any of the benefits of owning the property and how long does it take you to save up to purchase your own property if that is the goal. Otherwise I do think it is a good way for people to get started in investing.

I would say wether you are in or OOS, the MTR numbers have to work for you, so location of the unit is extremely important.

Good Luck and good job getting one in SF that works.

Shanai Rogers · Answer

oh wowwww this I didnt know! Well let me say LTR  since nurses stay a min of 30 days and that is my target market, but I will def do some digging. I appreciate you!!

Shanai Rogers · Answer

So I'm actually doing rental arbitrage, I am renting the spaces for now. Buying is in the plan but not yet! I have a space in sf that is doingf well but only because I luckedddd up so the profit margin is greattt. If it werent for that I just dont know. My other two are in sacramento, which does well when a nurse stays but after they leave the dry periods are brutal until another one finally comes. I have done more research and decided to go outside of california, its just not profitable unless you have multiple. Ive been looking in oakland due to the high demand for nurses  there and also Vegas for sure because of the high demand and low rents

Michael Baum · Answer

Hey @Shanai Rogers, are your other STRs in the bay area as well? How are they doing? Did you buy them before the pandemic and the inflation?

What is your budget? Where exactly are you looking?

Profit Margin clarification?

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