Should I let someone Airbnb Arbitrage my home?

[Kerns Churchill]

One of my rental homes in Phoenix will soon be vacant. I have it listed on Zillow and have had tons of people reach out to me about arbitraging my home. I was wondering if anyone has any experience renting to someone who is going to use the home for Airbnb? I'm not thrilled on the idea, but could be persuaded for the right premium. Any input is appreciated.

[Bill B.]

The minimum I would take is a few rolling months of rent paid in advance (so they're always paying rent for a few months in the future.)with a 50% premium and a personal guarantee from someone with great credit and assets to lose. You need all that because the day STR becomes illegal they're going to walk leaving you high and dry.

This is all assuming you have no assets and nothing to lose as you’re just getting started. After all you’re going to be letting unknown people in your house that you haven’t vetted that you’ll be liable for if anything happens to them. And get a BOATLOAD of insurance. Enough so that if an underage kid is drinking at the party being hosted in yoru house dies with 3 other underaged kids in his car you’re covered. (Again a good reason to do this when you have nothing for them to sue you over after you declare bankruptcy.)

Ps. This is all assuming you can’t get a regular LTR low maintenance renter interested. This is your option of last resort because you can’t rent or sell at a profit. 

[Chris Seveney]

@Kerns Churchill

As mentioned unless they want to pay months in advance and an increased deposit I would pass

[Theresa Harris]

I agree with the others.  You will have extra wear and tear and lots of traffic coming and going.

[Michael Baum]

Hey @Kerns Churchill, I am not a fan of arbitrage but here is my opinion.

First find out about them. Most of what we see here are people who don't have 2 nickels to rub together. They can barely come up with the basic lease cashola let alone setting it up for success.

Most also have never done STRs before. Zero experience is high risk of failure leaving you with a broken lease and maybe a house full of furniture you need to deal with.

I am not saying don't look at it, just do a search here and read about arbitrage first. Then vet the heck out of whomever contacts you. Don't buy buzz words like Corporate Rentals and the like. Most of the time it is a single person with an LLC.

Why not give it a shot yourself? Phoenix is a solid market and you should be able to do OK.

[Yu Liu]

I have a friend who is renting to an arbitrager and they have no complaints so far. It really depends on what you are comfortable with. If you are concerned about the wear and tear, I would vet them and ask to see if they have other properties in the area and if you can visit them to see what condition they are. My friends also asked for first and last months deposit I believe. 

I have STRs and they are in better condition than my LTRs, it really depends on the operator too. 

[Josh Young]

@Kerns Churchill I would make sure that they are also on the lease as a personal guarantee, I would charge first, last, and security deposit, and I would make sure you are charging a premium of at least 25%.  I would also make them responsible for paying for all repairs under $500, except major mechanical and roof. Think of it more like a commercial lease.

[Account Closed]

Quote from @Kerns Churchill:

One of my rental homes in Phoenix will soon be vacant. I have it listed on Zillow and have had tons of people reach out to me about arbitraging my home. I was wondering if anyone has any experience renting to someone who is going to use the home for Airbnb? I'm not thrilled on the idea, but could be persuaded for the right premium. Any input is appreciated.

Depends. Where in Phoenix is the property, do people want to be in that area, is it in an HOA, will AirBNB numbers work, who takes responsibility for AC, Water, Power, Garbage, pool, maintenance, etc?
What happens if there is a porn shoot like they did in Paradise Valley or a large rowdy party and AirBNB delists the property, what about guests with drugs and police calls? Who takes responsibility? Not that those can't be pre-empted to a certain degree but you have to limit your exposure to liability.
Fun to think about, but there are real questions you have to ask yourself first.

[Dan H.]

Question why would you choose to have someone that likely has no training, insurance, licensing, team, minimal capital, etc when you can hire a professional PM that is licensed, has training, has insurance, has a large support team?

If you do decide to arbitrage, make sure you have a very high umbrella policy and that the unit has an insurance policy that covers STRs.  Your liability if something goes terribly wrong is very high because you know the person doing this is unlicensed and likely uninsured.

Good luck

[Brooklyn McCarty]

Why not do it yourself? 

[Germán Rimoldi]

If you decide to move forward with Airbnb arbitrage, ensure that you have a legally binding agreement in place that outlines the responsibilities of both parties. Clearly define the terms of the arrangement, including rent payment schedules, maintenance responsibilities, and any penalties or consequences for breaches of the agreement.

[Richard Elvin]

@Kerns Churchill What @Dan H. said. Why would you choose an arbitrager vs a professional managment company? There would need to be some serious upside to working with some random person off Zillow vs a pro company. This is also just my opinion, which is some random person from BP. lol

[Curtis Porter]

Be careful, A lot of these requests come from Indonesia etc. I currently arbitrage a place in Scottsdale and it's going very well, but I have a legit local Airbnb business. It can be good for your property especially with how many cleans it gets per month and all the upkeep and maintenance it needs to stay rentable and get good reviews. BUT there's a lot of dumb kids trying get rich schemes and have no business trying to arbitrage. If your property is STR worthy I would think about doing it yourself or partnering with someone. Start up costs to furnish are $15-$20k. Realistically mid range rentals are going to gross $50k year one depending on what city, amenities etc. My arbitrage deal is for 3 years as the first year is basically break even. Where is yours located?

[Quinn Olivarez]

I have a property I thought about making available to an arbitrage person, but it's already 95% furnished and I like designing STRs so I decided to keep the project in-house

[KiKi Wood]

It could go well, but I would make sure to take the necessary precautions! Make sure you have a solid lease, that states they're fully liable for anything that happens while arbitraging, if AirCover doesn't cover it. Also, make sure it's solid how you get paid, what happens if a guest damages your home. There are some great leases online that outline this, but make sure it is solid, and talk to an attorney to be sure!