Horror Stories with Rental Arbitrage

[Alexander Knox]

I am curious to hear anyones horror stories with rental arbitrage! Don't hold back, I want to hear anyones mistakes and try to learn something from them. 

Thanks for sharing!

[Michael Baum]

So my stories are all anecdotal. I do not do arbitrage nor allow it at our place.

I know of 3 people who started out doing arbitrage in 2020. They were all in the same boat with little cash available. All of them also watched various videos on how it was awesome and you could make a ton of dough etc etc.

All three lost everything. One is being sued. 2 were forced to declare bankruptcy and the one being sued is going to have to most likely.

They all got over leveraged, didn't have enough cash to make the places nice, no real reserves and then the pandemic came along with the various municipalities restricting visitors etc. Pretty much killed their business.

I have posted a ton on arbitrage and why it can be dangerous so I won't rehash all that.

I will say that if you are young with little dough to blow, you would be much better off using the FHA loan program and buying a small multi family. Live in one and rent the rest. Live for free, make a little cashola, refi after a year or so, rehab your old unit, rent it and buy another one with the same FHA program and do it again.

After 2 or 3 years you will have a few performing LTR multi family properties, hopefully some cash in the bank then you can start to branch out to other asset classes.