Should I Airbnb Arbitrage?

Question

Hey Community!

I am trying to learn more about this business model and would love to hear from someone that has actually done/is doing arbitrage right now. I am looking into this strategy specifically because it requires significantly less capital than going and buying a property. I look forward to hearing your experiences and will have follow up questions for you!

Thank you!

Richard Elvin · Answer

@Zac Lindquist What @Steve K. said. Arbitrage is a business, not investing. Be wary of youtubers that make it look easy, especially if their info was pre rate hikes.

You are already a licensed agent, so the move into managing STR's would capitalize on the knowledge and licensing you already have. Most places are in need of good property management. If this truly interests you, vs just a way to make a buck, then I would encourage you to create a good PM company. That way you're actually building a business that's based on you, not dependent on some landlord's whim.

Having LL experience I can tell you that having some random arbitrager is a non-starter for me. If a licensed agent from PM company approached me with a value add proposition I would consider it. Something like, "I see that you have x rental listed for $2k/month. I've run this through our analysis and we believe that we can earn ~$3,500 as a STR. We are licensed, insured, and will furnish the property. I work for ___ broker and am a licensed agent. Our take is 20%, so you could expect to earn ~$1k more a month!".

Just my thoughts on the matter. Hope it was helpful!

Steve K. · Answer

Most of the people who ask this aren't licensed or insured and have no experience managing properties, and don't have any money, and they get negative responses on here. Seeing as you are at least licensed, why not just start up a property management company? Arbitrage is basically managing an Airbnb at the end of the day, although if you're unlicensed it's wise to be careful about not handling money, leasing paperwork, accounting, negotiating rent amounts, or crossing over into what could be considered regulated activity requiring a license (in most states). I'm sure many arbitragers are operating in a bit of a legal grey area and if anything were to happen with a tenant or the property, I wouldn't want to be them. I think I'd only do arbitrage if I was set up as a licensed and insured manager already and was looking to diversify the suite of options I offered to clients. Does your broker allow you to manage properties? If not, it's a non-starter unless you're willing to switch.

Chris Seveney · Answer

This has a very bad rap here in BP for obvious reasons. Real estate is a very cash intensive business and the aspects where little money is involved is not only risky but usually ends up in activities that are either unethical or against a contract.

If you get approval from a landlord to notify them of your intentions, then there is nothing wrong with it, just be aware a landlord can go after you and garnish your wages should you not pay the rent trying to run a business out of their rental.

This is not a path I would recommend a newbie take in real estate.

Alyson Gordon · Answer

I'm not the biggest fan of arbitrage - even if the landlord agrees, they may change their mind after 1 year and then you're stuck with the furniture. You also are going to be dependent upon them for any maintenance issues and if they don't handle things timely or properly it will all be your problem.

Can you still make money on an arbitrage deal? Absolutely. As with any investment, it comes down to looking at your numbers and the best/worst case scenario before jumping in.

Brooklyn McCarty · Answer

If you read on here long enough, you'll quickly see arbitrage is not a ideal path to take.

Andrew Steffens · Answer

If you search arbitrage on the main STR forum page you will see a ton of threads, many of which I have commented on explaining why I do not think this is a viable business now/anymore.  There are exceptions, but generally speaking, you will spend a lot of time to gain no equity and likely end up break even with a bunch of used furniture in an optimistic scenario in my honest opinion.

Michael Baum · Answer

Hey @Zac Lindquist, everyone really hit the nail on the head.

If you can't afford to buy a property, then you really can't afford to do arbitrage effectively in this day and age.

Paul Sandhu · Answer

This question is asked twice a week.  The answer is always the same.

No.

John Underwood · Answer

Read on here why this is a bad idea.

Zachary Cain Humphrey · Answer

Air bnb arbitrage for the sake of increasing your cash flow in order to reinvest that money into owning your own house for air bnb purposes. Rental arbitrage long term misses out on so much of what real estate investing can do to make you wealthy financially speaking. I have two rental arbitrage units right now. They help with about 800-1000$ / month in cash flow per unit. But that is not life changing money. but by doing it i have learned air bnb and been able to make a 20k profit this year to reinvest next year so its all about why you are doing it and what you need the money for that you will make from it.

Should I Airbnb Arbitrage?

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