Is rental arbitrage dying?

Question

Im interested in trying rental arbitrage. I just wanted to know if it is still profitable and will continue to be profitable. With all this airbnbust talk, it makes me question whether airbnbs can be profitable. It seems like a lot of cities are banning airbnbs now and with people shifting to MTR, MTR is going to start being oversaturated. Can anyone who's still doing rental arbitrage share with me their experiences and their numbers (if willing) in this niche? Id love to learn more.

Michael Baum · Answer

Hey @Alex Ng, if you do a search on there for arbitrage, you will get a ton of info. I am not a fan personally.

Having said that, there are some folks doing just fine. There is a lot of risk but it can work.

Too many "experts" talk about the end of STRs. They don't own a single one nor do anything in that space. Come here and read and ask questions.

John Underwood · Answer

I agree with Michael.

Search on here about the risks.

I also see a lot less discussions about arbitrage wich makes me think the popularity of this might be gading.

Andrew Steffens · Answer

I have commented on a little of similar posts in the past, more in depth than I have time for right now as well.  However, and this is just my experience and my market of Tampa area FL but I have not seen an arbitrage deal I would take in more than 3 years.  I got my start in this business in 2016 renting a small mansion on the beach in foreclosure for $5,500 and cashflowed tens of thousands per month.  This was great because the ride only lasted 13 months and I got the start up capital back in a few months and the rest was profit.  Not to mention the experience and the cashflow was parlayed into building the business we have now.  However, that house is available now would rent for double if not triple and cashflow half.  It would be lucky to be break-even nowadays.  While I still believe whole heartedly in short term rentals the best part of it for me is now appreciation, debt paydown, and tax advantages, not just the cash flow.  Just my 2 cents.

Bonnie Low · Answer

I'm not a fan of arbitrage for many reasons, but it works for many people. I'd be careful about buying into the whole Airbnb bust story line. AirDNA just released fall data showing that YOY demand is up in most markets that typically see a fall seasonal drop, indicating that traveling is becoming more spread out throughout the year in many places. The "bust" part is very market-dependent. There are lots of markets that are saturated and you're correct that a lot of STR operators are being forced to pivot to MTR because of regulatory pressures. But that doesn't mean the demand has dipped drastically - it's lagely a sensational story line that is getting a lot of attention and I think it's also being repeated by people who maybe paid too much and were operating on such thin margins that any drop forces them into the red and/or poor operators who have a property that just cannot compete. Just my opinion, but net-net don't let the "Airbn Bust" story line scare you. Find a good market with regulations suitable to STR, buy right (or arbitrage), stage your property well and be an awesome host and you'll do well.

Sarah Kensinger · Answer

Arbitrage is still very much alive and if the proper research is done, still very profitable as well. Honestly, you can get the numbers to work a little better with arbitrage over purchasing a property, but if interest rates keep coming down that'll change.

Michael and Elizabeth Chang would be a great resource for you to check into, and recently I learned about Preston Seo but I don't know very much about him. He has a podcast that might be worth checking out as well. Fakaradin Floyd and Jake Mercer are both on Biggerpockets and would be great to connect with. Jake has done arbitrage for several years and has posted a lot of informative posts lately. Fakaradin just started the strategy this year and has done well in his area. I would suggest connecting with those that have been successful and learn as much as you can, then decide if arbitrage is for you.

Is rental arbitrage dying?

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