How to price transfer of an arbitrage unit

Question

I am terminating the lease of an arbitrage rental unit (2 units in 1 house) in compliance with the lease. We rented the house unfurnished and we fully furnished and decorated the property. I am working out a deal to transfer the STR to the landlords instead of just vacating and returning an empty house.

They need to know our price for transferring all furnishings and supplies. I also offered to possibly link them with our cleaner who has been handling turnovers at the property for years now. Since the landlords live on the other side of the country having our cleaner would be extremely valuable as they embark on remotely managing STR operations. For a transitionary period, I also offered to allow them to utilize our online listings to capture longer-term stays (30 days+) until they get their own listings going/obtain a STR license. Then the Landlords also asked if they could use our professional photos to build their separate listings (that will be a no--they will have to reshoot the property themselves as that is our work and portfolio). In any case, I am not sure how to price this transfer.

- Furnishings and Supplies: Estimate what I would expect to earn from selling all of the furnishings and supplies. Giving them an option to pay a as a lump sum or distribute payments over the transitionary period.

- Booking Platform Listings: To utilize our listings for a transitional period, it would be a profit-sharing. Since we would only manage the listing and not operations, I suppose our percentage should be less than 15%.. so 10%.

- Cleaning Team: For utilizing the cleaning team that we have trained for years to the point where they basically manage the property (clean, stage, laundry, reports damage, inventory, sometimes facilitating repair appointments, etc)... I am not sure about that. Perhaps I should manage operations and tack on a surcharge to the cleaning (maybe 10-15%).

My goal is to get out of the property. So the more we offer to help, the more we are entrenched in everything. So the transitionary period needs to be clearly defined.

Does this approach to generating an estimate for the transfer sound reasonable? Any other ideas?

Thanks!!

Michael Baum · Answer

So I feel the furnishings are worth about zero. At the most maybe 10 cents on the dollar. That is my opinion and what I would pay at most if it was nice USA made stuff. Craigslist, OfferUP and Facebook Marketplace is rife with very nice USA made furniture for pennies on the dollar or even free.

I don't think the info for the cleaner is worth anything either. I don't think you have the right to own someones contact info. I get that you put time into getting them to do things the way you want but you shouldn't sell that info. Ask the cleaners what they would like to do.

Now the booking platform might have some value. Are we talking a fully functioning website or just the AirBNB and VRBO bookings? If it is a website working then there is value, but AirBNB and VRBO listings are not sellable. It is against their terms of service.

If it were me, I wouldn't take any of the bookings, especially if you try and sell them to me. I would start from scratch on everything.

All this is my opinion and I don't have the best view on arbitrage. My 2 cents.

Richard Elvin · Answer

I guess I would look up what the furniture would go for on CL, FB marketplace, Offer Up and go from there.

The "heat" towards arbitrage is that the arbitrager can always walk away without any recourse for the homeowner, which is exactly what is happening. It creates, as the OP stated, hardship for the landlord, but not the arbitrager, "...I knew the hardship a vacancy would have for them...".

It's nice to see the OP is working on reducing that hardship! I commend them for that!

As far as the cleaner, I'm not familiar with charging for a referral, maybe that's a thing, but if I considered someone a great resource I'm going to refer them. I would also refer someone that is a great resource to any of my friends without charge.

Just my 2 cents.

Michael Baum · Answer

You did ask if you thought it was reasonable @Lauren Pitts so I answered it.

Sarah Kensinger · Answer

Unfortunately, arbitrage is not a big thing on here. It's too bad because if done correctly, it can be a very successful strategy! I'm not sure what to suggest price wise, except to be fair to everyone involved, especially you! Sometimes we don't give ourselves enough value for our work. In some ways I wonder if you could do a bit of a co-hosting approach for the next month or so as you help transition. In that case it would be a percentage of each booking, from what I can tell from your question I think around 20% would be fair. And that would include the listing operations and cleaning team operations.

Sarah Kensinger · Answer

Your more than welcome! I feel the same as you about arbitrage, but for some it's their only way of getting into real estate and the STR space. I'm a huge proponent of taking what you earned and purchasing your own properties.If you need any resources on co-hosting or having a STR company let me know! It's another great strategy that is becoming quite popular with STR owners, that are sick of dealing with the big PM companies or tired mom and pop companies.

Lauren Pitts · Answer

Thanks for the heads up! Yes I can feel the heat towards arbitrage emanating off this community. Lol. And your advice was actually perfect because that is exactly what we are ended up moving towards. And who knows, maybe my business will hold onto the unit longer with this change in the arrangement! It is becoming essentially property management/co-hosting.

Im not the biggest fan of arbitrage myself and I couldn’t make it work with the STR laws, but it was the avenue I started the business with. I prefer the equity of owning plus the STR cash flow going forward. But less barriers to entry with the arbitrage and I learned a ton. The experience is worth a ton!

Thank you for the encouragement and tips!!!

Lauren Pitts · Answer

You said it yourself, you don't have a great view of arbitrage. So ...I guess thank you for letting me know that you do not see the value of what we are doing. Also, I did not "try and sell" anything to them. I gave notice to vacate. I planned to deliver the property vacant. I have an excellent relationship with the landlords and I knew the hardship a vacancy would have for them right now so I offered them this alternative and they very much appreciate it. The owners and I are in full agreement that compensation needs to transpire for us to move into this partnership. My post was for tips on how to properly and fairly valuate this unit, preferably from someone who has done this before.- If I am managing cleanings then I will be compensated. A surcharge structure was my approach. - The furniture has value. I have been buying and selling furniture for over 15 years, so I know well what items have value and those that do not. I just wanted to figure out how to bundle the entire 2 units, as selling all items at once has a benefit to me compared to selling each item individually to a consumer.- If I am managing listings then I also need to be compensated. Thanks for the comment, but if this is not your thing then I'm not sure how much helpfulness there will be

How to price transfer of an arbitrage unit

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