Who has a successful Airbnb rental abritage

Question

Is Charlestón, SC a good location for AIRBNB?

Trying to decide where I should start my first Airbnb property with Rental Abritadge … I’m from Florida

Sarah Kensinger · Answer

I know Charleston has some restrictions on STR so I would check into that. As for those that have a rental arbitrage property...@Jake Mercer would be a good person to reach out to and so would be @Fakaradin Floyd. We're part of a STR mastermind, and I can tell you more often than not STR operators have at least one arbitrage property, so it's pretty common!

If you want more high-level course material and coaching help, I know Jake offers that and so does Michael and Elizabeth Chang and Preston Seo.

Best of luck!

Michael Baum · Answer

Hey @Melanie Hernandez, first, it is a Short Term Rental. AirBNB is a platform where you list your STRs.

Second, take some time and do a search here for arbitrage. There is a ton of info on the topic.

Here is the page for all the regs in Charleston - https://www.charleston-sc.gov/2529/Short-Term-Rental-Ordinan...

Also, take a few minutes and search on AirBNB and VRBO for places near where you want to buy. What kind of nightly rates, occupancy and amenities do they have. That will give you a good idea if it will work.

Mercy Odey · Answer

Charleston has some restrictions, check that out. Some clients I helped searched for properties there to self-managed, testify it's successful.Check your DM

Todd Goedeke · Answer

@Jeremy H. you seem to think that short term vacation rentals are a RE play when they are in fact a business. Businesses goal is profit and in the form of STVRs it is net cash flow.

A STVR building/ home is not much different than a business like Walgreens triple net leasing a building. A business does not base their business plan on possible RE appreciation and sale of that building. The business is the hospitality side and how well the vacation rental is decorated and managed. No commercial business owner wants to own the building when they can triple net lease and instead just pay for furnishings, taxes , insurance and maintenance.

The ConC return on a triple net leased property is far higher than on a property owned by the management company.

Passive investors can still take advantage of accelerated depreciation and cost segregation thru material participation of new construction of a STVR home. The investor can also oversee management the first year of operation.

Jeremy H. · Answer

Sure - STR arbitrage an incredibly narrow scoped business. My LTRs are also a business - difference being I own the asset. Just another reason I don't like the arbitrage model - it's incredibly narrow in scope and high risk.

I would say Walgreens NNN leasing a building is incredibly different than a tenant doing a airbnb rental arbitrage. That's comparable to saying an apple is an orange because they both have seeds. It doesn't even start to make sense.

Jeremy H. · Answer

Honest feedback here - I hate the arbitrage model

Why? Higher risk in my opinion and you build wealth in one way - cashflow

If you buy the property you get the appreciation, cashflow, more tax deductions and cashflow. I want a tangible asset that builds wealth over time not a one time thing

I'd wholesale, flip, work multiple jobs, deliver packages, pizzas etc until I got enough cash to buy a place before I did arbitrage

Warren Powers · Answer

@Melanie Hernandez two questions to ask are: can you effectively and profitably run a STR business giving your guests a wonderful experience and can you provide value to and mitigate risk for your property owner? I allowed a LTR to convert to STR/MTR several years back and it works well for us due to my operator’s hard work, integrity and professionalism. I would guess that successful arbitrage arrangements are fairly rare but are possible if you are able to provide value/service to all parties and all aspects of your business

Devin Scott · Answer

It's not arbitrage.  Really wish people would stop calling it that.  Arbitrage would be renting out a place while simultaneously subletting it to someone else for more, assuming there was zero risk involved.  STR has risk and takes work, and by definition a true arbitrage has neither.  It's like saying when Starbucks rents a space and then profits from selling coffee, it's arbitrage.  Nope.

Jeremy H. · Answer

It's high risk relative to a LTR. Simple.

What's a NNN lease look like for Walgreens? What's a arbitrage agreement look like for STR arbitrage? Same terms? Same duration? Same rent escalation? Are you going to put in capex for the roof, gutters, fence etc? You're going to pay for all the utilities and insurance premium increases? There are extra costs involved in a NNN lease - that's why STR arbitragers don't do that - sure I'll take it as a landlord, but why would you want that? They want the cheaper version where they aren't responsible for any improvement expenses.

Can you give me one reason I'd prefer to do an arbitrage over owning the actual unit? Arbitrage is a short term game - covid and the end of covid proved this. How many bums that started that business are still in it? Not many. Want to know why? Because it generally sucks.

Give me another reason, why, as an STR owner, I would want you to sublet out my place on a nightly basis? Like I said - apples aren't oranges just because they have seeds

Todd Goedeke · Answer

@Jeremy H.It’s definitely high risk for people who have no experience running a business.If you don t know anything about managing and marketing STVRs stick to LTRs. If You can t grasp the concept of ConC returns with triple net leases you won t be able to minimize risk.

Walgreens triple net leases a building and runs a retail business within the building trying to attract customers thru it’s doors. A STVR manager triple net leases the home/ duplex/building and runs a hospitality business on that property marketing to get customers thru it’s doors. That’s apples to apples for triple net leasing.

Who has a successful Airbnb rental abritage

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