Co-hosting vs. Arbitrage

[Garrett Brown]

These two have become very popular over the last few years, and you'll get mixed reviews from all sides. I'm a fan of co-hosting pretty strongly over arbitrage, but I am trying to hear stories of success (or failure) on both sides. Who has done both? What are your advantages and disadvantages to each? Let's hear your wins and losses with them and your plans for the future. 

Thank you! 

[Michael Baum]

[John Underwood]

Both are just jobs, not RE investing. 

[Bruce Woodruff]

[Jon Martin]

Agreed with @John Underwood it is basically a job. 

I wouldn't touch arbitrage with a 10 foot pole unless it was a super unique property and situation with an owner where I saw some longevity and buy in from them. Otherwise you spend year 1 paying yourself back for the furniture (if you're lucky) and then hope to make a profit in year 2, only for your lease to possibly change terms, losing all of the time you put into building your brand. Plus the gray area between who's responsible for repairs. 

If I found myself out of work I would consider co-hosting to the pay the bills. Almost zero risk/investment and direct payment off of top line. 

[Todd Goedeke]

@Garrett Brown let’s hear your success story .why would a passive investor looking for a fixed rate of return of 15% Cash on Cash want a variable return via co-hosting?

[Todd Goedeke]

@Jon Martin You are right , if you don t know how to market a property and get direct reservations you should not attempt to co-host or triple net lease a property.

You fail to mention that leases on a property can be as long as 30 years.Long leases are a way to give both property owners and management companies favorable terMs.

[Garrett Brown]

Quote from @Todd Goedeke:

@Garrett Brown let’s hear your success story .why would a passive investor looking for a fixed rate of return of 15% Cash on Cash want a variable return via co-hosting?

To start, a passive investor would never consider co-hosting so I can’t even answer that question as people have mentioned these are businesses. My question wasn’t owning vs co-hosting vs arbitrage. I was asking for opinions for each side for people that have done them. 
1) I doubt any STR in 2024 is going to be COMPLETELY passive and make a fixed 15% return.
 If you know where that deal is, please let me know lol
2) I own 4 and co-host 3. The cash-on-cash return for my co-hosting ones are basically infinite because I put zero down in monetary value (sweat equity and experience are another thing) to make a profit. All my systems work together so my owning has higher returns the more I expand my co-hosting as I am vertically scaling. 
I’ll always be a fan of buying when you can. Not everyone can put down 20% to start in the STR world and these are options to find an entry if someone desires. 

[Jon Martin]

Quote from @Todd Goedeke:

@Jon Martin You are right , if you don t know how to market a property and get direct reservations you should not attempt to co-host or triple net lease a property.

You fail to mention that leases on a property can be as long as 30 years.Long leases are a way to give both property owners and management companies favorable terMs.

How common are 30 year leases for SFRs? If I am signing a contract to pay for 30 years, then I may as well get a mortgage and own it by the end. Plus it would have to be a banger of a property for me to have that kind of confidence in it going the distance through all the market cycles, regulation changes, OTA market shifts etc at which point I may as well buy it.

Which circles back to my original point- if I am not owning and benefiting from the appreciation, why should I absorb so much risk and upfront capital if instead I can find an underperforming property with potential, take a guaranteed return off the top and invest almost no money on my side? 

[Andrew Steffens]

I got my start in arbitrage (before it was even called that? Circa 2016).  I would not consider 99.99% of places for arbitrage nowadays.  Cohosting I have never done - it seems like a term that can mean many things to many people.

Generally speaking I see in 2024 arbitrage is for people who want to be involved without actually investing, and cohosting for people who want to be involved but do not want to a PM...

[Erwin Sham]

Quote from @Garrett Brown:

Quote from @Todd Goedeke:

@Garrett Brown let’s hear your success story .why would a passive investor looking for a fixed rate of return of 15% Cash on Cash want a variable return via co-hosting?

To start, a passive investor would never consider co-hosting so I can’t even answer that question as people have mentioned these are businesses. My question wasn’t owning vs co-hosting vs arbitrage. I was asking for opinions for each side for people that have done them. 
1) I doubt any STR in 2024 is going to be COMPLETELY passive and make a fixed 15% return.
 If you know where that deal is, please let me know lol
2) I own 4 and co-host 3. The cash-on-cash return for my co-hosting ones are basically infinite because I put zero down in monetary value (sweat equity and experience are another thing) to make a profit. All my systems work together so my owning has higher returns the more I expand my co-hosting as I am vertically scaling. 
I’ll always be a fan of buying when you can. Not everyone can put down 20% to start in the STR world and these are options to find an entry if someone desires. 

I have done both. Started off doing arbitrage for STR. Then pivoted some units to MTR. Also picked up co-hosting units. I know a lot of arbitrage hosts who aren't continuing and actually dropping these arbitrage units. Co-hosting is lower cost and easier to scale once you have your systems in place. It doesn't take 1 year plus to make back your money. Now I would only consider arbitrage for coliving/rent by room or assisted living. STR arbitrage is getting more expensive as everyone is force to add more amenities. Imagine trying to ask an owner permission to add on hot tub or high cost item just so you can compete. A lot to factor if the numbers actually make sense to do it. Personally I rather just own than arbitrage at that point.

[Charlie Cameron]

Quote from @Erwin Sham:

Quote from @Garrett Brown:

Quote from @Todd Goedeke:

@Garrett Brown let’s hear your success story .why would a passive investor looking for a fixed rate of return of 15% Cash on Cash want a variable return via co-hosting?

To start, a passive investor would never consider co-hosting so I can’t even answer that question as people have mentioned these are businesses. My question wasn’t owning vs co-hosting vs arbitrage. I was asking for opinions for each side for people that have done them. 
1) I doubt any STR in 2024 is going to be COMPLETELY passive and make a fixed 15% return.
 If you know where that deal is, please let me know lol
2) I own 4 and co-host 3. The cash-on-cash return for my co-hosting ones are basically infinite because I put zero down in monetary value (sweat equity and experience are another thing) to make a profit. All my systems work together so my owning has higher returns the more I expand my co-hosting as I am vertically scaling. 
I’ll always be a fan of buying when you can. Not everyone can put down 20% to start in the STR world and these are options to find an entry if someone desires. 

I have done both. Started off doing arbitrage for STR. Then pivoted some units to MTR. Also picked up co-hosting units. I know a lot of arbitrage hosts who aren't continuing and actually dropping these arbitrage units. Co-hosting is lower cost and easier to scale once you have your systems in place. It doesn't take 1 year plus to make back your money. Now I would only consider arbitrage for coliving/rent by room or assisted living. STR arbitrage is getting more expensive as everyone is force to add more amenities. Imagine trying to ask an owner permission to add on hot tub or high cost item just so you can compete. A lot to factor if the numbers actually make sense to do it. Personally I rather just own than arbitrage at that point.

I can't contribute on STR arbitrage, but I own STRs and have a portfolio of homes here we essentially arbitrage for assisted living, I CAN say the latter is awesome. We have multiple homes designed for assisted living that we lease out to the business owners. Because these are renovated to suit and can be licensed for assisted living, we are able to lease them for ~3X market rent. We cash flow on average $3K a month once leased on a 3-5 year commercial lease with increases built in. Can confirm: awesome.

[Brooke Larson]

My husband and I began our real estate journey as short-term rental (STR) cohosts. I completely agree that cohosting is a job and definitely not passive income. It provided us with valuable insights into STRs as we considered whether this was a real estate investment strategy we wanted to pursue. Cohosting can be a broad term, so it's crucial to clearly define the tasks and responsibilities you're managing and differentiate yourself from others in your market. Make sure to research local rates for cohosting and management services to stay competitive.

If you're doing this as a side gig or part-time job, it’s essential to time block, create systems, set expectations with property owners, and establish boundaries to ensure a smooth experience for everyone involved.

We opted not to pursue rental arbitrage for two key reasons: dealing with landlords and the significant upfront costs to set up and run a profitable STR without the benefit of property ownership. Just not for us in our local market in Georgia.