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Updated 3 months ago on . Most recent reply

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Vanessa Lule
  • New to Real Estate
  • Bay Area - California
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Newbie in Rental Arbitrage –How do I Analyzing Profit Potential?

Vanessa Lule
  • New to Real Estate
  • Bay Area - California
Posted

I’m an 18-year-old aspiring investor with a goal to build wealth in real estate. I’ve decided to start with rental arbitrage, given my tight budget. I’m focused on tourist-friendly areas (Bay Area, North Tahoe and primarily Sacramento) I have a few apartments interested in learning more about my plan. My challenge is that I’m struggling with figuring out if a property will be profitable or not, even though I've done research on sites like AirDNA and tried to analyze multiple factors.

where Im stuck: 
1. Occupancy Rates: How can I accurately estimate average occupancy rates for these areas? I’ve looked at Airbnb listings, but it’s hard to tell which ones represent long-term averages.
2. Monthly Expenses: I’m accounting for rent, utilities, and cleaning supplies, but are there other hidden costs I should consider? Any budgeting tips would be super helpful!
3. Expected Nightly Rate: What’s the best way to estimate this without over- or underestimating? 
4. Breakeven Analysis: I’ve read about calculating my breakeven occupancy rate, but I’d love to know more about how others in rental arbitrage set up and interpret this analysis.

If anyone has a process or checklist for analyzing potential arbitrage properties, I’d really appreciate it! Thanks in advance for any advice or insights.

Most Popular Reply

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Andrew Steffens
#4 Short-Term & Vacation Rental Discussions Contributor
  • Tampa, FL
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Andrew Steffens
#4 Short-Term & Vacation Rental Discussions Contributor
  • Tampa, FL
Replied

Your thoughts and commentary as an 18 year old is impressive! However, seriously beware of arbitrage.  I got my start in arbitrage but you will be sinking serious cash on start up and the cash flow could be minimal.  If you have $25-30k to sink in start up costs, it would be advisable to save up and use the money as a down payment on a turnkey furnished property.  Furniture tends to rapidly depreciate while real estate tends to appreciate.

  • Andrew Steffens
  • [email protected]
  • 813-563-0877
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