Negotiation Tips for Airbnb Arbitrage + How do I Present My business Plan?

Question

Hi all,I’m in talks with a landlord about leasing a property for $3,600/month, but that’s above my budget. I plan to negotiate the rent and I want to present my proposal to show how I’ll manage the property responsibly. The landlord asked for a website, but I don’t have one yet. I’m considering two options to present my plans:  1. Creating Google Slides pitch deck, or  2. A detailed PDF using Google Docs.  Which would be more effective for pitching my Airbnb arbitrage business?  Also, when it comes to negotiating the rent:  - Should I ask for a phone call or virtual meeting to discuss the price?  - Would it be better to send my proposal and negotiation request via email first?  I’d love to hear from anyone who’s successfully pitched a landlord for Airbnb arbitrage or negotiated rent for a corporate lease. What approach worked best for you?  Thank you in advance for any advice and insights.

Chris Seveney · Answer

If I was the landlord here are the questions I would be asking - providing these so you could be prepared if they come up:

1. Who are you marketing too?

2. What screening process do you use? 3. what type of deposit / reserves can you provide in case the monthly rents you receive do not cover the rent you pay me?

4. How many successful STR arbitrages have you done?

5. What unique features of this property do you believe makes it a good STR

6. Are you insured ? What happens if a tenant causes significant damage?

You can create a website in seconds nowadays but I would also provide him a pitch deck to show how this works and that he is not going to have to evict you in 5 months because payments are not being made.

Michael Baum · Answer

Hey @Vanessa Lule, both @Chris Seveney and @John Underwood make good points and Chris's list is right on the money.

So is the $3600 a month market rate? A bit above? Any owner who understands STR arbitrage will want a premium. Maybe 20% above market rate. They know that a STR brings more $$$ than a LTR would so they want a piece of that pie.

Of course the risks are there that the owner will not renew the lease and start doing it themselves if you are successful.

I am going to assume that you are doing this close to home in the bay area of CA. STR regs seem to be always in flux in CA. From simple rules like permits to outright bans so that is a huge risk IMHO. You could find yourself with a 2 year above market rate lease with no way to STR the property.

With all that being said, here are some things I would do based on your question.

A pitch deck needs to be simple and concise. I never use more than 3 slides. A long drawn out presentation is usually a fail in a situation like this. I would use Powerpoint or the equivalent.

I would do things in person if you can. If not, then a phone call. I wouldn't send things via email at first.

Basically you are selling yourself, not the arbitrage. The owner needs to know you are solid, a good bet. An in person meet (even if you have to drive 4 hours) would be the best way. It shows you are serious and willing to go the extra miles to make it work.

The fact that you got an owner to chat with you about it is a big win. Most won't entertain STR arbitrage.

John Underwood · Answer

Also, most of us would advise against arbitrage. It is just a job, not RE investing.

Save up and buy your own place to Truley create wealth and not just make an actual owner money.

Rick Pozos · Answer

Hey @Vanessa Lule

Thats great that you are going out there and trying to make things happen.

When I buy a property it is usually from someone who Really, Really needs to sell. Not just someone who has their property on MLS for 2 weeks. If it is listed, it has to be on the market at least 200 days. If not on the MLS, they have to be about to be foreclosed on, way behind on their property tax or some situation that MAKES them HAVE TO sell.

Same with rentals. You have to find rentals that are on the market for 3 or 4 months or more. Maybe something that needs just a little work, but in a great area. YOU let them know that you will rent as is (and fix the property for 1k or 2k). You will take care of repairs under say $200 or $300. I always let them know what I am doing and let them know about airbnb insurance or let them know that you will take care of repairs that tenants will do.

This should put them at ease. Plus they are so happy that someone is renting that they rarely ask many questions. I have never done an application for a rental because they are so happy to find someone who is going to help them with their good location, but needs just a little work, property. AND I usually pay a little below market rent, but put a little into the cleanup or fix up of the property.

JD Martin · Answer

You're looking at this from the wrong angle. You need to look at it from the property owner's angle, and reverse engineer the problems & objections that are going to arise, such as:

1. Why should I go into business with you when you are new/have no track record?

2. Why shouldn't I just do this myself?

3. How are you mitigating my downside exposure?

4. Why should I negotiate the rent with you?

Just to name a few items. The technical "Google Slides vs PDF" is pointless in this discussion. No owner is going to care if you print a brochure or show up with index cards written in crayon. They care about making money and protecting their asset. What you need to do is show what compelling argument makes taking this chance on you make sense.

*That said* - I agree with @John Underwood as you should be concentrating on saving and owning investments, not attempting to create a middleman job. I would guess that you have little or no experience running any kind of STR, and now want to get that experience on the back of someone else's investment, with little or no personal skin in the game, and that's not a good way to build an investment portfolio. If you own your own home, you might be able to start by STR'ing your own home, making and learning from mistakes and building a track record you can then try to replicate on other properties.

Bryant Xavier · Answer

Vanessa,

I second others comment on the advice of putting yourself in the owner's shoes and figuring out your selling points from that point of view.

On another note.. I know a rental arbitrage opportunity in the Bryan / College Station, Texas market if you want me to send you some more details.

Allan C. · Answer

@Vanessa Lule I think your biggest hurdle is getting someone over the barrier that you have limited investing and life experiences. Your profile says that you’re 18, and that will be apparent when you talk to property owners.

If you truly believe you have credible capabilities and commitment, you’ll need to convince them that you are worth the risk (which likely will be a hard sell).