Rental Arbitrage in Miami to build capital, or invest elsewhere?

Question

Good Afternoon, Hope all is well. My name is Ivan Urquiza, and I am a emergency room RN currently living in Miami, FL. First off, wanted to say a big thank you to Bigger Pockets as well as the BP community as a whole. Truly life changing. I am a complete newbie to real estate investing, however been devouring as many episodes of the podcast I can, as well as reading books recommended directly through either episodes or forums. I will be purchasing my first rental property this year, and I want to specifically get into STRs. I live in Miami, so the prices of property in my area are extremely high. My question to the BP community is this, would you recommend starting off with a rental arbitrage? Or purchasing a property outside of Miami all together. I feel that an arbitrage would be a good way to get my feet wet and learn the ropes, but again rent prices in Miami are very high so it still would be a costly endeavor. Also do not like the fact that I am not building equity and do not own the property. I do have some capital that I have managed to save through my W2, but it wont get me very far where I currently live. I would like my first deal to be close to home, but with the current prices purchasing anything worthwhile in Miami may not be feasible for me at the moment. Would love to hear some suggestions or maybe personal experience from anyone who has gone through a similar scenario. Look forward to hearing from you! Thanks again, take care.

Chris Allen · Answer

Hey there Ivan and welcome to BP! I am an ICU nurse, so at least we have the love of BP to agree on lol.

Couple of things here

- Rental Arbitrage is not investing, but it is a great way to help you build up some capital and experience in STR's when starting out. You will still need some decent capital to do this though (Security Deposit, furnishings, etc...), could be up to $10k depending on the size of property. This $10k could be used as a DP on a primary home instead.

- If you are really wanting to get into STR's, I would suggest that you try and position yourself as a "Professional Host" or a Co-Host. Then you can "partner" with property owners and you would not come out of your own pocket to furnish a property, you would just manage.

- If properties where you at are really too high for you to afford right now, I would either focus on increasing your savings, or maybe doing the out of state investing.

What do you mean when you say the loan you applied for was "just not enough"? Like you did not get approved for an amount you needed or what? I know several people in Florida who are investing in the secondary and tertiary markets around the major cities and having good luck with that.

Katherine Serrell · Answer

If you are still renting or living with family, I would start by buying a primary with a low-down payment loan (3-5% down) to live in for 12 months and househack/airbnb rooms or a separate unit while you live there then after 12 months, rent the whole thing out and repeat the process. I did this on 3 houses in Raleigh, NC and really helped me get started when i had little to no money but wanted to stay local.

Otherwise, I would read 'Long-Distance Real Estate Investing' by David Greene. This will help you decide if you are comfortable getting started with a property in another city or state.

Otherwise, I would read 'Long-Distance Real Estate Investing'  by David Greene. This will help you decide if you are comfortable getting started with a property in another city or state.

Chris Allen · Answer

Haha that's great, I was going to do CRNA before I decided to focus on the Real Estate stuff first.

Yeah, that's a lot of cash to shell out for something you don't own. But yeah, I know people that do well with AirBNB Arbitrage as well; it can definetly be a great business for income. The only downfall is you are not optimizing the tax benefits of owning the real estate or getting the appreciation and loan paydown as doing that. So if you are truly wanting to run a STR business, AirBNB Arbitrage is a solid strategy, but if your goal is to own the real estate, then I would say focus on buying your first property, convert that to an STR, THEN arbitrage to get more business if you want.

Ill DM you as well and we can chat!

Ivan A Urquiza · Answer

Hey Chris. Thanks for the reply and feedback man. Its greatly appreciated. Trust me when I say I get it lol, my older brother is an ICU nurse as well (he just started CRNA school actually). Not an easy profession to say the least, looking to take some travel contracts to get out of staff nursing for good.

In Miami realistically the capital required to start a STR arbitrage is more like 10-25k depending on the amenities you're looking to provide as well as area. Lots of not so appealing areas in Miami. The idea of becoming a professional host is amazing, actually have a friend who is successful in that space and have been working with him and been learning all I can.

As far as increasing my savings, I was actually looking at arbitrage as a way to build some more cashflow and ultimately save as much as I can. The travel nurse contract I am taking, as you know, will definitely help with that as well. I am not necessarily in any rush, my goal is to purchase one property this year. Just wanted to see what insight the BP community had on rental arbitrages. Does not seem to be a resoundingly positive one. However, I personally know people that make good cashflow with arbitrages and integrate that into purchasing properties. So did not want to rule that out completely either.

The loan was actually a pre-approval, was just testing the waters to get an idea of what I would be looking at. And yes I did not get approved for the amount I was looking for. Which was surprising to me having such a stable profession and working lots of OT the past few years. Yea going to be looking around Florida maybe a few hours outside of Miami.

Again thanks for the advice, much appreciated.

Ivan A Urquiza · Answer

Hey Katherine, hope all is well. I appreciate your response. Thank you for the feedback, I actually applied for a traditional loan last year and it just was not enough to get what I was looking for. At least in the area I am currently living. In all honesty I did not even speak to them about the possibility of an FHA loan, going to explore my options and see what I can do. Also, absolutely love Raleigh, NC. My little brother went to NC State. Actually in the process of looking for a travel nurse contract up there, looking at maybe Wakemed or Duke Hospital. Thank you for your advice and book recommendation. Take care!

Rental Arbitrage in Miami to build capital, or invest elsewhere?

Most Popular Reply