What are the pro & cons for airbnb arbitrage ?

[Robert Collins]

Saw a great interview with Grant Cardone & Brain Page . It’s been out for awhile now but I never took the interest in actually watching it , be I did yesterday and he was pretty much

Breaking down the business of airbnb arbitrage , so I thought I would ask bp what am I missing what are the pros & cons of this setup? I understand this is something a person who have to sale the property owner on letting them is their home to operate this product, but it feels like I’m missing some kind of major risk that I not seeing , it almost felt too good to be true , so what are your experiences with it ? Why or why don’t more investor use this strategy. Is it the new best kept secret that not so much to a secret? ...

[Uwe G.]

@Robert Collins, I agree with what @Trevor Ewen mentions and think of AirBnB as the following:

Assuming you can rent your property as a 12 month rental or chose to use AirBnB

Pros:  Generate higher yields in the short term, creates flexibility for your property if you also like to use it.

Cons:  More management overhead, cashflow could be unpredictable, higher property wear and tear, economically more dependent, on the hook for utiltilies (internet & cable) and upfront furnishing costs.

If you are taking an arbitrage strategy where you are renting from a landlord and then creating a spread.  You need to go direct to property owners to find propreties where you can do this.  Any good property management companies will not allow tenants to do this if they are aware of it.  If you are doing this you are not an investor but an operator...so make sure you are not confusing the two.  Investments have a value that can be sold, I don't see the arbitrage as a sellable asset.

Bottomline is that there are plenty of operators making money doing this and it requires minimal startup costs (~15K for furnishings) for the operating business.Overall, I see this business model as high risk for the following reasons:

1. Monthly costs (rents, insurance, utilities, landscaping, etc...)

2. Funiture and other furnishing costs due upfront

3. Property Owner can take back the property after your lease is up (potentially after the first 12 months)

4. Would a recession lower nightly prices?  How much new AirBnB inventory is coming online and how is that impacting prices and occupancy?