All Forum Posts by: Justin Brin

In our experience a LTR tenant is MUCH harder on a property then any STR guest. Dealing with damages on a former LTR as we type! The nonsense on rental arbitrage is just that, nonsense. The risk of rental arbitrage and all the reasons I regularly hear on this forum why a landlord shouldn't allow them; are the exact reasons we kicked a tenant out and why many other landlords kick tenants out.

The Enemy Method for Estimating Airbnb IncomeTo apply the Enemy Method, an investor needs to find a dozen similar short-term rentals, analyze their daily rates, estimate the occupancy rate, and calculate the Airbnb income

I would allow my rentals to be rented out by short term rental arbiter - but only if they had some money behind them.  And I would require the contract to state the the furnishings would all belong to me if they ended up being short on rent and I had to go after them.

To me, many of the people that do this tend to do it because they don't have the money to buy the units themselves.  And thats a red flag.  They might easily have some issues with a slow period and then where do they get the money to pay the actual rent to you.

the one question I have is if you could write the contract in such a way that an eviction would not be required.  If you set them up as a "property manager" who was required to produce X amount of income to you (i.e. your rent amount) and then they'd get the rest.  And that they'd be required to furnish the home and they'd be responsible for all repairs as well.

Then technically they would not be a renter so you wouldn't have to evict them and then you might be ok. To me thats the risk. If you "rent" to them and let them STR the home, then if they don't pay, I think you'd have to evict them.

Again, I think if you were to bring them on as property manager with no renter rights and require them to furnish the home and manage it and guarantee you your rent amount and allow them to keep everything else, you can at least mitigate your risks.

 Well they are likely going to tie up the property with a lease, contract or both.  It is true they supply the furniture, but ask yourself who would be willing to do all that without a guarantee of income.  Obviously there is no guarantee but if someone with a high level of success and experience was willing to do all that, it is likely a go.

Yes it is true there is seasonality in hospitality but with proper budgeting you will be fine.

For estimates I personally use AirDNA (Paid version) and then double check it using enemy method.

@Justin Brin long term rentals definitely have greater wear and tear. STVR guests are rarely in the home. They occupy a property 60-70% of the time , nights booked per year and are not in the property most of time while on vacation.

Set your mind at ease by triple net leasing your property( leasing company pays for furniture, RE taxes, insurance and interior maintenance.) As a triple net lease tenant the property will get cleaned weekly, while making sure the property is properly maintained.

@Justin Brin I do have a trusted, competent successful arbitrage operator for my out of state rental and it has been great for several years. It all comes down to the quality of the operator. I would not consider arbitrage for my other properties as I don't have that quality of an operator available for these locations. I do carry STR insurance myself that allows arbitrage and it costs several times as much as landlord insurance.

Because I do it myself. Like @Andrew Steffens said, I don't need to arbitrage it.

Regarding some of your other points. You won't be paying me what I make as a STR. If you did, then you wouldn't make a dime. So for you to make money, I make less.

I can see some folks allowing it, but I doubt that many here would allow it. We all run our STRs ourselves for the most part.

In the end, I never know how an arbitrager would do. Most don't have any experience at all and are using my property as a test case.

I could get stuck with a house full of substandard furniture and accessories that I need to deal with. Possible damage that didn't get fixed because the arbitrager wasn't able to make a go and they just walked away.

There are all sorts of possibilities for problems.

Exactly. Don't forget the cost to furnish the house, including linens, kitchen stuff, etc. Some owners don't want to put out tens of thousands more to outfit a high quality STR. As you say, some don't have the time to manage it themselves. And hiring a property manager will cost you 20-40% of your gross. It's not as simple as everyone saying do it yourself. You have to want to, and have the time.

The fact that someone wants to arbitrage your property is a sign that it might be a good STR, but you have to investigate. Airdna, Mashvisor, Awning, Rabbu, and AllTheRooms have calculators to help you estimate what you could make from a particular property. The gross amounts usually include cleaning fees, which you then pay right out to your cleaner, so factor that in when you figure out your net. Remember your costs will be more for an STR, you'll be paying for a lot of things you wouldn't with an LTR - higher STR insurance, all utilities including internet, supplies like toilet paper, paper towels, dishwasher detergent etc, upkeep on furniture and linens if damaged, yard maintenance and grass cutting/snow removal, trash removal, etc.
The other way is called the Enemy Method, where you go to Airbnb and Vrbo, look at your direct competitors, and figure out how full their calendars are, at what prices, keep a tally of their income, and make a guess as to their yearly gross. In a seasonal area, that requires time to look at them over the year.

And yes, you can ask for more from an arbitager. And as I said before, you need to make sure they have and continue to have STR insurance, not just homeowner-type or renter's insurance.

Hey @Justin Brin, nope. I wouldn't arbitrage my place.

I would not let some arbitrage my property because I can do it myself and cut them out :)

Even if you are not interested you could hire a good local manager and still cut them out.