Investment Info:
Condo other investment.
Purchase price: $1,950
Cash invested: $3,000
This is an STR Rental Arbitrage 1x1 unit (~650sf) on an avocado orchard. The unique setting is quite the bonus to keep us above 95% occupancy every month. Listed on AirBnB, VRBO/Expedia, Booking.com, and (just recently) via our own private bookings. We use the cashflow from this unit to support most of the advertising/marketing, supplies, and client meals for my real estate sales business. I've made several improvements (kitchen & bathroom refreshes) to the property *with owner approval* to increase desirability thus increasing how much we can rent it out for. Our location would not be considered a vacation area, but we tend to be a pitstop for folks traveling in and out of LA... normally related to flying out of LAX or headed up to Big Sur. The larger size and lower monthly fee of the space lends itself to being a better option than local hotels. We get around $3600/mo in bookings - the attached image shows lower earnings, but those dips are filled in with VRBO bookings. Costs: Rent @ $2000/mo (utilities included), Cleaning @ $700, Renters Ins. @ $11/mo, and Supplies @ $150/mo. The cashflow is not too shabby for us, would be nice to have all the revenue building us equity on a house hack, but it at least gives us confidence for what is possible in the area. We plan to hold this arbitrage until we replace it with a master bedroom or front room/studio conversion on a house hack. Don't sleep on rental arbitrage - many landlords appreciate the idea of a steward in their property rather than a tenant who may thrash it.
What made you interested in investing in this type of deal?
Low cost of setup and good cashflow
How did you find this deal and how did you negotiate it?
I put together a pitch deck, pitched many landlords, and this one stuck. Luckily I knew this owner through the grapevine so they were more interested in hearing me out. They had listed the rental on Craigslist.
How did you finance this deal?
Cash
How did you add value to the deal?
Light remodel of bathroom and kitchen, painted accent walls, added a gate to make an enclosed patio, and gave the place a general ambiance/brand.
What was the outcome?
Excellent cashflow from the go. Still holding.
Lessons learned? Challenges?
Arbitrage is great due to the low setup costs. There is plenty that is out of your hands as you're not the owner of the property though so this can impact the guest experience out of nowhere sometimes. Clear communication and expectations with the property owner are a must as you are business partners in a way.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Yes - I was the agent on both sides. I guess I'm ok.
