Quote from @Jasper Cabiao:
Quote from @Zane Cress:
Quote from @Jasper Cabiao:
Quote from @Zane Cress:
I currently have 3 MTR via arbitrage to complement the cash flow of my 8 unit portfolio. I don't get the tax advantages and I don't build equity but it does have benefits, mainly cashflow and testing the expansion potential of the business model in my area without having to commit too much up front cash. Also with my local prices the rent is cheaper than what my mortgage would be on anything else I could by right now. So if you can make the numbers work and then I say get started somewhere.
What are the terms are in your lease contract between the owner and yourself? I am also looking to get into arbitrage, but would like to know what terms I should include in the contract. Or if you can point me in the right direction where I can learn more about it is very much appreciated.
I use their standard lease agreement I just make sure the option to sub lease is in the contract and they know what I plan to do with the property. The master lease makes you responsible for the whole place and then allows you to sub lease at your discretion. Also put in there that you will be operating the unit for a profit and will not profit share with the owner of the property. Then you can Airbnb out of it or run MTR. If you are using your own leases for 1+ month contracts just make sure they are up to state standards and legal.
Thanks, Zane. I appreciate the reply. How do you handle repairs/ maintenance of the property? What are the limitations of the subleaser's responsibility in the master lease? For example a toilet clogging isn't something I'd trouble the owner about, but what about a burst pipe?
Major repairs would traditionally fall to the landlord, just like a long term lease would state. It is your job to maintain the property and do regular upkeep but a burst pipe or a tree falling through the roof would not be your fault or responsibility. But the landlord could drag their feet fixing something which would negatively affect your tenants. If the fridge dies and they won't get you a new one for 3-4 weeks then it might be your job to go get a fridge from the store or off facebook and get it installed right away.
I handle all repairs myself but a burst pipe would be something that an owner would handle in my opinion, unless you were supposed to drip the water during a freeze and did not. Then I would imagine the owner puts it on the tenant because they are the reason that pipe busted. But you can pass all of your responsibility on to that sublease if you want. But typically in these cases it should be your responsibility since this is your business and your tenants are there for a short period and they are using MTR because they don't want to deal with any of that responsibility while they work/travel/etc.
So picking a newer property in decent shape with newer appliances might be a big part of your search. Older property might leave you with more problems.
