It involves investing in strong growth markets, diversifying, and buying distressed properties.

Ultimately, STRs are like running a business and to be successful you want to distance yourself from the competition.  

Quote from @Sara Fuhs: Please give me your best advice for STR setup from a distance.

Like most things in real estate, a lot depends on the circumstances of the individuals involved and not just the numbers and figures.I hope this helps explain my thoughts, and I apologize for the lack of clarity when I defined "arbitrage".

Being deeply involved in the local real estate market, I stay connected with wholesalers, realtors, and local investors who often share opportunities.

There is a Fund of Funds involved.  

Here's some background: Data warehouses need the following: 20-50 megawatts of power, land (3, 9000+ square foot facilities within arms distance of each other), water and fiber optics. 1.

The borrowers could be paying their mortgage to scottsdale or scottsdale most likely sold the loans - when you invest in a syndication you have rights to manage the specific assets unless he gets a court order which there are also many other investors involved. 

Did you ever have to get a lawyer involved or did it not go that far?

The full circle of this would be paying vendors, employees, taxes, accepting payment all in crypto/facebook/bitcoin/form perhaps and without an actual bank involved.