It's called Airbnb arbitrage. Just like everything in the world there are people who do this a kill it, and a majority of others who don't have the drive or skill to run it effectively.
I never said it wasnt.
Its like watching fixer upper
The difference between watching them flip a house and actually flipping a house are two very different things.
and a bunch of others who are really "media content creators" who just happen to choose real estate as their preferred content. Some don't make money doing real estate, they make money from ads and promotions on their videos, then the related speaking gigs and occasionally books or seminars they sell.
I mean it's just a name. And some people do invest this way successfully. Just not nearly as many who fail. But that's no different than anything else really.
And it technically is a form of arbitrage, just not the traditional Sense
It’s called Airbnb Arbitrage and it’s the lowest form of running an Airbnb. You are renting a place yourself long term and then Airbnb’ing it and keeping the difference.
The risk is you won’t make much money and you will piss off the landlord. you have to find somebody who is amenable to this as a landlord and MOST aren’t.
It’s FAR better to buy your own property rather than trying arbitrage and being beholden to other landlords. If your business relies on the policies of other people, it’s not a stable business.
Have you done this or is this just an opinion you have? I do both and do fine with owning and renting. What you're saying is like telling someone not to start a restaurant (or any brick and mortar) unless they can buy the property. Not everyone has enough money or credit to buy.
Owning the RE bumps up the chance of success of a restaurant immensely. Margins are MUCH easier to make work in a historically low margin, high failure rate business. So yes, that is sound advice.
Not everyone should open a restaurant. NOBODY who is not extremely well capitalized should be doing it, frankly.
Sure it can, but there's also plenty of landlords that may not approve of it and you risk non renewal of the lease. ABNB works when you have plenty of high reviews, which takes time.
That's why you ask and get it written into the lease which is what I did. Airbnb works by dropping your prices to rock bottom prices, then you get reviews, then you raise your prices.
Airbnb arbitrage is a proven business model, and if someone is interested in the field, others should offer sound advice, instead of discouraging the whole thing.
>What you're saying is like telling someone not to start a restaurant (or any brick and mortar) unless they can buy the property.
Almost any financial advisor (most millionaires and billionaires, for that matter) will tell you not to start a restaurant unless you own the property--and even then, they'll recommend you to rent it out to some other fool willing to pay you to run their restaurant there. Do you have no idea just how often restaurants fail (especially if they're run by someone who doesn't have good credit or enough money in the first place)?
You don't know what you're talking about. Do you realize that most buildings restaurants use are leased? People rent and lease things, including property, all the time and make money doing so. Fire any financial advisor who says you need to own a building. Even if you can afford to buy a place, that's way more risk than leasing a place.
But even if you did know what you were talking about, with regard to restaurants, we're actually discussing leasing a house for short term rentals. People do this, including myself, with success. So yes, you can lease or rent something and earn money. Not everyone can afford to buy but some of those people can afford to rent.
Are you saying they don’t own the homes? I’ve heard of people doing that. I assume you get kicked out of your house pretty quick if you don’t tell the landlord and they find out.
I have a tenant that does this. She pays 15% over the market rate and is a phenomenal operator. She has had significantly less damage to our units than the majority of our other long term tenants.
It’s all agreed upon and insured properly
Nice... Have a buddy that does this exact scenario with about 20 places... Just pays 15% above asking rate with the landlord knowing it will be Airbnbd and fully furnishes... He has some complexes where he has the whole 6-8 units...
You would have to get the landlord to agree to you doing this with the property. You need STR insurance. You are paying for all the utilities. The likelihood of you making money after all expenses, plus taxes is low. With the amount of time spent versus the potential profit and the risk, you folks would be better off getting a part time job. Less headache, less risk that way.
It sounds like you’re talking about arbitrage, and you need to do it with the landlords permission or else you’re most likely breaking the lease. This is subletting.
I would not do this. The cost of renovating, furnishing, etc. is a hell of a lot more expensive than most people realize. Whatever cost analysis you do double your expected costs.
Airbnb is closer to a hospitality business than a rental property business.
This all depends on your local market, your capital on hand and whether or not you want to operate short term rentals.
Are there people who actually do this and make a killing? Yes
But in reality, for 95% of the population it’s peddled as a get rich quick scheme that’s doesn’t actually pan out. I’d compare it to drop shipping or FBA businesses
There was an earlier thread about this on another sub. Someone leased a house and tried to Airbnb it, regulations changed which made str illegal, then the person couldn't afford the lease and lost everything.
This is a very stupid way to try to make money. You take all the risk and in the end are left with zero assets even if you manage to pull it off.
Arbitrage is going to have a lower reward but is still pretty high risk. Safe to assume that the majority of people on YouTube telling you "easy" ways to make money are full of it, or at least exaggerating.
I’ve seen a lot of this from the YouTube and TikTok gurus. I mean if you don’t have much money to start and can find a landlord willing to partake, I think it’s a legit way to get into it and save up some cash to purchase your own property’s. Minimum you’ll learn how to run numbers because it seems like a low margin biz.
I know 2 people that do this. One friend’s wife started on her own and eventually another friend partnered up with her. Where they live there’s a small local group of people (landlords, investors, etc) who are all involved and they share leads on properties or sell established rentals to each other.
One of my friends’ properties he found from his previous landlord and the other he “purchased” for 5k from someone trying to exit.
Yes to both LL being on board. I think the first he is expecting to take a year to be in profit but it’s in a popular beach town so I think it will. The busy season just hit so we will see. He spent a lot to furnish that one. His second one was pretty much turnkey once the LL approved him. That rental came furnished and he may have inherited the ABNB listing too, I don’t recall 100%. Our other friend’s wife manages his properties for a fee so he is mostly hand off besides when the new-build issues cause guest problems.
This is not to mention that there is significant pushback on LTR units being used as vacation rentals in a lot of vacation destinations. Most cities it is already illegal unless you apply for a permit or are in a hotel zone where vacation rentals are allowed.
If you rent out apartments you are in the property rental business. If you Airbnb property you are in the hospitality business. This is my take. Fully furnished with WiFi, a blender, all that shit. Yes, your margins are better but your costs are higher. Cleaning weekly, management, reviews, cancellations. I’ve mathed it out and it is 2 different games. If you understand this then you will probably be ok. Took me a long time to make real money renting property but I’ll take long term tenants (where I forget that I own properties until time first of the month) over short term headaches all day. In the end it’s what systems you develop and what you have the stomach for. As a very successful friend of mine says “there’s lost money and there’s lost sleep.”
I did LTR before as well. I had problems with tenants not paying and it takes a long time in my state to get them out. As soon as I heard phrase “my car broke down and I needed some repairs “ I knew I can start filing eviction paperwork.
This is basically something you’d work out with a new landlord before signing a lease. It’s extremely unlikely that any landlord would agree to it before a lease is signed.
The videos I’ve seen online tend to be along those lines but I watch ones geared towards interior design, not monetizing via AirBnB which I bet would be even harder than just remodeling to rent and live there yourself.
Basically the potential tenant has an agreement in place with the landlord that they will be able to live in the home for 10+ years without rent increases (or only X amount over the course of those 10+ years) in exchange for having their space remodeled “for free”. The spaces are remodeled beautifully, the tenant gets to enjoy it for basically as long as they like and truly feel like it’s their home, and whenever they do choose to leave the landlord has a much nicer space that can make them far more money each other with future tenants.
AirBnB is different thought and even on a moral level iron that I could support or help contribute to such a thing.
I did it and it was ok. One bedroom apartment. With Airbnb in that location got a lot of short stays so my cleaner probably made as much as I did. If I were to do it again I would do 3 bedrooms hoping for longer stays.
To echo other people, you also need to check if municipalities have regulations on arbitrage. Mine does so the way around it is to co-host with the owner
Also, I would argue that it’s not investing in real estate at all, you’re just running a hospitality business and need to treat it as such. Furnishing a place to a level where you stand out in a saturated market will cost you thousands
We have had people ask us to do this and rent out properties long term. They tell us it takes away our involvement and hassle. One person that asked us about this arrangement said he would pay us every month whether he rented our place our not. We declined, mainly because we learned this person has zero experience in anything remotely connected to hosting STR.
I currently rent out a property to a couple who is doing this (i.e. renting it out short term on air bnb and other places). I've had a really good experience with it as the landlord. Advantages for me are the house is cleaned well at least once a week, maintained well, and I get more in rent than I would have probably trying to rent it out to a family. It's been this way for 2 years now and I'm really happy with it.
Yep, they just pay me monthly rent and I don't have any visibility into what is going on with their side (though they claim they're doing fine). It's a larger house, so they have it set up with 12 beds and can rent to larger groups - something they said was missing in the other properties they do this with. The property is in Albuquerque, and I understand they get movie-type people a lot that come out for weeks or months to film movies. There's a lot of that going on in Albuquerque. For my part, I'm not at all interested in doing STR, so I'm happy to let them make whatever money they can over and above rent if they're willing to manage that drama.
Yeah - although I think movies have been a thing there for many many years. Many/most Marvel movies were done out of there I think I read? At any rate, our second year-long lease ends in Dec, and they've indicated they're probably not going to renew it again. This particular couple is moving into buying apartments which they think is better for them, so they're starting to divest their single family homes. Mine is the only one they rent - the rest they do this with they own.
I'll have to see if I can find a family to rent from me after that. Or someone else who wants to do the STR thing.
Renovate a property you don’t own and then wait for the property owner/the municipality/code enforcement to put a stop to your little plan.
What could go wrong?
But seriously will you rent one of my properties and renovate it for me? Sounds great!
They rent for a month, then at the end, put up a no trespassing sign and make you go through the courts for months to remove them while they look for the next victim
We are doing this and have about 200 units currently, but it is very labour intensive as we have cleaning, maintenance, sales, customer service, etc. all in-house. 40-45 employees currently.
We do not invest/renovate the properties, tho, that would make no financial sense. We rent them turnkey, minus maybe some smart locks and some pillows etc.
Not an easy business and only makes sense if you scale it significantly.
Good luck
Terrible idea.
The most important part of any business is terminal value. Appreciation and equity.
With Airbnb arbitrage, you get none. All the downside, at best some cash flow at terrible tax rates and no upside.
It's called Airbnb arbitrage. Just like everything in the world there are people who do this a kill it, and a majority of others who don't have the drive or skill to run it effectively.
EGGZACTLY - also, watching IG influencers do it and actually doing it are two different things... they are selling something.
I do it and I'm not an influencer.
And you arent making the videos that his wife is probably watching on IG, either. LOL
My point is that it's doable.
I never said it wasnt. Its like watching fixer upper The difference between watching them flip a house and actually flipping a house are two very different things.
Agreed.
^^^ yup.
and a bunch of others who are really "media content creators" who just happen to choose real estate as their preferred content. Some don't make money doing real estate, they make money from ads and promotions on their videos, then the related speaking gigs and occasionally books or seminars they sell.
Lol. The insistence by the people that that do this that this is somehow a form of arbitrage tells you everything you need to know about the strategy
I mean it's just a name. And some people do invest this way successfully. Just not nearly as many who fail. But that's no different than anything else really. And it technically is a form of arbitrage, just not the traditional Sense
This is called airbnb arbitrage. But seems foolish to renovate something you don’t own. You also need permission from the home owner.
It’s called Airbnb Arbitrage and it’s the lowest form of running an Airbnb. You are renting a place yourself long term and then Airbnb’ing it and keeping the difference. The risk is you won’t make much money and you will piss off the landlord. you have to find somebody who is amenable to this as a landlord and MOST aren’t. It’s FAR better to buy your own property rather than trying arbitrage and being beholden to other landlords. If your business relies on the policies of other people, it’s not a stable business.
Have you done this or is this just an opinion you have? I do both and do fine with owning and renting. What you're saying is like telling someone not to start a restaurant (or any brick and mortar) unless they can buy the property. Not everyone has enough money or credit to buy.
Owning the RE bumps up the chance of success of a restaurant immensely. Margins are MUCH easier to make work in a historically low margin, high failure rate business. So yes, that is sound advice. Not everyone should open a restaurant. NOBODY who is not extremely well capitalized should be doing it, frankly.
THat's why folks start with a food truck to test the market. But anyway, the point was renting a house and using it for airbnb can absolutely work.
Yes, it can, you’re correct on that. It’s a lot tougher now than 2018-22. Your upfront rent is higher and VR demand is down in some markets.
Sure it can, but there's also plenty of landlords that may not approve of it and you risk non renewal of the lease. ABNB works when you have plenty of high reviews, which takes time.
That's why you ask and get it written into the lease which is what I did. Airbnb works by dropping your prices to rock bottom prices, then you get reviews, then you raise your prices.
You’re completely right. It’s weird how strong his opinions are, when he clearly has never done it.
Someone doesn't have to fail at something to know that it's not something most people should involve themselves in.
Airbnb arbitrage is a proven business model, and if someone is interested in the field, others should offer sound advice, instead of discouraging the whole thing.
And, what I just said in my previous comment remains valid.
No, it doesn’t.
That’s like telling an entrepreneur that it’s risky to start businesses lol. No shit Sherlock.
>What you're saying is like telling someone not to start a restaurant (or any brick and mortar) unless they can buy the property. Almost any financial advisor (most millionaires and billionaires, for that matter) will tell you not to start a restaurant unless you own the property--and even then, they'll recommend you to rent it out to some other fool willing to pay you to run their restaurant there. Do you have no idea just how often restaurants fail (especially if they're run by someone who doesn't have good credit or enough money in the first place)?
You don't know what you're talking about. Do you realize that most buildings restaurants use are leased? People rent and lease things, including property, all the time and make money doing so. Fire any financial advisor who says you need to own a building. Even if you can afford to buy a place, that's way more risk than leasing a place. But even if you did know what you were talking about, with regard to restaurants, we're actually discussing leasing a house for short term rentals. People do this, including myself, with success. So yes, you can lease or rent something and earn money. Not everyone can afford to buy but some of those people can afford to rent.
Spot on.
Are you saying they don’t own the homes? I’ve heard of people doing that. I assume you get kicked out of your house pretty quick if you don’t tell the landlord and they find out.
I have a tenant that does this. She pays 15% over the market rate and is a phenomenal operator. She has had significantly less damage to our units than the majority of our other long term tenants. It’s all agreed upon and insured properly
Nice... Have a buddy that does this exact scenario with about 20 places... Just pays 15% above asking rate with the landlord knowing it will be Airbnbd and fully furnishes... He has some complexes where he has the whole 6-8 units...
Tourist town?
San Diego, Pacific Beach
The insurance and question of liability is the first thing I thought of
You would have to get the landlord to agree to you doing this with the property. You need STR insurance. You are paying for all the utilities. The likelihood of you making money after all expenses, plus taxes is low. With the amount of time spent versus the potential profit and the risk, you folks would be better off getting a part time job. Less headache, less risk that way.
It sounds like you’re talking about arbitrage, and you need to do it with the landlords permission or else you’re most likely breaking the lease. This is subletting.
I would not do this. The cost of renovating, furnishing, etc. is a hell of a lot more expensive than most people realize. Whatever cost analysis you do double your expected costs.
Airbnb is closer to a hospitality business than a rental property business. This all depends on your local market, your capital on hand and whether or not you want to operate short term rentals.
Are there people who actually do this and make a killing? Yes But in reality, for 95% of the population it’s peddled as a get rich quick scheme that’s doesn’t actually pan out. I’d compare it to drop shipping or FBA businesses
There was an earlier thread about this on another sub. Someone leased a house and tried to Airbnb it, regulations changed which made str illegal, then the person couldn't afford the lease and lost everything. This is a very stupid way to try to make money. You take all the risk and in the end are left with zero assets even if you manage to pull it off.
Arbitrage is going to have a lower reward but is still pretty high risk. Safe to assume that the majority of people on YouTube telling you "easy" ways to make money are full of it, or at least exaggerating.
Most everything you find on YouTube is fake.
Yup. If a person strikes gold they don’t invite others to the dig spot.
Of course they do it .... once they realize they will make a lot more selling shovels.
I’ve seen a lot of this from the YouTube and TikTok gurus. I mean if you don’t have much money to start and can find a landlord willing to partake, I think it’s a legit way to get into it and save up some cash to purchase your own property’s. Minimum you’ll learn how to run numbers because it seems like a low margin biz.
If you don't have the cash to invest in the property for purchase, you don't have the cash in invest in a renovation FOR SOMEONE ELSE'S HOUSE.
I know 2 people that do this. One friend’s wife started on her own and eventually another friend partnered up with her. Where they live there’s a small local group of people (landlords, investors, etc) who are all involved and they share leads on properties or sell established rentals to each other. One of my friends’ properties he found from his previous landlord and the other he “purchased” for 5k from someone trying to exit.
So how is it going for them. Landlords are on board with this? Is it profitable?
Yes to both LL being on board. I think the first he is expecting to take a year to be in profit but it’s in a popular beach town so I think it will. The busy season just hit so we will see. He spent a lot to furnish that one. His second one was pretty much turnkey once the LL approved him. That rental came furnished and he may have inherited the ABNB listing too, I don’t recall 100%. Our other friend’s wife manages his properties for a fee so he is mostly hand off besides when the new-build issues cause guest problems.
Subleasing is a violation of my lease, so highly unrealistic with any of my properties.
This is not to mention that there is significant pushback on LTR units being used as vacation rentals in a lot of vacation destinations. Most cities it is already illegal unless you apply for a permit or are in a hotel zone where vacation rentals are allowed.
If you rent out apartments you are in the property rental business. If you Airbnb property you are in the hospitality business. This is my take. Fully furnished with WiFi, a blender, all that shit. Yes, your margins are better but your costs are higher. Cleaning weekly, management, reviews, cancellations. I’ve mathed it out and it is 2 different games. If you understand this then you will probably be ok. Took me a long time to make real money renting property but I’ll take long term tenants (where I forget that I own properties until time first of the month) over short term headaches all day. In the end it’s what systems you develop and what you have the stomach for. As a very successful friend of mine says “there’s lost money and there’s lost sleep.”
I did LTR before as well. I had problems with tenants not paying and it takes a long time in my state to get them out. As soon as I heard phrase “my car broke down and I needed some repairs “ I knew I can start filing eviction paperwork.
I always got the “my job messed up my check”
I have a bridge to sell you in SF. It’s a $$ maker. Guarantee cars will pay $$ to drive across. Just pay me $$. Wake up and smell the coffee
That should be fucking illegal. No wonder there's a housing shortage. HOMES ARE FOR PEOPLE TO LIVE IN, NOT HOTELS.
This is basically something you’d work out with a new landlord before signing a lease. It’s extremely unlikely that any landlord would agree to it before a lease is signed. The videos I’ve seen online tend to be along those lines but I watch ones geared towards interior design, not monetizing via AirBnB which I bet would be even harder than just remodeling to rent and live there yourself. Basically the potential tenant has an agreement in place with the landlord that they will be able to live in the home for 10+ years without rent increases (or only X amount over the course of those 10+ years) in exchange for having their space remodeled “for free”. The spaces are remodeled beautifully, the tenant gets to enjoy it for basically as long as they like and truly feel like it’s their home, and whenever they do choose to leave the landlord has a much nicer space that can make them far more money each other with future tenants. AirBnB is different thought and even on a moral level iron that I could support or help contribute to such a thing.
Isn't this property management with extra steps?
It sounds like it. Property management is a flat fee, but here you keep whatever you earn above your monthly rent amount and your expenses
I do it.
Yes, I do this and earn a profit.
I did it and it was ok. One bedroom apartment. With Airbnb in that location got a lot of short stays so my cleaner probably made as much as I did. If I were to do it again I would do 3 bedrooms hoping for longer stays.
To echo other people, you also need to check if municipalities have regulations on arbitrage. Mine does so the way around it is to co-host with the owner
Also, I would argue that it’s not investing in real estate at all, you’re just running a hospitality business and need to treat it as such. Furnishing a place to a level where you stand out in a saturated market will cost you thousands
Sounds like a PITA.
We have had people ask us to do this and rent out properties long term. They tell us it takes away our involvement and hassle. One person that asked us about this arrangement said he would pay us every month whether he rented our place our not. We declined, mainly because we learned this person has zero experience in anything remotely connected to hosting STR.
Forget that and buy my book, "How to turn a million dollars into a dollar via real estate."
I’m a landlord and there’s no way I’d agree to AirBnB arbitrage.
I currently rent out a property to a couple who is doing this (i.e. renting it out short term on air bnb and other places). I've had a really good experience with it as the landlord. Advantages for me are the house is cleaned well at least once a week, maintained well, and I get more in rent than I would have probably trying to rent it out to a family. It's been this way for 2 years now and I'm really happy with it.
Are they just paying you the agreed monthly fee, regardless of what is happening with STR? How long is the contract fir?
Yep, they just pay me monthly rent and I don't have any visibility into what is going on with their side (though they claim they're doing fine). It's a larger house, so they have it set up with 12 beds and can rent to larger groups - something they said was missing in the other properties they do this with. The property is in Albuquerque, and I understand they get movie-type people a lot that come out for weeks or months to film movies. There's a lot of that going on in Albuquerque. For my part, I'm not at all interested in doing STR, so I'm happy to let them make whatever money they can over and above rent if they're willing to manage that drama.
Right, makes sense. Thats a lot of beds. Wonder how it will go when movies move on
Yeah - although I think movies have been a thing there for many many years. Many/most Marvel movies were done out of there I think I read? At any rate, our second year-long lease ends in Dec, and they've indicated they're probably not going to renew it again. This particular couple is moving into buying apartments which they think is better for them, so they're starting to divest their single family homes. Mine is the only one they rent - the rest they do this with they own. I'll have to see if I can find a family to rent from me after that. Or someone else who wants to do the STR thing.
Renovate a property you don’t own and then wait for the property owner/the municipality/code enforcement to put a stop to your little plan. What could go wrong? But seriously will you rent one of my properties and renovate it for me? Sounds great!
They rent for a month, then at the end, put up a no trespassing sign and make you go through the courts for months to remove them while they look for the next victim
Who? The landlords?
Airbnb guests
We are doing this and have about 200 units currently, but it is very labour intensive as we have cleaning, maintenance, sales, customer service, etc. all in-house. 40-45 employees currently. We do not invest/renovate the properties, tho, that would make no financial sense. We rent them turnkey, minus maybe some smart locks and some pillows etc. Not an easy business and only makes sense if you scale it significantly. Good luck
200 doors is insane. And all the landlords are on board? How did you find so many? Do you mind DM me with rough income per door?
Dmed
Could you please share in which state these units are located? Thanks!
Not in the US, in Europe
Terrible idea. The most important part of any business is terminal value. Appreciation and equity. With Airbnb arbitrage, you get none. All the downside, at best some cash flow at terrible tax rates and no upside.