Recently, I was at a real estate summit in Philadelphia, when a guy in a Hawaiian shirt slipped into a nearby row. He had a beer in his hand, though it was only about 10:00 a.m. (if I recall). He looked a bit out of place, honestly, and I couldn’t help but notice that he seemed to be… well, let’s say more relaxed than everyone else.
I struck up a conversation and learned that he travels the world full-time—on his real estate profits. And he said his goal was to work as few hours as possible. He seemed like he was having fun! I just had to probe.
I never would have guessed he was a former banker.
This guy—we’ll call him Martin—had shucked his suit and tie for a suitcase and a straw hat. He had learned the secret of Airbnb arbitrage.
This is Martin:
Martin explained that he is able to locate vacant apartments or other rentable units, furnish them, and make massive profits leasing them out to long-term corporate tenants, with Airbnb filling the gaps. This guy has 19 rentals and works a few hours per week while the cash rolls in. (He did a great job at outsourcing virtually everything.)
I was looking for income for one of my kids and asked how I could learn more. He told me how he had been trained by Al, a guy who was actually speaking at that conference, and he introduced me to him that morning.
Martin said, “When Al first told me years ago that I could make three times the profit on furnished rentals, I thought he was a little out there. When I did it myself over and over, I became a true believer! Probably would have made another $100K and retired a year or two earlier if I would have listened to Al a few years back!”
I attended Al’s talk, and I think it was the most popular session at the conference. As he told how he had stumbled into this opportunity, the room was buzzing. I heard someone lean over to their friend and say, “This is a game changer! It could change my whole real estate investing strategy.”
Al is not only training others to do this. He’s living proof that it works. An engineer by trade, he now refers to himself a landlord scientist, and he’s testing out different variables to see how to make this most profitable.
Al is living the dream himself, with a stable of cash-producing corporate and Airbnb and long-term corporate rentals—with a twist. He has figured out how to maximize the profits in this niche without owning any real estate. He’s learned the secret of Airbnb and corporate rental arbitrage.
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Why This Works
Did you know that 36% of travel nights are by travelers on the road for one to six months? And did you know that Airbnb, only a decade old, hosts more nightly stays and is in more countries than the world’s largest hotel chain—Marriott—which has been around since the 1950s? Check this out:
And that doesn’t even count others like VRBO, Flipkey, HomeAway, or a half-a-dozen others.
This is your chance to get in on this business travel economy!
So, Who Will This Work for?
It’s really quite simple—yet powerful. And it works great if you don’t own any real estate—and equally well if you do. A guy on my team is going through this training program right now, and we are setting up two of our units as furnished rentals this week. If it works well, we plan to do many more.
I know others who are profiting from this strategy with rented units and rented furniture. And very little out of pocket.
This is truly a strategy that I think anyone could use to increase their income and accelerate their ability to bag their J.O.B. and jump into real estate investing full-time.
Even if you don’t want to do this particular strategy forever, I think it could be a bridge for you to get from where you are now to the place where you have income and options. See if you agree.
The High-Level Strategy
The strategy is to lease (or own) a vacant rentable unit in the right location. Then furnish it beautifully, with all the nice touches. Professionally photograph it, turn on all of the utilities, then list it on Airbnb and several similar sites.
Once you’ve got some nights booked, go to the next level. Go out and start marketing to corporate clients who need long-term (say, one to 12 months) corporate stays.
As soon as possible, plug one of the long-term tenants into your unit and halt the short-term stays. If you can find more tenants through that company or individual, you may be able to expand your business into multiple units.
Related: How to Upgrade Your Landlording to Make Your Investment More Passive
Profitability (You Will Love This)
Often a typical unfurnished rental unit cash flows at $100 to $300 per month to the owner. (I realize there are wide variations to this, so don’t shout me down.)
Many units on straight Airbnb may cash flow a net $700 to $1,000 (or even more) per month. But there’s a lot of effort involved with Airbnb. You’ve got to answer prospective tenants’ requests, help them check in, check for damage, help them find the closest grocery that carries semi-boneless ham, get a timely cleaner in, and much more.
That’s why I think a lot of people (especially those with busy lives, jobs, or a desire to travel the world and drink beer at 10:00 a.m.) may like this corporate landlord arbitrage strategy better.
From what Al tells me (and what we’ve learned in his training), the long-term corporate travel clients will typically provide cash flow of just a little lower than an Airbnb strategy. For the sake of argument, let’s say $600 to $800 per month.
But this strategy takes a fraction of the effort. At least once a tenant is secured (which takes more effort than Airbnb, but has no commission attached). And it may therefore be more sustainable and easier to grow. Hang with me, and I’ll tell you how one guy’s business skyrocketed as a result of one sales call.
Here’s some math. This is an example straight from Al.
Guest pays: $1,860
Rent due to owner: – $950
Utilities: – $130
Monthly Profit: $780
What Are the Detailed Steps?
It’s quite simple. (So simple, it just might work!)
First, locate a vacant rental unit. This could be in an apartment complex, or it could be in a duplex or a single-family rental. Ideally, this unit would be in an area where there are business travelers. Look for locations where there are long-term stay hotels like Extended Stay America, Homewood Suites, and Residence Inn by Marriott.
Negotiate your best possible deal on the rental unit. See if you can get a month-to-month lease, and see if they’ll let you delay your first payment ‘til you have a tenant. (Yes, you’ll have to tell them what you’re up to, but that should be fine.)
I have a theory that this may work very well in a new apartment complex that is still far from being leased up. But you’d have to get the owner to give you a discount if it’s a Class A+ building.
Next, furnish the unit as beautifully (but economically) as possible. Think of Joanna Gaines or other home stagers. That’s your goal. (Hey, if Chip and Joanna can renovate a whole house for $40,000, you can furnish it for cheap.) I would expect you to spend about $3,000 furnishing a unit if you buy smart. Or you may even want to rent furniture to lower your risk even more.
Then get professional photos. Don’t skimp on this step. No, you cannot do first-class photos from your phone, not even in portrait mode on the iPhone X. Professional photos will help you stand above the crowd.
Similarly, spend a lot of time reviewing the best Airbnb descriptions, and if needed, consider getting a copywriter to help write yours. Great writers can be worth their weight in gold.
Turn on the utilities. Get great wifi, cable, and more. Get your listing on Airbnb and start renting it out short-term.
Last step (or you could do it first actually): Once you’re up and running, start tracking down corporate tenants. You can do this on Facebook groups, Craigslist, at local companies, hospitals, or even by hanging around other extended stay hotels.
Engineers, nurses, therapists, visiting professors, and construction people may be great tenants. And once you locate one, you may be able to follow the bread crumbs back to their company.
My new friend, Al, has dozens of strategies to market your unit to longer-term tenants, and it’s beyond the scope of this article. (Al has developed a whole lot of strategies, policies, and shortcuts for this business. He even provides labels for the silverware drawers in your units. That’s why we’re working with him rather than going it alone.)
Once you have your units rented by long-term tenants, you will probably only need to plug Airbnb tenants in the gaps between one tenant and the next to maintain your revenue.
More Real-Life Examples
Since meeting Martin, I’ve heard about others who are killing it with this strategy.
Like an Oklahoma pastor who was tired of his family being limited to his less-than-amazing salary. He started following these steps and ended up as a preferred housing provider for the Oklahoma City Dodgers Minor League Baseball team.
Related: 5 Ways to Earn Rave Reviews on Airbnb (& Maximize Your Income!)
Or the guy in the sticks who loved this strategy but was sure he’d have to move to a bigger city to make this work. He finally got the courage to go to the local airport to offer his furnished unit as housing for people coming there for training.
He was surprised when the airport manager followed him back to his unit, signed a six-month agreement—then asked for 60 more units.
That was a pretty good day for this guy, but of course he now had a new problem. I’d take that new problem. Do the math.
I don’t know that this will happen to any of you, but how could you boost your income by doing this with five or 10 units? How would that impact your life and future, even if you don’t want to do this forever?
You may even find yourself in a position to acquire more units—small apartments, duplexes, or single family rentals. Or you may be a large apartment owner (like my company) who uses this strategy to fill a handful of vacant units. There are many wonderful possibilities.
One guy in California has 11 units (combo of leased and owned) that he’s leasing out under an arrangement like this. His current positive cash flow is $7,160 per month.
So far, he’s been reinvesting his cash to buy more furnishings and rent more units. But he told me that when he hits $10,000 per month, he’s going to stop there and enjoy the fruits of his labor. He hopes to get there by the end of this year.
And for those of you who know my story, you may recall that my business partner and I built a whole complex to provide furnished corporate housing to oil workers in the Bakken region of North Dakota. We decked out the rooms, gave them great cable and internet, and charged them $3,995 per month. (This was based on a hotel daily rate of $129, a steal in those oil rush days.)
We made bank, I can promise. We took an inordinate amount of risk to pull this off, and I honestly wouldn’t do it again. But it is a strategy to consider if you are in an area with higher demand than supply and you don’t mind some risk.
The great news is you don’t have to take much risk at all to pull this off. This is very doable. And you don’t have to travel the world or drink beer for breakfast (necessarily) to pull it off. You can do it in your pajamas from the comfort of your own home.
Which sounds like a great business to me.
What about you? Would you rather go for the easiest path of unfurnished rentals? The highest effort/profit path of Airbnb? Or the Goldilocks scenario with long-term corporate with Airbnb in your gaps?
We’d love to hear your thoughts.