Is rental arbitrage a good bet?

Question

Hi BP community,

One of my tenant is living on property for more than a couple of years and never had the rent review. Recently I proposed rent increase (below market in good faith and relationship) to which he proposed if he can do rental arbitrage for certain time of the year he would be fine with the rent increase.

If any of you have experience with this, please share thoughts.

Thanks in advance

Ian Halter · Answer

I will agree with @Nathan Gesner. Short answer to this question is no to rental arbitrage.

While I do not have experience with allowing renters to do this, nor have done it myself, I have rented a place where with someone who did this. It won't work to the extent you want it to. Rental arbitrage seems like a slippery slope (from a landlord's perspective) and furthermore, since you own the property you should dictate the terms.

It's not to say that it can't be done, and can't be done well, simply that it likely is not worth your time and money.

Nathan Gesner · Answer

Your tenant is asking to use your property to produce an income so he can afford the rent and stay. If you allow this, you lose control over who lives in the rental and you allow the Tenant to produce income with your property. That's a hard "No" for me.

If he can't afford the rent on his own, you should move him out at the end of the lease, clean the place up, and rent it at market rate to someone that can afford it and appreciate it.

Jay Malaviya · Answer

Appreciate it, Nathan! That's what my first thought was. Although, they have been living there for a while (on the same rent) without any issues in terms of rent payments so wanted to get a second opinion. The biggest thing I'm afraid of is the liability if something happens.

Jay Malaviya · Answer

Great point! The timeliness of rent payments hasn't been an issue in the past. It's just liability I'm afraid of. If something major happens, I won't have visibility on anything.

Eliott Elias · Answer

What happens when your tenant can not make enough to keep up with your payments? Where does that leave you? If you're going to allow this, your tenant should have a arbitrage track record.

Is rental arbitrage a good bet?

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