New Property Manager Looking for Advice

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New Property Manager Looking for Advice

Jordan Brooks
Property Manager · Orange County, CA · Member since 2020 · 10 posts · 3 votes

I am completely new to real-estate, but have been thinking about doing short-term rentals through Airbnb for quite some time now. I've done quite a bit of research/market research and have a decent amount of capital saved up at this point so Im ready to try my hand at it now. My target market is in the Orange County area around Huntington Beach. 

Ive done a lot of research already, but just looking for some advice or info directly from someone with hands-on experience in the field. Any suggestions or recommendations would be greatly appreciated. 

One question I do have is: how much cash is a good amount to have starting out w/ 1 property and planning to expand to 3 by the end of 2021? Btw I am looking to rent these properties w/ an arbitrage agreement w/ the landlord. I dont own any properties of my own... Yet.

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Kyle Keller
Realtor · Honolulu, HI · Member since 2018 · 255 posts · 118 votes
5y

@Jordan Brooks

That makes sense, sounds like a good idea in theory.

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  • Marc Winter
    Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 3k+ votes
    5y

    @Jordan Brooks, you do understand that arbitrage, like leverage, is a two-edged sword?  It all works great in theory, but remember, you are on the hook whether you rent as a profitable air BnB or it stays vacant and you have no income.  

    Another lockdown, anyone?

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  • Kyle Keller
    Realtor · Honolulu, HI · Member since 2018 · 255 posts · 118 votes
    5y

    @Jordan Brooks

    Is an arbitrage agreement with a landlord a rent to own situation? I'm unfamiliar with the term arbitrage.

    As for the amount of capital saved for the three properties, I wouldn't worry about having the capitol ready for three before you have one. You need to get the first one before you get the second one, so be on the lookout for good deals now and just get started.

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  • Jordan Brooks
    OP
    Property Manager · Orange County, CA · Member since 2020 · 10 posts · 3 votes
    5y
    Originally posted by @Marc Winter:

    @Jordan Brooks, you do understand that arbitrage, like leverage, is a two-edged sword?  It all works great in theory, but remember, you are on the hook whether you rent as a profitable air BnB or it stays vacant and you have no income.  

    Another lockdown, anyone?

    Yes. I am aware of that risk, but there is always a similar risk in almost any business. That is why I am doing extensive market research in my target area before I jump into anything.

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  • Jordan Brooks
    OP
    Property Manager · Orange County, CA · Member since 2020 · 10 posts · 3 votes
    5y
    Originally posted by @Kyle Keller:

    @Jordan Brooks

    Is an arbitrage agreement with a landlord a rent to own situation? I'm unfamiliar with the term arbitrage.

    As for the amount of capital saved for the three properties, I wouldn't worry about having the capitol ready for three before you have one. You need to get the first one before you get the second one, so be on the lookout for good deals now and just get started.

    An arbitrage agreement in this situation is basically an agreement that says I may rent the property from the landlord for the purpose of renting it out as an Airbnb. It is not necessarily a rent-to-own agreement, but that could be an option. 

    I only ask about 3 properties because I know that I may not be substantially profitable from 1 property alone so just wondering what a good starting point is with my plans to scale up.

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  • Kyle Keller
    Realtor · Honolulu, HI · Member since 2018 · 255 posts · 118 votes
    5y

    @Jordan Brooks

    Oh, interesting, I've never heard of doing that before. My initial thought on that would be, if you have the money to buy something, wouldn't you want the equity gain, appreciation, tax breaks, and cash flow that come from a purchase?

    For the money with doing something like that, I would think you would want enough to cover a couple months rent in case you can't rent it out for the first bit, otherwise the cash flow should cover any expenses you have and then some.

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  • Jordan Brooks
    OP
    Property Manager · Orange County, CA · Member since 2020 · 10 posts · 3 votes
    5y
    Originally posted by @Kyle Keller:

    @Jordan Brooks

    Oh, interesting, I've never heard of doing that before. My initial thought on that would be, if you have the money to buy something, wouldn't you want the equity gain, appreciation, tax breaks, and cash flow that come from a purchase?

    For the money with doing something like that, I would think you would want enough to cover a couple months rent in case you can't rent it out for the first bit, otherwise the cash flow should cover any expenses you have and then some.

    I only have about $50k so not enough to buy anything outright or I definitely would. I could put a down payment on something, but then I figure Id be stuck with a single property whereas if I simply rent I could do multiple and exponentially increase my profits with each one. 

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  • Kyle Keller
    Realtor · Honolulu, HI · Member since 2018 · 255 posts · 118 votes
    5y

    @Jordan Brooks

    That makes sense, sounds like a good idea in theory.

    1Reply
  • Account Closed
    Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
    5y

    Whats the spread between long term lease and expected short term net profit? Whats the breakeven occupancy? You will have to furnish and equip the place so that would be the upfront cost. If I was the property owner Id rather rent to a regular tenant. Whats the upside for me to let you do this? Unless you are willing to pay significantly more than market. And then there's HOA and city regulations etc. The owner still bears liability for all this as well as general liability. Doesn't seem like a good idea from the owners POV.

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y

    I understand why people try arbitrage, just like I understand why people attend a 3-day Kiyosaki seminar. I think the odds of you finding success through either one is highly unlikely. You can't typically build wealth with other people's property.

    If you want to learn about short-term rental, you should head over to that specific forum. You'll find plenty of people with short-term experience, specifically arbitrage. Click below for the forum.

    https://www.biggerpockets.com/...

    The DIY Landlord Book4.7247 Reviews
    WebsiteView Page
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  • Robert Herrera
    Investor · Denver, CO · Member since 2015 · 492 posts · 267 votes
    5y

    @Jordan Brooks I would watch AirBnB Automated I n YouTube. It’s a great resource for what you’re looking at doing. He does this on a massive scale

    1Reply
  • Jordan Brooks
    OP
    Property Manager · Orange County, CA · Member since 2020 · 10 posts · 3 votes
    5y
    Originally posted by @Account Closed:

    Whats the spread between long term lease and expected short term net profit? Whats the breakeven occupancy? You will have to furnish and equip the place so that would be the upfront cost. If I was the property owner Id rather rent to a regular tenant. Whats the upside for me to let you do this? Unless you are willing to pay significantly more than market. And then there's HOA and city regulations etc. The owner still bears liability for all this as well as general liability. Doesn't seem like a good idea from the owners POV.

    Breakeven occupancy is 50%. Average occupancy for the area & type of home Im looking at is 69%. Yes, furnishing would be upfront cost unless I rented a place that is pre-furnished. Upside to property owner is that Airbnb offers 1,000,000 liability coverage so it would actually decrease the owners liability. If necessary I may purchase additional insurance. Also, it is in my best interest to keep the owners property in peak condition as well as maintain a business relationship w/ them long-term VS a regular tenant who may move after a year. I could also pay them an additional premium of 10-20% of profits. At least at first until my LLC has an established reputation & portfolio. As far as city regulations there are none that are hindering in the area Im looking at & I would look into HOA and not rent anywhere that has regulations that would be detrimental to my business plan. Of course regulations can always change so there is that risk.

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  • Jordan Brooks
    OP
    Property Manager · Orange County, CA · Member since 2020 · 10 posts · 3 votes
    5y
    Originally posted by @Robert Herrera:

    @Jordan Brooks I would watch AirBnB Automated I n YouTube. It’s a great resource for what you’re looking at doing. He does this on a massive scale

    Will do. Thank you

    1Reply
  • Johann Jells
    Rental Property Investor · Jersey City, NJ · Member since 2011 · 1k+ posts · 876 votes
    5y
    Originally posted by @Account Closed:

    Whats the spread between long term lease and expected short term net profit? Whats the breakeven occupancy? You will have to furnish and equip the place so that would be the upfront cost. If I was the property owner Id rather rent to a regular tenant. Whats the upside for me to let you do this? Unless you are willing to pay significantly more than market. And then there's HOA and city regulations etc. The owner still bears liability for all this as well as general liability. Doesn't seem like a good idea from the owners POV.

    A few years ago a couple of guys came to tour a vacancy of mine without disclosing 1st that this is what they were up to. They didn't even offer me a rent premium! I told them to take a hike. My city became ABnB central after NYC limited them, many people bought or rented apartments to ABnB until many buildings became virtual hotels and the camel's back broke. There was a plebiscite about limiting short term rentals that became national news for the well funded election battle between ABnB and the hotel industry. STR forces lost, and a whole of people invested in properties that could not come close to cashflowing as a normal long term rental got stuck holding the bag.

    https://www.nytimes.com/2019/1...

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