Rental Arbitrage: Yay or Nay?

Question

Hey everyone, My name is Blake and I am an engineering student out of Springfield, MO. I have been looking at getting a sfr here in town within the next year, but I am very intrigued about the idea of rental arbitrage. I listened to a BP episode about it, but I wanted to see if there was anyone out there who had any experience with it or know someone who has and could share with me some insight/tips on the strategy?

John Underwood · Answer

Nay

You don't own the property therefore you don't get appreciation, depreciation deduction or mortgage paydown. Much better off buying your own STR's. Owning property creates wealth. Having Arbitrage creates a job.

John Underwood · Answer

This is not diversification of your portfolio because you don't own anything.

Robert Gilstrap · Answer

@Blake Ramsey Guessing you will get plenty of naysayers responding but I can tell you that arbitrage works wonderfully for me. There is risk for sure but that risk can largely be mitigated with proper agreements and planning. Big picture is that long term ownership should be the ultimate goal but arbitrage is a great way to get started.

Wes M. · Answer

Be careful where you would choose to invest in Wilmington. Regulations have limitations on whole-house rentals. There is a pending court case -- outcome should be forthcoming in the next month or so.

Blake Ramsey · Answer

@Joe Splitrock Hey Joe thanks for your input! I’m definitely not considering on doing this for a while, certainly not as my first deal. I am looking at coastal cities as potential spots, specifically Wilmington, NC (I agree Springfield would be a horrible spot to do this haha). I honestly didn’t see why any owner would agree to it, but after looking into it I definitely understood a lot of the benefits. I appreciate your insight Joe!

Blake Ramsey · Answer

@Corby Goade You’re right, it’s not investing. It’s like any business, without any systems in place to automate it you have to work to make money. But there are plenty of options to make it a hands off business that needs little input from yourself.

How familiar are you with RA? I was definitely skeptical about it at first (honestly thought it was illegal) but after listening to a guest on BP podcast it really changed my view on it.

Taufic Mezher · Answer

Hey is it possible to get help personally about some questions. I want to get into airbnb arbitrage aswell because im a new 19 year old investor willing to spend $5-10k but um wondering about this.

My questions about all this are many and probably a lot i do not know of, first off sweden might not be a good idea to airbnb we pay high tax but if i were to make less than 2k monthly i dont pay tax so at first i dont pay that but what other outcomes do i need. For example cleaning service, will i have to pay for damage done to the property? How can i be sure the airbnb dates will be filled to pay for the rent and gain an income? Im guessing i would need around 5-10k to start this business off in the first place. Any tips please? Highly appreciate all guidance and advice.

Todor Ialamov · Answer

@Blake Ramsey

I would see a benefit in this only if you are doing it to save money and then invest.

You don’t get any of the actual benefits of owning RE - depreciation, creating equity, etc.

John Clark · Answer

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If you consider renting out you-rented apartments as part of your "portfolio" then you have a very tenuous portfolio. Much better off owning, and do you really think you'll get a real landlord to permit it? If there's a problem, who contacts whom and who is held responsible?

Alex Jarbo · Answer

@Blake Ramsey it’s how I started and now we’re developing boutique resorts. It’s a great way to start, you’ll be surprised how many people will agree to it. I do recommend owning your properties you own but again it’s a great strategy to start.

Rental Arbitrage: Yay or Nay?

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