Rental Arbitrage - Apartment - Disney Area
Member since 2022 · 62 posts · 16 votes
Rental Arbitrage - Apartment - Disney Area
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Ryan MoyerBusiness Member
Property Manager · Orlando Kissimmee Davenport Salt Lake City, Park City · Member since 2019 · 996 posts · 1k+ votesIn practice "corporate lease" is more just a term that STR arbitragers use to pitch their idea to landlords to try and get an agreement to be able to sublet their place without using the term "airbnb" or "short term rental" in the sales pitch. It's a way to make it sound a little more classy to the landlord. I think it's kind of silly, both because it's misleading, and because it's unnecessary (the better idea is to just convince the landlord why short term rentals are a good idea for them), but it works for a lot of people.
Ultimately this isn't a good place to find info on arbitrage. It's a legitimate business model but this is more of a real estate investing forum than a business forum and most of the folks here have an irrational hatred for it. Even further, those of us that don't dislike it don't really have any experience with it (we're here as real estate investors) so any info we're providing is just guessing and probably less helpful than what you'll find in arbitrage groups on Facebook, etc.
Cosmic Vacations4.9177 Reviews
26 Replies
- Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes4y
2 big red flags. Arbitrage. Corporate lease. SMH.
- Member since 2022 · 62 posts · 16 votes4yOkay, Paul, that’s incredibly vague along with an unnecessary “SMH.” Care to elaborate? You’re reply can’t get much more vague.
Quote from @Paul Sandhu:
2 big red flags. Arbitrage. Corporate lease. SMH.
- Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes4y
Quote from @Colby Burt:
Okay, Paul, that’s incredibly vague along with an unnecessary “SMH.” Care to elaborate? You’re reply can’t get much more vague.Quote from @Paul Sandhu:
2 big red flags. Arbitrage. Corporate lease. SMH.
It's generally accepted on here that arbitrage is not a good idea. Look at previous posts about arbitrage.
Corporate housing. That's pretty much a myth. Why would they rent from you when they could rent from the entity that actually owns the property? I've sent out hundreds of letters offering corporate housing. None of them came to fruition. The companies just give their employees a per diem and let them find their own place.
However, I did get a phone call yesterday from a guy that has stayed with me about 20 times. His company has him guide about 6 of their top clients CEO's for a week long deer hunt here in Kansas. The CEO's are all from Louisiana, and they probably spend 10 million a year with this guys company. The guy that called me wanted 2 houses to put up his 6 clients that are going to be deer hunting. - Member since 2022 · 62 posts · 16 votes4yThank you for the elaboration. We aren’t on the same page. My intent is to run the property as an airbnb, and to do that with an apartment, you need a corporate lease. You need the apartment complex to approve your corporate lease. If that gets approved, you list it on airbnb and any other str sites you desire.
Quote from @Paul Sandhu:
Quote from @Colby Burt:
Okay, Paul, that’s incredibly vague along with an unnecessary “SMH.” Care to elaborate? You’re reply can’t get much more vague.Quote from @Paul Sandhu:
2 big red flags. Arbitrage. Corporate lease. SMH.
It's generally accepted on here that arbitrage is not a good idea. Look at previous posts about arbitrage.
Corporate housing. That's pretty much a myth. Why would they rent from you when they could rent from the entity that actually owns the property? I've sent out hundreds of letters offering corporate housing. None of them came to fruition. The companies just give their employees a per diem and let them find their own place.
However, I did get a phone call yesterday from a guy that has stayed with me about 20 times. His company has him guide about 6 of their top clients CEO's for a week long deer hunt here in Kansas. The CEO's are all from Louisiana, and they probably spend 10 million a year with this guys company. The guy that called me wanted 2 houses to put up his 6 clients that are going to be deer hunting.
You are talking about marketing to a specific group(s) of people and trying to entice them to stay at your place. Maybe you do direct bookings? I’m not talking about that.
Lastly, for the sake of courtesy and professionalism, please refrain from comments or abbreviations that would make a person feel dumb for calling upon this great community for guidance. SMH? Come on. Wholly unnecessary.
Thanks. - 4yRyan MoyerBusiness MemberProperty Manager · Orlando Kissimmee Davenport Salt Lake City, Park City · Member since 2019 · 996 posts · 1k+ votes
In practice "corporate lease" is more just a term that STR arbitragers use to pitch their idea to landlords to try and get an agreement to be able to sublet their place without using the term "airbnb" or "short term rental" in the sales pitch. It's a way to make it sound a little more classy to the landlord. I think it's kind of silly, both because it's misleading, and because it's unnecessary (the better idea is to just convince the landlord why short term rentals are a good idea for them), but it works for a lot of people.
Ultimately this isn't a good place to find info on arbitrage. It's a legitimate business model but this is more of a real estate investing forum than a business forum and most of the folks here have an irrational hatred for it. Even further, those of us that don't dislike it don't really have any experience with it (we're here as real estate investors) so any info we're providing is just guessing and probably less helpful than what you'll find in arbitrage groups on Facebook, etc.
Cosmic Vacations4.9177 Reviews Is your plan to lie when you fill out the background check for the “occupants”? I’m 90% sure any large apartment building will have a subsection about how subletting is not allowed, so make sure not to read that part. I assume you have a well established corporation you plan to lease this apartment under as they obviously sent going to rent their apartment to a “corporation” that owns nothing, produces nothing, has no credit and no money.
You can see why rental arbitrage has such a bad name when every person that gets tricked in to tying it through the latest guru has no problem with starting off their “business” with lying to other businesses.
- 4yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votesExactly.
Quote from @Paul Sandhu:
Quote from @Colby Burt:
Okay, Paul, that’s incredibly vague along with an unnecessary “SMH.” Care to elaborate? You’re reply can’t get much more vague.Quote from @Paul Sandhu:
2 big red flags. Arbitrage. Corporate lease. SMH.
It's generally accepted on here that arbitrage is not a good idea. Look at previous posts about arbitrage.
Corporate housing. That's pretty much a myth. Why would they rent from you when they could rent from the entity that actually owns the property? I've sent out hundreds of letters offering corporate housing. None of them came to fruition. The companies just give their employees a per diem and let them find their own place.
However, I did get a phone call yesterday from a guy that has stayed with me about 20 times. His company has him guide about 6 of their top clients CEO's for a week long deer hunt here in Kansas. The CEO's are all from Louisiana, and they probably spend 10 million a year with this guys company. The guy that called me wanted 2 houses to put up his 6 clients that are going to be deer hunting.
We are investors.
Arbitrage is just a job. - Member since 2022 · 62 posts · 16 votes4y
Quote from @Bill B.:
Is your plan to lie when you fill out the background check for the “occupants”? I’m 90% sure any large apartment building will have a subsection about how subletting is not allowed, so make sure not to read that part. I assume you have a well established corporation you plan to lease this apartment under as they obviously sent going to rent their apartment to a “corporation” that owns nothing, produces nothing, has no credit and no money.
You can see why rental arbitrage has such a bad name when every person that gets tricked in to tying it through the latest guru has no problem with starting off their “business” with lying to other businesses.
Wow. Good of you to assume my intent was to lie. Thanks for that.
I would be telling any would be landlord to run it as an airbnb. I only used the corporate lease terminology in my post because I saw that is the specific type of lease you need to use.
- Member since 2022 · 62 posts · 16 votes4y
Apparently my post humbly asking for advice stirred up quite the hornet’s nest. Look at the replies I am getting. Quite the unwarm welcome. Can’t imagine this is what the BP family would want. Everyone can have their own opinions of course, but sheesh. You however wrote the most informative post and did it thoughtfully. I really appreciate it.
- Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes4y
Arbitrage is like shooting the Devil in his back. Your first shot better connect. If it doesn't, he's going to turn around and get you back.
- 4yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
serious question - have you looked into buying a place and making it a STR? or is that not an option for you at this time?
- Member since 2022 · 62 posts · 16 votes4y
100% have, and am debating bw owning and trying my hand at arb. One is obviously much less expensive out of the gates, unless I use OPM. Am just surveying all options while avoiding venom and vitriol for asking questions haha
- 4yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
Quote from @Colby Burt:
100% have, and am debating bw owning and trying my hand at arb. One is obviously much less expensive out of the gates, unless I use OPM. Am just surveying all options while avoiding venom and vitriol for asking questions haha
You can use OPM. Wells Fargo is just one place we're you can get some to buy a place.
You don't have to have your own money to start investing. You can also ask sellers to finance the downpayment and you are zero out of pocket that way.
- Member since 2022 · 62 posts · 16 votes4yTried to ask some seller’s to finance, actually. My offers were rejected. I need to get better at my pitches to owners for seller financing.
Quote from @John Underwood:
Quote from @Colby Burt:
100% have, and am debating bw owning and trying my hand at arb. One is obviously much less expensive out of the gates, unless I use OPM. Am just surveying all options while avoiding venom and vitriol for asking questions haha
You can use OPM. Wells Fargo is just one place we're you can get some to buy a place.
You don't have to have your own money to start investing. You can also ask sellers to finance the downpayment and you are zero out of pocket that way.
- 4yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
Quote from @Colby Burt:
Tried to ask some seller’s to finance, actually. My offers were rejected. I need to get better at my pitches to owners for seller financing.Quote from @John Underwood:
Quote from @Colby Burt:
100% have, and am debating bw owning and trying my hand at arb. One is obviously much less expensive out of the gates, unless I use OPM. Am just surveying all options while avoiding venom and vitriol for asking questions haha
You can use OPM. Wells Fargo is just one place we're you can get some to buy a place.
You don't have to have your own money to start investing. You can also ask sellers to finance the downpayment and you are zero out of pocket that way.
Also ask if they will carry back a 2nd to cover the downpayment then you can still use WF for a mortgage and have $0 out of pocket.
- Member since 2022 · 62 posts · 16 votes4y
Quote from @John Underwood:
Quote from @Colby Burt:
Tried to ask some seller’s to finance, actually. My offers were rejected. I need to get better at my pitches to owners for seller financing.Quote from @John Underwood:
Quote from @Colby Burt:
100% have, and am debating bw owning and trying my hand at arb. One is obviously much less expensive out of the gates, unless I use OPM. Am just surveying all options while avoiding venom and vitriol for asking questions haha
You can use OPM. Wells Fargo is just one place we're you can get some to buy a place.
You don't have to have your own money to start investing. You can also ask sellers to finance the downpayment and you are zero out of pocket that way.
Also ask if they will carry back a 2nd to cover the downpayment then you can still use WF for a mortgage and have $0 out of pocket.
Really good advice. I will try that. I’ll research what you are saying too so that I’m informed. Thanks a ton.
- Member since 2022 · 1 post · 0 votes4y
Quote from @John Underwood:
You can use OPM. Wells Fargo is just one place we're you can get some to buy a place.You don't have to have your own money to start investing. You can also ask sellers to finance the downpayment and you are zero out of pocket that way.
What is unique about Wells Fargo financing for a STR?
Thanks in advance, this is my first comment on BP.
- 4yRyan MoyerBusiness MemberProperty Manager · Orlando Kissimmee Davenport Salt Lake City, Park City · Member since 2019 · 996 posts · 1k+ votes
Nothing wrong with starting with arbitrage and building up some money to buy a place later via arbitrage rather than leveraging all-in at 100% financing at the potential top of a real estate bubble (unlikely, but possible). This just isn't the place where you'll find any useful info on it. And people here will generally steer you towards buy-at-any-cost since everyone here is a real estate investor, which isn't necessarily bad advice, but it could be extremely risky depending on your financial situation.
Cosmic Vacations4.9177 Reviews - Investor · Member since 2021 · 65 posts · 33 votes4y
@John Underwood Is there something that WF is offering that other banks aren't?
- Investor · Full time RVer · Member since 2022 · 3 posts · 0 votes4y
Hey there Colby,
There are specific zones in central Florida where STRs are allowed. So make sure you do the research. There is a post that has a list of all or most of the communities that allow STRs. I'll find it and post the link for you. Holly Hudson is a real estate agent in that area and she can send you listings in the STR approved communities. She works with investors and is great. I can send you her info if you're interested. We are new to rental arbitrage too and are interested. Like someone else mentioned it's not actual real estate investing but more of a cash flow opportunity. We are doing the research now and all of our due diligence before we make a decision to move forward. We've been flipping homes and are now looking to buy airbnbs and diversify our investments. Wishing you the best on your journey. - Member since 2022 · 62 posts · 16 votes4y
Quote from @Ryan Moyer:
Nothing wrong with starting with arbitrage and building up some money to buy a place later via arbitrage rather than leveraging all-in at 100% financing at the potential top of a real estate bubble (unlikely, but possible). This just isn't the place where you'll find any useful info on it. And people here will generally steer you towards buy-at-any-cost since everyone here is a real estate investor, which isn't necessarily bad advice, but it could be extremely risky depending on your financial situation.
Understood. My intention was to get educated, not to cause a rukus. Thanks for the help.
- Member since 2022 · 62 posts · 16 votes4yThank you for the kind words. I have done a ton of research on local zoning laws and ordinances, licensing, etc. I really appreciate your thoughtful response.
Quote from @Dorcas Wood:
Hey there,
There are specific zones in central Florida where STRs are allowed. So make sure you do the research. There is a post that has a list of all or most of the communities that allow STRs. I'll find it and post the link for you. Holly Hudson is a real estate agent in that area and she can send you listings in the STR approved communities. She works with investors and is great. I can send you her info if you're interested. We are new to rental arbitrage too and are interested. Like someone else mentioned it's not actual real estate investing but more of a cash flow opportunity. We are doing the research now and all of our due diligence before we make a decision to move forward. We've been flipping homes and are now looking to buy airbnbs and diversify our investments. Wishing you the best on your journey. - 4yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votesNope, just an example. Substitute WF for any mortgage company.
Quote from @Kevin Escobar:
@John Underwood Is there something that WF is offering that other banks aren't?
@Colby Burt
I'm an investor and STR operator just not in Florida. I own, do RA and also do some cohosting as well. I would try buying the property or talking to passive owners to help cohosting their properties. RA is my least favorite of the three. I think at this time it's super risky to do RA. You will be limited on what you can really do to the property to stand out. In the Disney market it's all about the themes that gross the most revenue. You can't just drop a few grand and make it rentable. You will be disappointed and broke when you barely break even or clear a few hundred. Also your days are numbered and not in your control at all when you don't own it.
I think my favor methods would be a brrSTR. I tell my wife it’s like buying a house a for free lol. Go find a run down/dated Airbnb listing to see if you can buy it from them. Lock it up.. I use friends and family to fund my deals. Rehab, then list it. Wait a few months and refi to long term debt and pay back your family or friends.
I’d also go join a bunch of fb groups that do RA instead of asking people on BP if you’re set on doing it.
Good luck!
- 4yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
Hey @Colby Burt, I am one of the irrational dislikers of arbitrage for the most part. My biggest problem is with the people who want to do it. Not the people exactly, but they almost always have nearly zero capital. They want to get started and arbitrage looks like a way to get the ball rolling. What most of us here tell people is that the risk is quite high for low income people to get started with.
The biggest problem is the area IMHO. I have looked into buying a place in the general area where you are looking. So far I haven't seen anything that will cashflow at the current market values. At least, something I can afford. You can get great $$$ on a 1.5m 8/9 place fully remodeled with all theme rooms.
There are several 2/2 condos for sale. They average about $280k give or take in the Champions Gate and surrounding area. The nightly rates for those types of condos are under $100 a night. Sometimes quite a bit under. You have 22k in mortgage (10% down second home on 280k). Even with 100% occupancy that is 35k gross per year at $95 a night. No one is getting 100% occupancy on those units. Closer to 50% that I can see. It is a loser right out of the gate IMHO.
And if you do manage to get someone to allow a sublease for a vacation rental (stop calling it AirBNB as that is just a platform), you will pay above market rates for your leases if the owner is smart. If things so south, you could lose a lot more than you could gain.
Try not to be offended by others responses. We get asked this question at least 5x a week. It gets a little trying after a while. Please do a search and you will find a lot of posts on this subject. There is a lot of data to peruse.
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