Air BnB Arbitrage $25k-58k per Month Opportunity

Member since 2018 · 14 posts · 7 votes

3y

It's a great idea, love your thinking. Many students sublease their own apartments. but that's typically only one person for the summer, not many guests. You could try it without getting the approval, but if you had roudy guests, they could get reported and you'd get your clients kicked out of their apartments. I'm not saying to not do it, but trying to think of a way to help solve this.

OP

Investor · Highland Park, IL · Member since 2022 · 38 posts · 26 votes

3y

@Paul Sandhu The landlord isn't doing it themselves because they have over $200,000,000 worth of real estate in this particular market and are focused on long-term lease agreements. The extra returns with air bnb aren't worth the headache for them. My main concern was regarding issues with the landlord, hence why I was posting this for everyone to comment on. The landlords aren't too hands-on with their properties from what I have seen/heard of so far. I live in an apartment owned by the same company and the property manager of this particular property lives within a 12 hour drive of us.

OP

Investor · Highland Park, IL · Member since 2022 · 38 posts · 26 votes

3y

@Grant Bynum In all honesty, these landlords are terrible and rarely even check up on their properties. I live in an apartment owned by the same company and they have a property manager who literally lives 12 hours away from the property I am leasing and never comes (besides when there are major complaints from all 30 of us tenants).

OP

Investor · Highland Park, IL · Member since 2022 · 38 posts · 26 votes

3y

@John Underwood They would have no incentive. Maybe I could offer them extra cash on top considering they already have a year long lease signed. It would just be extra cash in their pocket. Just a thought

OP

Investor · Highland Park, IL · Member since 2022 · 38 posts · 26 votes

3y

@Michael Dumler What would the logistics be of me hypothetically moving forward with this without telling management? Just spit-balling ideas here.

Member since 2018 · 14 posts · 7 votes

3y

Quote from @Daniel Kaplan:

@Grant Bynum In all honesty, these landlords are terrible and rarely even check up on their properties. I live in an apartment owned by the same company and they have a property manager who literally lives 12 hours away from the property I am leasing and never comes (besides when there are major complaints from all 30 of us tenants).

Why don't you go to the management company and say you are going to work with one apartment? And that you will give a cut of the profits to them of what you earn? Once they agree on one, then hit them up for more.

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OP

Investor · Highland Park, IL · Member since 2022 · 38 posts · 26 votes

3y

@Grant Bynum The only issue is that I'd be dealing with a W-2 employee instead of the actual landlord of the property. So they may just say no right away considering they essentially don't have too much say in what goes on.

Member since 2018 · 14 posts · 7 votes

3y

Daniel, what if you went to the students and offered to get only ONE sublet tenant for the summer, not tons of tenants? It would be less money, but it'd make it easier to get everyone's buy in, including the landlord?

2 Reply

OP

Investor · Highland Park, IL · Member since 2022 · 38 posts · 26 votes

3y

@Grant Bynum That's honestly a good idea. My goal was to get it to work at a larger quantity. If not, going with one tenant is most definitely the next best route to go down.

Member since 2018 · 14 posts · 7 votes

3y

It might be a winner.

Michael BaumPro Member

Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes

3y

So is it even allowed in the area to do STRs? Is it designated student housing specifically? It might not be allowed due to zoning or the university having some kind of restrictions that the owners have to follow.

I would start there and make sure you can even do it.

2 Reply

John UnderwoodPro Member

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

3y

Quote from @Daniel Kaplan:

@John Underwood They would have no incentive. Maybe I could offer them extra cash on top considering they already have a year long lease signed. It would just be extra cash in their pocket. Just a thought

I think you need something along these lines to incentivize them.

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Christian EhlersBusiness Member

Real Estate Agent · NH & MA · Member since 2021 · 457 posts · 291 votes

3y

For the arbitrage model there are benefits to the owners/landlords you just have to find the right landlord that is okay with it. For instance the place will be professionally cleaned several times a month making sure it stays sparkling clean. You could potentially pay them slightly more rent (though I would encourage this option right out of the gate as you are taking on extra risk). You could offer to handle the maintenance of these units to avoid any extra headache. The biggest thing I've seen is being able to show them how you prevent parties and bad guests! (Noise monitoring systems in units, ring doorbell cameras, requiring guest ID's before checkin). These could all be points to sell them on, but of course you need the landlord's consent to try any arbitrage strategy.

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JD MartinBusiness Member

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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

3y

Quote from @Daniel Kaplan:

@Paul Sandhu The landlord isn't doing it themselves because they have over $200,000,000 worth of real estate in this particular market and are focused on long-term lease agreements. The extra returns with air bnb aren't worth the headache for them. My main concern was regarding issues with the landlord, hence why I was posting this for everyone to comment on. The landlords aren't too hands-on with their properties from what I have seen/heard of so far. I live in an apartment owned by the same company and the property manager of this particular property lives within a 12 hour drive of us.

Any entity that has $200 million in RE investments just in your market has a pretty heavy staff, which could easily offer the current tenant a deal in which S/he would have their rent reduced over the 5 month period while they STR'd their apartments for them. You really have no value proposition whatsoever to offer the property owners, so in order to pull this off you'd have to sublet these places on the sly since I guarantee the management says "No way". The extra cash you think you might be offering to the owners to convince them to let you do this is chump change compared to the risks they experience allowing someone without any skin in the game to take over management of 15 of their units for 5 months.

Assuming you move forward - renting them out illegally - then the other considerations of STRs come into play, i.e. are STRs legal in this area? Is occupancy as high as you believe in that area? Cost recovery issues (frequency of cleaning, repairs & maintenance, etc), insurance, etc.

I know a lot of landlords and I don't know a single one that allows this "arbitrage" model, which is really a Carlin-esque way of saying "individual with no assets attempting to profit from another's asset". I don't own anywhere near $200 million worth of RE and I wouldn't be swayed by a cash incentive to be an unvested manager of any of my properties, so I don't see how someone for who it really would be a rounding error would accept that additional risk.

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Nathan GesnerBusiness Member

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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

3y

Quote from @Daniel Kaplan:

You need the Landlord's permission to do what you want to do. Ask and see what happens. Don't be surprised if he rejects your idea and be prepared to accept his decision because it's his property.

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Darius A.

Member since 2021 · 25 posts · 25 votes

3y

@Daniel Kaplan

As everyone pointed out the first hurdle would be getting the LL to approve, which is a tough sell.

To me the bigger question assuming the LL approves is on the demand side, what gives you the confidence that you’ll be able to find tenants to stay in that type of living situation? I get that it’s a college town and all but I would not make the assumption that you’ll be able to fill all of those units. A certain % of them sure but then that begs the question what kind of tenant would this attract and is the LL up for the risk/headache. From the LLs perspective they’re still making money even though the students are going away for a few months, put yourself in the LLs shoes.