Airbnb Arbitrage as a stepping stone into STR
Most Popular Reply
Michael BaumPro Member
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votesHey @Erica Lee, I am going to be the cloud of reality on all this sunshine blowing your way.
Arbitrage is a tough row to hoe. It is easy to lose it all with one issue. Regs change, owner decides to stop leasing to you, pandemic...there are a lot.
So any owner who knows anything will ask for above market rates for their place you want to STR. That will be after making 100 calls with them all saying no.
Let's say they just want a year lease. Ok, so that is first, last and deposit. So maybe 5k of your saved cashola.
Now you have to outfit. Let's say it is a 2/2 in a trendy area that allows STR. You will be looking at a certain demo that will want certain things. More upscale maybe. You can expect to pay about 10k per bedroom to outfit the property in total. That would soup to nuts done and ready to hit the market.
Now, if you do well, then maybe the landlord sees that and says I can do that and won't reup the lease. Now you are stuck with a ton of furniture you have to either give away or store. Maybe sell for pennies.
Honestly if you can save up 19k, you can save up 30k to buy your first place. Scrimp, live cheap etc.
If you are a single person, or maybe with a partner, look at the FHA multifamily loan program. 5% down on up to a 4 plex. Live in one, rent the other 3. They pay your mortgage and maybe a little extra.
Then you refi after a year or so, fix up your unit and do it all again with another FHA loan. Then again. Now you have 4 multi family units performing for you and it is a great first layer to branch out to STRs.
That is what I would do if I was still young.
25 Replies
- Realtor · Sacramento CA · Member since 2023 · 16 posts · 7 votes2y
Hey Erica!
I'm a real estate agent and investor here in Sacramento with Hardin Realty and Property Management. We manage over 100+ STR/MTR (Sacramento, Phoenix/Scottsdale, Smokies TN)
Airbnb arbitrage is a great way to break into the str space and create income. Knowing your market and creating a strategy before you begin your journey is a hard step to overcome. Furnishing an airbnb can cost around $10k-15k ( depending on how nice/big). Rents can be $2000-$3000, depending on location. Just to get off the ground you are looking at around $15k -$20k upfront for furnishing and rent/deposits. Getting professional pictures taken and securing the cleaners are a few other things to account for when doing research. Feel free to reach out with any other questions! Hope I helped
- Irvine, CA · Member since 2023 · 17 posts · 9 votes2y
Quote from @Cole Sullivan:
Hey Erica!
I'm a real estate agent and investor here in Sacramento with Hardin Realty and Property Management. We manage over 100+ STR/MTR (Sacramento, Phoenix/Scottsdale, Smokies TN)
Airbnb arbitrage is a great way to break into the str space and create income. Knowing your market and creating a strategy before you begin your journey is a hard step to overcome. Furnishing an airbnb can cost around $10k-15k ( depending on how nice/big). Rents can be $2000-$3000, depending on location. Just to get off the ground you are looking at around $15k -$20k upfront for furnishing and rent/deposits. Getting professional pictures taken and securing the cleaners are a few other things to account for when doing research. Feel free to reach out with any other questions! Hope I helped
Thanks Cole! I appreciate the help.
- 2yJake AndronicoBusiness MemberRealtor · Reno, NV · Member since 2019 · 1k+ posts · 938 votes
Great question. It's certainly an attractive looking option when starting out. However, if you've been able to save $10-19k I'm assuming you could likely save more relatively quickly (that's an assumption, however).
I'm always a fan of owning something (especially when you're young) and playing the long game, but it is a strategy I've seen people have success with.
It's going to be more volatile than a traditional long term rental, house hack, etc. For me, house hacking by the room and renting to college students was an approachable way to get into RE investing and I didn't have to change my lifestyle much because I of course was used to living w/ college students in college.
Just some food for thought. Best of luck to you!
- Cleveland, OH · Member since 2022 · 826 posts · 578 votes2y
Erica,
How expensive are the type of properties you're looking for in your area?
- Contractor · Member since 2022 · 22 posts · 2 votes2y
Good morning Erica,
Yes its a good starting point my current client is going this route. Im a General Contractor located in Sacramento if you need any help/advice construction wise let me know
Good luck to you
- 2ySarah KensingerPro MemberReal Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
Yes, with the right principles in place this would be a great steppingstone for you to get started! For some reason Biggerpockets won't let me tag Jake Mercer, but there's a link to his profile. He has been successful with arbitrage and shared a lot of his story on this form. If you're looking for a course or group of people to learn with, Michael and Elizabeth Chang have created a place for new people to learn. They've been very successful with arbitrage and have purchased millions of dollars in real estate with the money they earned!
Best luck as you begin your journey!
- 2yAndrew SteffensBusiness MemberTampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
There are a lot of posts about Arbitrage, personally I am not a fan even thought I have employed it successfully in the past. I suppose it is market dependent but the rental market is hot and the STR market is cool so attracting owners will be challenging. Also, unless you secure a really good deal with a multi year lease, the cost of furnishing alone will make you negative year one...
Vacation Rentals of Florida53 Reviews - Real Estate Agent · Denver, CO · Member since 2022 · 20 posts · 18 votes2y
Hi Erica! This is probably the exact same scenario I found myself in when wanting to get into the STR business! Speaking from my personal experience, I started with an arbitrage about 3 years ago and that has led me to purchasing two str investments since then. I think it's a great way to learn the intricacies of Airbnb and being a landlord, without taking on the financial risk / challenges of homeownership. I did go through a DFY program that sourced a cash flowing property for me and negotiated a 3 year lease with the landlord on my behalf. I definitely needed the mentorship when first getting started so looking back, I feel confident that I made the right choice in starting with arbitrage... All of my STR's are in Colorado by the way(:
I'm happy to share more about my experience so feel free to send me a message if you think it would be beneficial to your journey!
- Investor · Tallahassee · Member since 2019 · 249 posts · 93 votes2y
I think it's a great way to start but obviously very market dependent.
Depending on your personality type, I would also recommend partnering with someone more experienced or hiring someone to coach you through every step of it. Happy to provide free advice if you have any specific questions!
You can also take advantage of 12 month 0% business credit cards to help you furnish the properties so you have your 19K for first month's rent, deposit and any extra expenses as a buffer.
Hope that helps!
- Irvine, CA · Member since 2023 · 17 posts · 9 votes2y
Quote from @Yu Liu:
I think it's a great way to start but obviously very market dependent.
Depending on your personality type, I would also recommend partnering with someone more experienced or hiring someone to coach you through every step of it. Happy to provide free advice if you have any specific questions!
You can also take advantage of 12 month 0% business credit cards to help you furnish the properties so you have your 19K for first month's rent, deposit and any extra expenses as a buffer.
Hope that helps!
Awesome! Thank you Yu, I will keep you as a connection throughout my journey. Do you do arbitrage yourself?
- 2yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
Hey @Erica Lee, I am going to be the cloud of reality on all this sunshine blowing your way.
Arbitrage is a tough row to hoe. It is easy to lose it all with one issue. Regs change, owner decides to stop leasing to you, pandemic...there are a lot.
So any owner who knows anything will ask for above market rates for their place you want to STR. That will be after making 100 calls with them all saying no.
Let's say they just want a year lease. Ok, so that is first, last and deposit. So maybe 5k of your saved cashola.
Now you have to outfit. Let's say it is a 2/2 in a trendy area that allows STR. You will be looking at a certain demo that will want certain things. More upscale maybe. You can expect to pay about 10k per bedroom to outfit the property in total. That would soup to nuts done and ready to hit the market.
Now, if you do well, then maybe the landlord sees that and says I can do that and won't reup the lease. Now you are stuck with a ton of furniture you have to either give away or store. Maybe sell for pennies.
Honestly if you can save up 19k, you can save up 30k to buy your first place. Scrimp, live cheap etc.
If you are a single person, or maybe with a partner, look at the FHA multifamily loan program. 5% down on up to a 4 plex. Live in one, rent the other 3. They pay your mortgage and maybe a little extra.
Then you refi after a year or so, fix up your unit and do it all again with another FHA loan. Then again. Now you have 4 multi family units performing for you and it is a great first layer to branch out to STRs.
That is what I would do if I was still young.
- Investor · Raleigh, NC · Member since 2020 · 61 posts · 92 votes2y
Quote from @Sarah Kensinger:
Yes, with the right principles in place this would be a great steppingstone for you to get started! For some reason Biggerpockets won't let me tag Jake Mercer, but there's a link to his profile. He has been successful with arbitrage and shared a lot of his story on this form. If you're looking for a course or group of people to learn with, Michael and Elizabeth Chang have created a place for new people to learn. They've been very successful with arbitrage and have purchased millions of dollars in real estate with the money they earned!
Best luck as you begin your journey!
Thank you of the shoutout @Sarah Kensinger ! Very kind of you! @Erica Lee we have spoke on the phone. You got this! You seem like you have done your research. Use your budget to align with your strategy and take ACTION!
- Member since 2023 · 4 posts · 1 vote2y
Hey guys,
So I ran across a guy I really like named Preston Seo I started following and then realized he offered a course for learning AirBnb arbitrage. I thought this seemed like a pretty solid way to get some cashflow and roll it into eventually owning Airbnbs and or long term rentals. The course seems legit but I just can’t find any real reviews other than people he interviews which I tend to trust but also don’t want to be too trusting. My wife I skeptical so I figured some people on here might know about it or have tried it and I would like to hear some reviews on his course. It’s only $2500 and he says the team will look at your numbers for each of your deals just to make sure you have done them right which is basically the biggest draw for me but there is other content offered as well. Anyway, if you guys have insight in his course I would really appreciate it. Thanks!
- Real Estate Consultant · Franklin, IN · Member since 2012 · 80 posts · 71 votes2y
Always blows my mind a bit no one simply suggests managing for an owner for a percent of revenue as an alternative possibility. No money out of pocket and if something changes, they drop you, or whatever, like @Michael Baum suggests, you're high and dry either on the hook for a lease and/or left with a bunch of used furniture. And like @Andrew Steffens said, this makes a profitable year one tough.
Arbitrage might make sense in a certain set of circumstances, but for lots of other times, the percent model is a nice middle ground you can consider. You get the same set of skills faster using more of OPM so to speak.
- 2yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
Hey @Lauren Vega, you know you can post stuff here and we will all take a look at your deals.
Most of us don't advocate for arbitrage but rather scrimping and saving for your downpayment on a first property.
Most of these sorts of courses are cash grabs. You have to ask yourself why do they exist? If there were making tons of money doing arbitrage, why take the time to sell a course?
My 2 cents of course. I don't know anything about this particular course.
- Member since 2023 · 4 posts · 1 vote2yHi Monica, do you mind telling me how did you started and if you did some kind of course ?
Quote from @Monica Mejia:
Hi Erica! This is probably the exact same scenario I found myself in when wanting to get into the STR business! Speaking from my personal experience, I started with an arbitrage about 3 years ago and that has led me to purchasing two str investments since then. I think it's a great way to learn the intricacies of Airbnb and being a landlord, without taking on the financial risk / challenges of homeownership. I did go through a DFY program that sourced a cash flowing property for me and negotiated a 3 year lease with the landlord on my behalf. I definitely needed the mentorship when first getting started so looking back, I feel confident that I made the right choice in starting with arbitrage... All of my STR's are in Colorado by the way(:
I'm happy to share more about my experience so feel free to send me a message if you think it would be beneficial to your journey!
- Member since 2023 · 4 posts · 1 vote2yThank you so much for your point of view. I appreciate it
Quote from @Michael Baum:
Hey @Lauren Vega, you know you can post stuff here and we will all take a look at your deals.
Most of us don't advocate for arbitrage but rather scrimping and saving for your downpayment on a first property.
Most of these sorts of courses are cash grabs. You have to ask yourself why do they exist? If there were making tons of money doing arbitrage, why take the time to sell a course?
My 2 cents of course. I don't know anything about this particular course.
- Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes2yDefinitely a low barrier to entry.
- Investor · KY · Member since 2022 · 204 posts · 77 votes2y
I started rental arbitrage January 2023. Put 20k down on furnishings of 2 investment properties in Ashland KY. We are set to gross 55k this year on that 20k investment. Im blown away by how good its done and thats obviously a huge return. Yet ultimately my goals are ownership where you then capture all the upside of being an investor! Good luck and happy hosting. Check us out on instagram at: @bluegrassrentalsofeky
- Rental Property Investor · Patuxent River, MD · Member since 2023 · 10 posts · 2 votes2yMonica,
Quote from @Monica Mejia:
Hi Erica! This is probably the exact same scenario I found myself in when wanting to get into the STR business! Speaking from my personal experience, I started with an arbitrage about 3 years ago and that has led me to purchasing two str investments since then. I think it's a great way to learn the intricacies of Airbnb and being a landlord, without taking on the financial risk / challenges of homeownership. I did go through a DFY program that sourced a cash flowing property for me and negotiated a 3 year lease with the landlord on my behalf. I definitely needed the mentorship when first getting started so looking back, I feel confident that I made the right choice in starting with arbitrage... All of my STR's are in Colorado by the way(:
I'm happy to share more about my experience so feel free to send me a message if you think it would be beneficial to your journey!
I am curious what DFY mentorship you chose? Do you mind sharing a link? I am considering a few right now, having a hard time deciding. Thank you. - Real Estate Agent · Denver, CO · Member since 2022 · 20 posts · 18 votes2yTotally! www.BNBLeverage.com
Quote from @Nick Moats:
Monica,Quote from @Monica Mejia:
Hi Erica! This is probably the exact same scenario I found myself in when wanting to get into the STR business! Speaking from my personal experience, I started with an arbitrage about 3 years ago and that has led me to purchasing two str investments since then. I think it's a great way to learn the intricacies of Airbnb and being a landlord, without taking on the financial risk / challenges of homeownership. I did go through a DFY program that sourced a cash flowing property for me and negotiated a 3 year lease with the landlord on my behalf. I definitely needed the mentorship when first getting started so looking back, I feel confident that I made the right choice in starting with arbitrage... All of my STR's are in Colorado by the way(:
I'm happy to share more about my experience so feel free to send me a message if you think it would be beneficial to your journey!
I am curious what DFY mentorship you chose? Do you mind sharing a link? I am considering a few right now, having a hard time deciding. Thank you. - Rental Property Investor · Patuxent River, MD · Member since 2023 · 10 posts · 2 votes2yThank you! I will take a look and compare them to some of the options I have uncovered.
Quote from @Monica Mejia:
Totally! www.BNBLeverage.comQuote from @Nick Moats:
Monica,Quote from @Monica Mejia:
Hi Erica! This is probably the exact same scenario I found myself in when wanting to get into the STR business! Speaking from my personal experience, I started with an arbitrage about 3 years ago and that has led me to purchasing two str investments since then. I think it's a great way to learn the intricacies of Airbnb and being a landlord, without taking on the financial risk / challenges of homeownership. I did go through a DFY program that sourced a cash flowing property for me and negotiated a 3 year lease with the landlord on my behalf. I definitely needed the mentorship when first getting started so looking back, I feel confident that I made the right choice in starting with arbitrage... All of my STR's are in Colorado by the way(:
I'm happy to share more about my experience so feel free to send me a message if you think it would be beneficial to your journey!
I am curious what DFY mentorship you chose? Do you mind sharing a link? I am considering a few right now, having a hard time deciding. Thank you. - Rental Property Investor · Patuxent River, MD · Member since 2023 · 10 posts · 2 votes2y
Quote from @Lauren Vega:
Hey guys,
So I ran across a guy I really like named Preston Seo I started following and then realized he offered a course for learning AirBnb arbitrage. I thought this seemed like a pretty solid way to get some cashflow and roll it into eventually owning Airbnbs and or long term rentals. The course seems legit but I just can’t find any real reviews other than people he interviews which I tend to trust but also don’t want to be too trusting. My wife I skeptical so I figured some people on here might know about it or have tried it and I would like to hear some reviews on his course. It’s only $2500 and he says the team will look at your numbers for each of your deals just to make sure you have done them right which is basically the biggest draw for me but there is other content offered as well. Anyway, if you guys have insight in his course I would really appreciate it. Thanks!
Lauren, I found the same individual and considered his program as well. In the process of finding a mentor for learning and applying this method of investing.
- Real Estate Broker · Raleigh, NC · Member since 2019 · 17 posts · 10 votes2y
Yes and no, air bnb has it's ups and downs I would try to get a cheap flip and use the money from that to buy what you really want :)
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