Rental Arbitrage -how to do airbnb without BUYING

[Joe Kim]

Lots of people have asked me how to start doing a "Rental Arbitrage" in STR (short term rentals - Airbnb is most popular but VRBO is another way).

Rental arbitrage is you as the investor rents a home and becomes the tenant.    But the sole purpose of renting is to then sublease the home on Airbnb or VRBO or corporate rentals.  

Here are the key rules of Rental Arbitrage:

1) You need to MAKE money/profit. Typical target for most Rental arbitrage investors is $1000 NOI (net operating income = revenue - expenses). Do your research to make sure you can make a profit. This is not easy work to find a property, lease a property, furnish the property, and manage it. You better not come up with a calculation that comes out to be less than $1000/month NOI or you may actually LOSE money.

2)  You need to make sure everything is LEGIT/ABOVE BOARD/TRANSPARENT.   You cannot hide the fact that the sole purpose for you to rent the home is to sublease.   The owner must know from the beginning and in fact you need to include it in your lease agreement that the home is going to be subleased and that the owner agrees to allow this to happen.  

3) City, county, local, HOA regulations must support what you are doing. You cannot go blindly into doing a rental arbitrage without knowing the restrictions. HOA is the trickiest. Typically the restrictive HOAs are condos, new construction communities.

4)  Cost of furnishing needs to be factored into your calculations.    Cost of furnishing is not limited to the cost of furniture but labor costs to furnish home can be high.   Typical costs can vary widely depending on where you get your furniture, labor cost, etc.   Remember your own labor cost. 

Typically a 2 bedroom home can be furnished between $3000-8000.    Remember the home is empty and filling it with all the amenities including (all kitchenware, bedding, etc..) are not cheap.

5) Extra expenses include - Utilities, Garbage, Internet, Streaming (Netflix, SlingTV, do NOT get cable).  

Tricks and TIps - Best TV for STR = Roku TCL 4K TVs - as low as $250-350 per TV.

Watch for my next post:   How to approach a Landlord to rent to you!