Arbitrage ... The Didnt Want to Listen

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While new Arbitrage/Master Leaser threads piled on here for many months, some of us tried to warn them. And of course some forum residents here egged them on. Likely in a year, we will see a new stream of Brian Page and Arbitrage threads again because people just don't listen.

this is a business. Again, it's not about reward.  It's about risk-adjusted reward.

From CNBC:

https://news.google.com/articl...

"hosts are trying to stay afloat on mortgages and arbitrage leases after the demand for short-term rentals has suddenly dried up due to the coronavirus pandemic.

An arbitrage is when a host rents a property and then rents it out to other people on Airbnb.

I'm putting someone in my house and crossing my fingers they'll pay because I can't evict them, Ray said. But I can't keep it on Airbnb because that's a guaranteed loss."

I've looked at this business model in the past (and may again in the future). When you're running a business like this with such a leveraged model and high fixed costs, you need to have a fair amount in reserves since you're so screwed if something goes wrong. What was the "standard" guidance these programs offered for reserve funds? If they advocated for anything less than 3-6 months in reserves then they were being negligent (whether practitioners followed the advice or not is a whole other issue).

From a forum arb post

"I am closing down. The owners have decided to sell. I have so much in the way of furnishings and stuff to get rid of! I have bedding, towels, brand new sets of dishes and cookware, microwaves, coffee pots, flatware, 50" smart tv's, eLocks, 4 queen mattresses and one king, platform beds, art work, rugs. Everything to completely furnish two to five units, depending on the size..."

And they should be thanking their lucky stars the owner is selling rather than suing them for rent.

Every time they bragged about low entry costs, no debt, and no fear of property values falling I asked their plan if suddenly STR became illegal in their area. (This is effectively a 1-2 month ban so it should be nothing to them.) I don't know if their plan the whole time was to bail on owners as I assumed or their head was just too high in the clouds.

But don’t worry about the arbitrage gurus, they’ll be back before you know it. 

Originally posted by @Ken Latchers :

From a forum arb post

"I am closing down. The owners have decided to sell. I have so much in the way of furnishings and stuff to get rid of! I have bedding, towels, brand new sets of dishes and cookware, microwaves, coffee pots, flatware, 50" smart tv's, eLocks, 4 queen mattresses and one king, platform beds, art work, rugs. Everything to completely furnish two to five units, depending on the size..."

That arbitrager should just buy the house.  I sort of did the same thing when my long term tenants moved away.  I bought all their furniture, televisions, utensils, cookware, etc.  It made it really easy to furnish the house.

 

As I said in the original post, there were quite a few egging on the newbies and saying what could be the harm?

oooh, Brian page! Man am I going to scale up rapidly! What could possibly go wrong?

This...