*** Where do I start? STR/AirBNB/Arbitrage ***
Investor · Austin, TX · Member since 2019 · 229 posts · 229 votes
*** Where do I start? STR/AirBNB/Arbitrage ***
Most Popular Reply
John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votesOriginally posted by @Duncan Hayes:
Originally posted by @John Underwood:
Don't start or end with Arbitrage, this is not RE investing.
I would say start with buying a place and renting it as a LTR.
how is it not? I put up a deposit on unit (investing), I pay first months rent (investing), I furnish (investing), I pay the utilities (investing), I pay "management" fees to AirBNB for connecting me and the customer (investing), I pay cleaning company to clean my units after checkout (investing), all in hopes for a larger return so I can recoup what I spent and put some money in the bank (investing).
You are buying into a job. You are not buying equity or wealth. The actual owner is buying wealth an equity as you make his mortgage payments for him every month.
The owner can decide to take his property back at some point as you are just a tenant.
29 Replies
- 5yLuke CarlPro MemberRental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
@Duncan Hayes
This is the worst place to start unfortunately lol. Try Brian Page.
- Investor · Austin, TX · Member since 2019 · 229 posts · 229 votes5y
Originally posted by @Luke Carl:
@Duncan Hayes
This is the worst place to start unfortunately lol. Try Brian Page.
LOL why do you say that?
- 5yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
Don't start or end with Arbitrage, this is not RE investing.
I would say start with buying a place and renting it as a LTR.
- Investor · Austin, TX · Member since 2019 · 229 posts · 229 votes5y
Originally posted by @John Underwood:
Don't start or end with Arbitrage, this is not RE investing.
I would say start with buying a place and renting it as a LTR.
how is it not? I put up a deposit on unit (investing), I pay first months rent (investing), I furnish (investing), I pay the utilities (investing), I pay "management" fees to AirBNB for connecting me and the customer (investing), I pay cleaning company to clean my units after checkout (investing), all in hopes for a larger return so I can recoup what I spent and put some money in the bank (investing).
- Investor · Austin, TX · Member since 2019 · 229 posts · 229 votes5y
Don't get me wrong, I want to get into LTR as well. MF to be specific. But, I'm interested in how you've come to your conclusion.
- 5yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
Originally posted by @Duncan Hayes:
Originally posted by @John Underwood:
Don't start or end with Arbitrage, this is not RE investing.
I would say start with buying a place and renting it as a LTR.
how is it not? I put up a deposit on unit (investing), I pay first months rent (investing), I furnish (investing), I pay the utilities (investing), I pay "management" fees to AirBNB for connecting me and the customer (investing), I pay cleaning company to clean my units after checkout (investing), all in hopes for a larger return so I can recoup what I spent and put some money in the bank (investing).
You are buying into a job. You are not buying equity or wealth. The actual owner is buying wealth an equity as you make his mortgage payments for him every month.
The owner can decide to take his property back at some point as you are just a tenant.
- Real Estate Agent · Greater Tampa Bay · Member since 2017 · 392 posts · 290 votes5y
As @John Underwood said. I really looked into rental arbitrage because of the benefits that are visible from the surface level. Wayyyy too many risks once you really dive down into the details. Some people make it work though and are very successful but you're not ever creating equity for yourself and the owner can take back the property one day and then what?
- 5yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
Hey @Duncan Hayes, I am not sure I agree with what you think investing is. Paying someone to clean your place isn't investing. It is the cost of doing business. Buying furniture isn't investing. Investing usually involves a return. Everything listed is a cost.
Do a search on here for arbitrage and you will see most of us frown on it. Now, if you have 20 doors with multiple revenue streams, then the risk is manageable. You can take the hit when things go south. If you don't have that, there is a lot of risk. Many folk went bankrupt in 2020 due to the pandemic.
Just my opinion. There are some folks on here doing just fine with arbitrage, but usually that is in addition to their other investments.
- Lender · Asheville NC · Member since 2016 · 469 posts · 317 votes5y
I just watched the We work documentary on hulu which seemed to be arbitrage gone amuck. Agree with @michael baum that it can be a safer bet if you can afford the risk later, balancing it out with less risky investments.
- Investor · Austin, TX · Member since 2019 · 229 posts · 229 votes5y
Originally posted by @John Underwood:
Originally posted by @Duncan Hayes:
Originally posted by @John Underwood:
Don't start or end with Arbitrage, this is not RE investing.
I would say start with buying a place and renting it as a LTR.
how is it not? I put up a deposit on unit (investing), I pay first months rent (investing), I furnish (investing), I pay the utilities (investing), I pay "management" fees to AirBNB for connecting me and the customer (investing), I pay cleaning company to clean my units after checkout (investing), all in hopes for a larger return so I can recoup what I spent and put some money in the bank (investing).
You are buying into a job. You are not buying equity or wealth. The actual owner is buying wealth an equity as you make his mortgage payments for him every month.
The owner can decide to take his property back at some point as you are just a tenant.
anyone could buy a job, just like anyone can buy a business. I would imaging I could eventually automate airbnb the same way you can automate most any other business. owning cash flowing businesses will generate wealth if you own enough of em for a long enough time. yea the owner is gaining too, which makes it a win-win right? but you're right, they could find a way to terminate lease, but that's a risk that comes with investing, is it not? I could invest in Tesla and then Elon decide to throw it all away tomorrow with one bad decision. I could purchase a house and a sink hole swallow it. I just see that as the risk of investing.
appreciate your input though.
- Investor · Austin, TX · Member since 2019 · 229 posts · 229 votes5y
Originally posted by @Michael Baum:
Hey @Duncan Hayes, I am not sure I agree with what you think investing is. Paying someone to clean your place isn't investing. It is the cost of doing business. Buying furniture isn't investing. Investing usually involves a return. Everything listed is a cost.
Do a search on here for arbitrage and you will see most of us frown on it. Now, if you have 20 doors with multiple revenue streams, then the risk is manageable. You can take the hit when things go south. If you don't have that, there is a lot of risk. Many folk went bankrupt in 2020 due to the pandemic.
Just my opinion. There are some folks on here doing just fine with arbitrage, but usually that is in addition to their other investments.
you don't have to agree with me. I don't agree with you. the cost of doing business is investing. it's a cost you pay in the midst of trying to earn a return on all the money you spend. everything spent is spent with the goal of making a higher return. there's plenty other businesses where you have to spend on items that don't physically produce a return for you individually, but as a collective the money comes back. if I spend $4k on a unit and that unit makes me $3500/mo, did I not invest the initial $4k? it was just spent?
- Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes5y
With arbitrage the rug can be pulled out from under you and you are left holding the bag.
- 5yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
Originally posted by @Duncan Hayes:
Originally posted by @John Underwood:
Originally posted by @Duncan Hayes:
Originally posted by @John Underwood:
Don't start or end with Arbitrage, this is not RE investing.
I would say start with buying a place and renting it as a LTR.
how is it not? I put up a deposit on unit (investing), I pay first months rent (investing), I furnish (investing), I pay the utilities (investing), I pay "management" fees to AirBNB for connecting me and the customer (investing), I pay cleaning company to clean my units after checkout (investing), all in hopes for a larger return so I can recoup what I spent and put some money in the bank (investing).
You are buying into a job. You are not buying equity or wealth. The actual owner is buying wealth an equity as you make his mortgage payments for him every month.
The owner can decide to take his property back at some point as you are just a tenant.
anyone could buy a job, just like anyone can buy a business. I would imaging I could eventually automate airbnb the same way you can automate most any other business. owning cash flowing businesses will generate wealth if you own enough of em for a long enough time. yea the owner is gaining too, which makes it a win-win right? but you're right, they could find a way to terminate lease, but that's a risk that comes with investing, is it not? I could invest in Tesla and then Elon decide to throw it all away tomorrow with one bad decision. I could purchase a house and a sink hole swallow it. I just see that as the risk of investing.
appreciate your input though.
I buy houses for cash. No one can terminate my investment. As long as I take care of them and pay my taxes I will likely have them forever.
You can have insurance on a house you own to protect your investment from it being swallowed up by a sink hole.
Big difference from having a job that you only get paid from putting your contious work into it. This is trading hours for dollars.
My investments make me money while I'm sleeping with no input from me. Sure they need to be maintained, but my handyman does that for me.
- Investor · Rowlett, TX · Member since 2013 · 132 posts · 72 votes5y
@Duncan Hayes
You came asking for advice on investing, passive investing. People are giving you advice on the best way to start and arbitrage is not one of them. You seem to have your mind made up so I’m not sure if you came to learn or if you came to get confirmed of what you want to do. I’ll give the same advice as others have. If you want to invest then you need to buy and own your own properties that produce income for you. If you want another JOB like wholesaling then go ahead and try arbitrage but understand that what you are doing is just another job, a risky one at that.
I personally shudder when I hear the words arbritrage, and have seen people call themselves investors when they own none of it. Kind of a skewed sense of investing if that’s what you think it is.
- Investor · Austin, TX · Member since 2019 · 229 posts · 229 votes5y
Originally posted by @Luke Rorech:
As @John Underwood said. I really looked into rental arbitrage because of the benefits that are visible from the surface level. Wayyyy too many risks once you really dive down into the details. Some people make it work though and are very successful but you're not ever creating equity for yourself and the owner can take back the property one day and then what?
I think you failed to read my previous reply, where I stated I want to purchase LTR also. but that is not what I am looking at or speaking on right now. it really sucks that this forum is full of people who just want to shoot others down based on stories they've heard, not something they've actually been involved with.
I appreciate the input but this forum post was asking those that actually have their own experience for their advice, not the advice of people that never got into the game themselves; only watched or heard about it.
- Investor · Austin, TX · Member since 2019 · 229 posts · 229 votes5y
Originally posted by @Onan Dumas:
@Duncan Hayes
You came asking for advice on investing, passive investing. People are giving you advice on the best way to start and arbitrage is not one of them. You seem to have your mind made up so I’m not sure if you came to learn or if you came to get confirmed of what you want to do. I’ll give the same advice as others have. If you want to invest then you need to buy and own your own properties that produce income for you. If you want another JOB like wholesaling then go ahead and try arbitrage but understand that what you are doing is just another job, a risky one at that.
I personally shudder when I hear the words arbritrage, and have seen people call themselves investors when they own none of it. Kind of a skewed sense of investing if that’s what you think it is.
Maybe you misread something but I did not come here asking for advice on anything other than resources being used to assist folks with starting their STR business. I gave a piece of my background, no long term goals or breakdown, just that I'm interested in something and was asking EXPERIENCED folks in the sector I'm specifically asking about. I don't remember thinking to myself, "let me create a forum post on BP so that I can hear people who never actually did it themselves tell me why they don't or why they wouldn't"
you can shudder, but going by the actual definition of the word "investing," you don't have to own to invest. nobody said I'd never own either. I can purchase a property on lease to own, airbnb it out, exercise my option, and purchase the property to convert it to longterm. it would seem that you all are thinking on a much smaller scale than me about this specifically and placing your limitations onto me.
- Investor · Charleston, SC · Member since 2018 · 32 posts · 34 votes5y
@Duncan Hayes First off, your current business is a monumental asset to everyone on this forum, as I'm sure you're aware if you still have a pipeline of wholesale deals in the current state of market. My question would be, depending on what you define as a healthy monthly spread on a STR arbitrage, how many wholesale transactions would you need to close in order to produce the income you will have produced from one year of airbnb arbitrage? With all the overhead, management, a liability of airbnb'ing someone else's buy and hold, I'd personally rather increase my wholesale marketing spend by the amount of money you're considering investing into the arbitrage, and see if you can't close a handful more wholesale deals.
- Real Estate Agent · Kansas City MO · Member since 2021 · 12 posts · 13 votes5y
STRs do not necessarily equal Arbitrage. Dependent on the market owning the property and running an STR can be a great investment.
There was a reply that mentioned spreading out the risk and that's important to the conversation because a bad guest can impact cash flow or future cash flow, however that is the nature of that business and one you will plan for.
As long as you're holding a title to a property, paying down a note and at least breaking even, maintaining and improving over time the property... that's an investment in my book.
AirBnB Austin is gonna be different beast than DFW or whatever too, find a model that is workable. We all know that there are multiple reasons to own property so if the positives outweigh the negatives and your risk in the deal is low... why not?
Run the numbers, find the value, create a viable conservative plan of action, be organized and put it into action. Also piggyback off mentors in the area if possible. Being positive will take you much further than being negative! - Investor · Durham, NC · Member since 2016 · 16 posts · 9 votes5y
@Duncan Hayes STR arbitrage is the wrong term. There is no arbitrage, it is not riskless, but very risky.
- 5yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
Originally posted by @Duncan Hayes:
Originally posted by @Onan Dumas:
@Duncan Hayes
You came asking for advice on investing, passive investing. People are giving you advice on the best way to start and arbitrage is not one of them. You seem to have your mind made up so I’m not sure if you came to learn or if you came to get confirmed of what you want to do. I’ll give the same advice as others have. If you want to invest then you need to buy and own your own properties that produce income for you. If you want another JOB like wholesaling then go ahead and try arbitrage but understand that what you are doing is just another job, a risky one at that.
I personally shudder when I hear the words arbritrage, and have seen people call themselves investors when they own none of it. Kind of a skewed sense of investing if that’s what you think it is.
Maybe you misread something but I did not come here asking for advice on anything other than resources being used to assist folks with starting their STR business. I gave a piece of my background, no long term goals or breakdown, just that I'm interested in something and was asking EXPERIENCED folks in the sector I'm specifically asking about. I don't remember thinking to myself, "let me create a forum post on BP so that I can hear people who never actually did it themselves tell me why they don't or why they wouldn't"
you can shudder, but going by the actual definition of the word "investing," you don't have to own to invest. nobody said I'd never own either. I can purchase a property on lease to own, airbnb it out, exercise my option, and purchase the property to convert it to longterm. it would seem that you all are thinking on a much smaller scale than me about this specifically and placing your limitations onto me.
Most of us got into actual investing not renting someone else's property to re-rent as an unlicensed PM and create a job for ourselves. Try reading Rich Dad Poor Dad or re-reading it if you have read it before.
You want your money working for you, not you working for it. That is what investing is.
Paying rent or the utility bill is simply not investing. I'm sorry you don't understand the difference.
- 5yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
@Duncan Hayes, well you did ask where to start. If you wanted comments/suggestions from people who are involved in the arbitrage space only with no other comments from anyone else required, you should state that.
What you got was some solid advice from people who are in the STR space. You don't like to hear about how it can fail. You have made up your mind to do it so I wish you well.
As for the "investing", a purchase of a place to STR is an investment, but the mortgage goes in the cost column. That list is offset by the rent taken in. Hopefully that is on the plus side. I suppose you could look at everything as investing...not sure why.
- Investor · Rowlett, TX · Member since 2013 · 132 posts · 72 votes5y
@Michael Baum
What he was looking for was people to tell him what a great idea he had and to basically tell him what he wants to hear. When he didn’t get that it seemed he went all defensive mode. We’re just trying to help but we are people with no “experience” apparently.
- Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes5y
I wonder what this guy has to say?
- Investor · Austin TX · Member since 2016 · 1k+ posts · 2k+ votes5y
@Duncan Hayes Im here in Austin! I considered this strategy after researching a local company called Locale that does exactly this. There is also a building called Natiivo that is going to be condos that are all short term rentals. There are some very cool things happening with STRs here in Austin. From a research standpoint, you should definitely start with getting familiar with the regulations for STRs in Austin. You must be registered with the city (of course) and pay some fees (of course). There are also regulations with how many units in a multifamily dwelling that can be STRs. I cannot recall the percentage off the top of my head. When converting an apartment or other rental unit into an STR the city of Austin requires you to get approval from the property owner. This is why Locale partners with large multifamily owners and developers, so they can have this approval from the start. Also get airdna so you can start researching potential markets and analyzing whether there is the potential for profitability. Im buying a house in Point Venture with plans to airbnb it once its been rehabbed. Airdna was incredibly helpful with my research! If I can help you in any way feel free to reach out
- Real Estate Agent · Greater Tampa Bay · Member since 2017 · 392 posts · 290 votes5y
Originally posted by @Duncan Hayes:
Originally posted by @Luke Rorech:
As @John Underwood said. I really looked into rental arbitrage because of the benefits that are visible from the surface level. Wayyyy too many risks once you really dive down into the details. Some people make it work though and are very successful but you're not ever creating equity for yourself and the owner can take back the property one day and then what?
I think you failed to read my previous reply, where I stated I want to purchase LTR also. but that is not what I am looking at or speaking on right now. it really sucks that this forum is full of people who just want to shoot others down based on stories they've heard, not something they've actually been involved with.
I appreciate the input but this forum post was asking those that actually have their own experience for their advice, not the advice of people that never got into the game themselves; only watched or heard about it.
No one is "shooting you down". They are letting you know the risks associated with it. Arbitrage is not investing. You'll never gain any equity in the property. And if people were in your same shoes but actually did research and decided the risks outweighed the gains, why wouldn't you want their input? Seems you're just getting defensive when you don't hear what you were hopping to.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.