MTR Arbitrage - Viability?

[Lucas Bernard]

I've always heard about arbitrage and never really given it much thought, but it seems easier to get Packers season tickets than a tier 4 STR permit in SD. Arbitrage could be a good way to overcome barriers to entry in this market and build some knowledge (and hopefully make some money).

Anyone pursue this strategy before in San Diego or elsewhere? Any tips from personal experience that I might be surprised to hear, other than the obvious challenges?

Appreciate the insight,

Lucas

[Allen Duan]

Hey Lucas, rental arbitrage is how I got my start in the furnished rental space. My business does property management now, but it still holds a place in my heart for my origin story. 

I'm in Los Angeles, so it may be similar to your market, in that long-term rents are high. What I've found in L.A. is that the delta between long-term and mid-term rent is not enough to make MTR arbitrage worthwhile here. I do know other arbitrage operators who do MTR specifically in other markets where it is definitely a viable business model, and I believe that's because their long-term rents are lower and there's more margin there for MTR arbitrage.

You're on the right track with your thinking. Short-term arbitrage will make a lot more sense here in LA and probably in San Diego as well, except for regulations. So, you have to kind of pick which path you want to take, and I agree with you that the arbitrage is a great way to get started at building cash flow. Remember, arbitrage is a business, not investing; it is a real estate business similar to property management as a real estate business but it is not real estate investing. So, you are creating a job for yourself if that's what you want - that's awesome. If it's not what you want, then just keep that in mind.