Rental Arbitrage strategy

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Rental Arbitrage strategy

Hanna Ainsworth
Member since 2026 · 2 posts · 0 votes

Hello! Does anyone here currently do the rental arbitrage method in order to gain more capital to scale quicker? My husband and I have a long term rental but have recently been introduced to the arbitrage method. We’ve researched alot but I really just want to talk with real people who have done it. If you have, please reach out! I’d love to pick your brain.

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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
2d

My first question - why would I enter into an arbitrage contract with someone that hasn't converted their own LTR to STR and is not "walking the walk" their promoting?

What STR experience do you have?

What happens if you implode?

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  • Jaron WallingPro Member
    Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
    2mo

    @Hanna Ainsworth This question gets brought up from time to time but way less as of lately. The "golden era" of rental arbitrage occurred during the period of ultra-low interest rates and the post-pandemic travel boom. It was cheap way to get into REI. We're way past those days now so the strategy is basically dead. It was popular with apartments and condos with lacks or no HOAs.

    Most landlords don't like it and some HOA block it. As a landlord myself there's no incentive to allow our tenants to arbitrage. We have specific language in our lease and it's denied without permission (of which I'll never give).

    I'd focus on co-hosting or PM. If you want to get into STR start a small management business and learn from the inside out. Your spread becomes the management fee which can easily be 15-30%. That's nearly 2x what most investors pay for a LTR. It's a lot of work depending on your markets demand (tourism city) but you can make good money, learn, and then buy property, not arbitrage something. 

       

     

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  • Andrew SteffensBusiness Member
    Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
    2mo

    This is a question asked weekly if not monthly, you should use the search function and read prior posts, but its not well liked on this board for a plethora of reasons as you will see.

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  • Angela Venger
    Member since 2026 · 47 posts · 21 votes
    2mo

    Hanna, I don't do arbitrage, but the thing I'd look at hardest is your floor. With owned property my bottom cost is mortgage, HOA, utilities, insurance, and in a slow month I can sit on it. With arbitrage that rent is due every month whether you book or not, so your break even is higher and it never moves. Ask yourself this, if your market has 3 slow months, can you cover 3 months of rent, cleaning and utilities out of pocket without touching the money you were trying to save. If yes, it can work with a strong operator. If no, it's not a scaling strategy, it's leverage stacked on leverage.

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  • Matthew Tregoning
    Property Manager · Melbourne, FL · Member since 2019 · 394 posts · 163 votes
    3d

    Before treating arbitrage as a way to build capital, I would put the permission and downside on one page. The lease should explicitly allow the intended use, the property and local rules should support it, and the full monthly floor should include rent, utilities, insurance, supplies, cleaning gaps and a reserve for slow periods. Then stress-test the model with lower occupancy and one unexpected repair. That exercise tells you whether the arrangement creates operating cash or simply adds a fixed obligation.

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    2d

    My first question - why would I enter into an arbitrage contract with someone that hasn't converted their own LTR to STR and is not "walking the walk" their promoting?

    What STR experience do you have?

    What happens if you implode?

    [email protected]248-209-6824
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    WebsiteView Page
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    • Jaron WallingPro Member
      Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
      1d

      You get to evict them. It's a fun time! Said no one.

      1Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1d

    There is a reason only gurus teaching it are the ones talking about it. It is high risk, there is no equity play and honestly what good can come from it? You are in a rat race of hoping money in is greater than money out - not really any skill involved and its like gambling in my mind.

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  • Hanna Ainsworth
    OP
    Member since 2026 · 2 posts · 0 votes
    1d

    Thanks everyone for your advice! We actually do own a couple long term just wanted to speak to people who have possibly done arbitrage along side. Obviously equity with owning is a plus but the cash flow with arbitrage is what attracted us to researching it more. We jumped right in, have 3 properties since my first post 2 months ago and have already net cash flowed over $3000 with the model. It’s going great for us!

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    • John RacinePro Member
      Rental Property Investor · Casselberry, FL · Member since 2008 · 56 posts · 38 votes
      1d

      Hanna, congrats on the fast start. Most replies here are from people who haven't done arbitrage. I have, so here's the lesson I'd pass along: verify the HOA rules yourself, in writing, for every unit. I had an arbitrage in Jacksonville where the owner told us the HOA allowed STRs. When she sent our lease to her attorney, he told her the HOA didn't. Owners usually believe what they've been told, but if it's wrong, you're the one holding the lease and the furniture.

      Second, make sure your numbers include all of the costs, not just rent and cleaning. I don't think enough arbitrage experts talk about everything that goes into it: furnishing, marketing, managing, and taxes like TDT (Tourist Development Tax), which a lot of communities charge. If the furnishing went on credit cards, those payments can be a real drag on profitability too.

      Third, check whether each unit could fall back to 30+ day stays if nightly rentals get shut down or slow down. Many HOA and city rules treat stays under 30 days differently from longer ones. That's how I run most of my calendar now: set for 30+ day stays, with short stays only filling gaps.

      We've since moved into co-hosting and management, and I like it a lot more mainly because it costs much less to get started. My plan going forward is to start with little to no cost of my own, buy property to run as STR/MTR, and use private lending to fund it. Full disclosure: I co-host STRs for owners, so factor in my bias.

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    • JD MartinBusiness Member
      Moderator
      Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
      23h

      Most people here don't like it because it generally doesn't make any sense for the owner to allow a nobody - and that's not meant to be derogatory but realistic - to take possession of their asset and try to run it as a money-making business. Professionals who run STRs will tell you that it is not an easy play, even in good times, to run an STR. It is a job. Now take that issue and compound it with someone who likely has few to no assets, including liquid capital, and little to no experience running one, and that sounds like the good makings of a train wreck for the property owner.

      Someone else above already mentioned it (I think it was @Drew Sygit ), but I'll ask it again - if you're impressed with the STR model, are you planning on converting your existing LTR to a STR? Would you allow someone else to come in and run a STR from your property?

      Finally, netting $3k with 3 properties in 2 months, assuming you can keep up that pace, extrapolates to $18k per year. That's not very much money for that level of risk for both yourself and the property owner(s). I'd consider it safe to say you haven't subtracted your true costs of operations out of those figures (replacing towels, furniture, etc) nor considered the workload hours or tax implications.

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