All Forum Posts by: Jordan Brooks

I started doing short term rentals a few years ago and have loved the arbitrage model. It helped me get started in the industry and it has generated cash flow that allows me to grow my business in other areas.

I recorded a podcast specifically about how to do arbitrage the right way by being transparent with the landlord and providing value. (Str success stories episode 72, https://podcasts.apple.com/us/podcast/short-term-rental-success-stories/id1457263788?i=100048728161)

While arbitrage has worked well for us, we only have two properties under this model because we are aware that we are assuming all the risk. We pay for the rent, we pay for the furniture, we pay for all the expenses associated with it. We don’t want to be over leveraged like so many others who have rented 40+ units and when times are hard, they can’t pay rent.

For this reason, it has to be a really great deal for us to take a property in arbitrage. We prefer to buy or manage.

As long as you understand the risks and prepare for them, it’s a fine model that can help you get some cash.

Thanks for your feedback. Im glad to her you are doing well with it. I am going to listen to your podcast as soon as I have some time later. Thanks again :)

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Originally posted by @Michael Baum:

Hey @Jordan Brooks, CA can be a real PITA. It is not landlord friendly.

Arbitrage is generally a very bad idea for most. Do you have a few hundred thousand bucks as a backup? There is a distinct possibility that you could end up on the hook for the lease? What if someone gets in there and doesn't leave due to pandemic rules?

The only people that I think could do arbitrage is someone with a large portfolio that generates excellent returns. That way they can dip their toes in and the risk is minimal.

Like the others have said, do a search and you will find a ton of info here.

Is someone not leaving an Airbnb really a possibility even in the pandemic. I know their bookings slowed down for a bit, but now they are back up to par, but I havent heard or read anything about anyone refusing to leave? I figured thats worked into the terms of Airbnb. However, I plan to start with just 1 and if it goes sour I will just hold the lease and live there myself. Possibly just rent an extra room out through ABNB if it comes to that... I am working on going through the forums now as that seems to be the general consensus. Thanks for your time & input. It is greatly appreciated. I have already seen more than a few people mention you on here so Im sure you know what youre talking about. Thanks again.

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I see someone already mentioned using Airdna.co rentalizer feature. You may also use some automated pricing service like wheelhouse or beyondpricing as well.

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I am completely new to real-estate, but have been thinking about doing short-term rentals through Airbnb for quite some time now. I've done quite a bit of research/market research and have a decent amount of capital saved up at this point so Im ready to try my hand at it now. My target market is in the Orange County area around Huntington Beach.

Ive done a lot of research already, but just looking for some advice or info directly from someone with hands-on experience in the field. Any suggestions or recommendations would be greatly appreciated.

One question I do have is: how much cash is a good amount to have starting out w/ 1 property and planning to expand to 3 by the end of 2021? Btw I am looking to rent these properties w/ an arbitrage agreement w/ the landlord or through apartment complexes. I dont own any properties of my own... Yet.

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Originally posted by @Robert Herrera:

@Jordan Brooks I would watch AirBnB Automated I n YouTube. It’s a great resource for what you’re looking at doing. He does this on a massive scale

Will do. Thank you

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Originally posted by @Account Closed:

Whats the spread between long term lease and expected short term net profit? Whats the breakeven occupancy? You will have to furnish and equip the place so that would be the upfront cost. If I was the property owner Id rather rent to a regular tenant. Whats the upside for me to let you do this? Unless you are willing to pay significantly more than market. And then there's HOA and city regulations etc. The owner still bears liability for all this as well as general liability. Doesn't seem like a good idea from the owners POV.

Breakeven occupancy is 50%. Average occupancy for the area & type of home Im looking at is 69%. Yes, furnishing would be upfront cost unless I rented a place that is pre-furnished. Upside to property owner is that Airbnb offers 1,000,000 liability coverage so it would actually decrease the owners liability. If necessary I may purchase additional insurance. Also, it is in my best interest to keep the owners property in peak condition as well as maintain a business relationship w/ them long-term VS a regular tenant who may move after a year. I could also pay them an additional premium of 10-20% of profits. At least at first until my LLC has an established reputation & portfolio. As far as city regulations there are none that are hindering in the area Im looking at & I would look into HOA and not rent anywhere that has regulations that would be detrimental to my business plan. Of course regulations can always change so there is that risk.

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Originally posted by @Kyle Keller:

@Jordan Brooks

Oh, interesting, I've never heard of doing that before. My initial thought on that would be, if you have the money to buy something, wouldn't you want the equity gain, appreciation, tax breaks, and cash flow that come from a purchase?

For the money with doing something like that, I would think you would want enough to cover a couple months rent in case you can't rent it out for the first bit, otherwise the cash flow should cover any expenses you have and then some.

I only have about $50k so not enough to buy anything outright or I definitely would. I could put a down payment on something, but then I figure Id be stuck with a single property whereas if I simply rent I could do multiple and exponentially increase my profits with each one.

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Originally posted by @Kyle Keller:

@Jordan Brooks

Is an arbitrage agreement with a landlord a rent to own situation? I'm unfamiliar with the term arbitrage.

As for the amount of capital saved for the three properties, I wouldn't worry about having the capitol ready for three before you have one. You need to get the first one before you get the second one, so be on the lookout for good deals now and just get started.

An arbitrage agreement in this situation is basically an agreement that says I may rent the property from the landlord for the purpose of renting it out as an Airbnb. It is not necessarily a rent-to-own agreement, but that could be an option.

I only ask about 3 properties because I know that I may not be substantially profitable from 1 property alone so just wondering what a good starting point is with my plans to scale up.

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Originally posted by @Marc Winter:

@Jordan Brooks, you do understand that arbitrage, like leverage, is a two-edged sword? It all works great in theory, but remember, you are on the hook whether you rent as a profitable air BnB or it stays vacant and you have no income.

Another lockdown, anyone?

Yes. I am aware of that risk, but there is always a similar risk in almost any business. That is why I am doing extensive market research in my target area before I jump into anything.

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All Forum Posts by: Jordan Brooks

Jordan Brooks has started 2 posts and replied 10 times.

Post: New to STRs. Looking for Advice

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Post: Determine Market Rent for STR

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