All Forum Posts by: Lisa Marie

@Kyle Smith If I was a guest myself, I would not want to deal with a charcoal grill, especially those ugly bare bone park grill. That’s for people to use for free in public venues. If I am paying thousands of dollars to stay in your property, I want convenience and I want something similar to what I use at home, which most likely is a propane grill. Faced with an unfamiliar grill, I will either burn or undercook my food and then I will blame the cheap property owner for not wanting to spend $300 on a real grill. Not to mention the fact that if I want to cook it again, I will have to clean out the used charcoal. Am I going to carefully scrap it into a garbage can? No. You are lucky if I dump them in the landscape instead of on your lawn. The easiest way for me to express my displeasure? Docking a star on your review.

I have a propane grill at my rental and my insurance company asked me to show them pictures of where it was. They specifically said it needed to be at least 3 horizontal feet and 6 vertical feet away from any building or fence or siding. I had it by the pool but one guest carried it up onto a second floor balcony which was no more than 4-5 ft wide. After that, I moved it back down to the original spot by the pool but used some left over ceramic flooring tiles to build a little platform for the grill. It has stayed put since then. 

@Elizabeth Chan Or you can find an unhappy STR owner who is ready to fire her current Property Manager but doesn't want to take on the management herself. The house is already fully furnished. You just need to upgrade a few things to make it stand out. That's what I did on the other end, I.e. I was the property owner and signed a contract with an arbitrageur. He agreed to invest a minimum amount of money into the property and I agreed to a 4 year contract to allow him to recoup his investment.

There are other owners like me out there, especially in today’s market. You just have to find them at the right time. Most PM requires a 3-month notice for termination and it will take you 2-3 months to find a couple of these owners (either through BP classifieds, Facebook, or cold calling property owners in the neighborhood) and another 2-3 months to negotiate a contract with the owner, then 1-2 months to do the renovation or upgrade or just getting a handle of everything about the house. So if you want to have this arbitrage business ready for 2024 spring/summer peak season, right now in August 2023 is almost too late but you may still be able to do it. 

@Fakaradin Floyd Congratulations! 

Do you mind sharing the link of the property? Would like to see it. And if it’s somewhere my husband and I often travel to, we may even book it sometime.

Also would be curious to get some financial breakdown if you are willing to share. What’s the typical LTR for this size property in the area? Are you paying above market rate to the landlord or just at market rate?  When you fixed the leak, did you pay out of your own pocket? I think the landlord should have paid for it since any tenant, long term or short term, should not have to tolerate a leak.

What’s your projected occupancy rate and ADR? What’s your projected expenses? At the end of the year, if you hit those projections, how much net profit would you have? 

@Tony Green Yes we signed the contract.  It will take effect in Jan 2024.  The arbitrager pays us a fixed monthly rent and he keeps the spread (or pays out of his own pocket), depending on how well he runs the business.  He will give us 2 free weeks of stay every year -- that's important to us, because we get to enjoy the house and can keep an eye on the condition of the house.  Property-wise, we the landlord are still responsible for the repair or replacement of major items that a typical LTR landlord will be responsible for, such as major kitchen appliances, A/C, hot water heater, and of course anything structural to the house.  He will be responsible for anything else.  It's pretty straight forward if everything goes as planned.  The tricky part is to imagine the scenarios when things may not go as planned and figure out how to protect ourselves. For instance, whichever party wants to terminate the contract in the middle of the year has to pay the other party a hefty penalty.  Also, he plans to invest some of his own money to upgrade/refurbish things.  To protect his investment, we agreed to a multi-year contract.  If we the landlord want to break the contract before the end of the multi-year term, we have to pay him a pro-rated fee to reimburse his investment.  

My feeling is that even though we structured it to be like a regular LTR as much as possible, ultimately this is still a partnership and the two sides have to have a certain level of trust/respect that's beyond a typical landlord/tenant relationship. 

For the right people (landlord who wants hands-free ownership but achieve higher than normal LTR rate, and arbitrager who has the skills and extra bandwidth, AND has confidence in their own ability), I think this kind of arbitrage model is a win-win.  Obviously we won't know how it turns out until a few years from now.

@Fakaradin Floyd,

First of all, don't get discouraged by the naysayers. STR Arbitrage can be a successful entry point for somebody with the right situation. My husband and I are on the other side of the table -- we have a property in Virginia Beach and we were looking for somebody to do the Arbitrage, because we don't like the current PM and we have zero desire to manage it ourselves. We found somebody on this forum who was successful at managing his own STR properties and had connections in Virginia Beach. We are about to sign the contract with him in the near future and the arbitrage will officially start in 2024.

Having said that, I am going to offer you some advice that you may not like. I said earlier "STR arbitrage can be a successful entry point for somebody with the right situation". I want to emphasize the phrase "right situation". I don't think you are in the right situation. The biggest obstacle you are facing is that you have zero experience. With the price of the real estate where it is today, you will need to pay the property owner a significant amount of money as the monthly rent to satisfy the owner's financial needs. Then you need to be able to earn at least $1000 more in profit (after subtracting all the expenses) per month above that rent to make it worthwhile to yourself. Are you that confident in your ability that you can do that, even though you have never done it in the real world? Even if you are that confident, the property owner may not be. The last thing the owner wants to see is for you to want to break the lease 6 months into it because you realize that your STR income doesn't cover the LTR rent.

I know it's a chicken-and-egg thing -- you can't get the experience if you don't have a property, but nobody will let you manage a property if you don't have the experience. That's why most of the other people have suggested that you find a way to buy a property yourself, and cut your teeth on managing STR (or even LTR) with your own property. One of the 2 things will happen after you try that for 2 or 3 years: you are really good and make a lot of money and have a track record to attract other property owners to do arbitrage with you (that's what happened between us and the guy we are about to sign a contract with), or you are not very good or you don't really enjoy doing it, so you either sell the property or let other people manage them. Both scenarios are better for you than what you are doing right now -- spin your wheels sending out mass mailers. Come back to me in 4 or 5 years, and show me how you have done with the STR properties your owned, and I may be interested in letting you do STR arbitrage on my beach house in Virginia Beach.

Finally, I noticed that you are a Software Engineer at your day job. What about focusing some of your time and energy to make yourself a better Software Engineer? It seems that you can more easily increase your earning power by $50k or $100k over the next couple of years by doing that than through STR arbitrage. A lot of newbies come to Real Estate because they are miserable at their day jobs and look at this as an escape. What they fail to realize is that if they don't have the IQ or EQ to thrive at their day jobs, they are going to be equally miserable at Real Estate. I am not implying that you are that kind of people. I am just saying that most people have a better chance making more money by trying to be better at their day jobs and win some raises and promotions, instead of entering a new career in Real Estate.

@Ke Nan Wang,  appreciate your input.  I guess we will go with a regular real estate attorney.

@Sarah Kensinger, we have a person already lined up to do this. My husband and I interviewed 3 people who were interested and picked this guy, who we felt most comfortable with. He had 2 successful STR properties himself and he seemed to be an upstanding guy. Money is actually not our #1 priority. We want someone we can trust and can have a long term relationship with. Hopefully he is the right one. Sarah, do you have recommendations on somebody else who may be interested in taking on an arbitrage project? We would be happy to talk to that person just to get to know each other, in case something happens with the current guy. Also, if this arbitrage model works, we may buy another property and do it again, which means we will be looking for another partner.

Resurrecting this thread.

@Pandu Chimata, @Ke Nan Wang, @Sarah Kensinger, do you guys have a recommendation on an attorney who has experiences with STR arbitrage? My husband and I own a STR rental property but we are tired of having to manage the PM and still getting a mediocre performance. We have been discussing doing an STR arbitrage deal with an experienced and successful STR investor.

We have agreed on all the terms and conditions, and addressed all the possible scenarios - who is paying for what, and what happens if one party wants to terminate the contract, and etc. We have a document that's written in plain English, now we need to each hire an attorney to review the document and translate it into legalese. I know we could just hire a run-of-the-mill real estate attorney, who will just take a LTR contract and add a couple of paragraphs to fit this application. It's probably ok, but I am hoping that if we are paying the money anyway, it will be nice to have an attorney who has worked on other STR arbitrage contracts so that he/she may point out scenarios that we haven't addressed and help us fine tune the contract even more.

Appreciate any recommendation or insight you may have.

@Arsen Atanasovski were you able to find legal help with your arbitrage contract? I am in a similar situation and need to find an attorney who has experiences with STR arbitrage. Our 2 parties have privately agreed to the terms and conditions (and addressed all the possible scenarios as far as we can think of), but we need to get the document "translated" into legalese. I also would like to have an attorney who has experiences with this kind of deals to provide insight on what other scenarios that we may have missed, so that we can address those in the contract.

Appreciate any help or guidance anybody on this forum may provide.

@Alvaro Arango I have been watching that area for 2 years and still haven't pulled the trigger. There are many houses for sale right now, but the prices are still inflated. If you plan to self manage and are experienced at marketing, you can still do well, but if you need to rely on PMs, the current STR market supply and demand equilibrium is not favorable, especially at today's the mortgage rate.

Do you, the property owner, obtain the STR insurance or do you make the arbitrager do it? As the owner, you want to be the recipient of the policy payout if there is damage to the house, but the arbitrager needs to be covered for the liability (the property owner needs to be covered as well). Would it be easier if the property owner buys the insurance and put the arbitrager on the policy in the same way as you would for a Property Manager? Obviously the insurance premium will have to be included in the rent.