All Forum Posts by: Richard Elvin

I don't know that I agree that "Doing arbitrage is a low-risk...". (Not directing this at you @Yael Lederman, you just mentioned the concept in this thread and I thought I would post what I've been considering.)
I've noticed that the idea that somehow arbitrage is "low risk" keeps popping up in the forums. I've been trying to find arbitrage analysis numbers, and failing, so I've tried to account for things myself. First of, it is less cash out of pocket than a DP on a condo in Miami, but so is throwing $1,000 out a window. Just because the entry is less doesn't mean the risk is less, ie, a condo in Miami has a possibility of a return on investment vs the guaranteed loss of throwing $1k out a window.

A quick Google of "cost to setup a str arbitrage" shows a very general $5k-$10k. But that's just the cash out of pocket. In reality, as several have said, a multi-year lease is necessary to protect the investment of furnishing an str, so that needs to be factored in as risk. Another quick Google search has "miami average rent 2023" at $2,900/month for a 1/1 condo. So factor that in for a 36 month lease and we have $104,400 of lease risk. For the sake of quick analysis (and because most leases have some type of escape clause) we'll only factor in the first, last, and deposit of $11,600. So that gets us to what I feel is an optimistic $16,600 to $22,600 for real startup costs.
Let's look at numbers!
Overly optimistic arbitrage startup cost: $16,600.
Monthly income (Rabbu) $3,733 - Rent $2,900 - str insurance $? (I don't know this) = $833
Multiply rent x 36 month lease = $29,988
Total str rent $29,988 - startup cost $16,600 = $13,388 
So $13,388 is close to best case scenario after 3 years, without factoring in str insurance.
True risk is actually startup cost plus full lease = $109,400 and the risk of being sued if the lease agreement isn't fulfilled.
Is a real risk of almost $110k worth the $8k (minus insurance) return? Maybe for some. 
Another point, FHA loans are 3.5% down and USDA can be 0% down. That $16,600 could get you into a house hack.

Anyway, this has been on my mind. Thanks for reading and letting me get this out of my system. :)

 I think the point about being nearby is that rental arbitrage doesn't provide a lot of cash flow cushion, ie, you may not be able to afford to pay someone to do the small stuff. If you are renting it at ltr rates, then subletting at str rates, are the str rates high enough to pay for utilities, cleaning, maintenance, repairs, etc? What about cash input for furnishing the ltr as an str? 
I'm really curious about how the numbers work out on arbitrage and would love to see a breakdown of this. (Now I'm going to have to research this. Down the rabbit hole I go!)
Do you have numbers you're analyzing? I'm geniunely curious!

I've looked at purchasing an str on CSB. @Sarah Kensinger also mentioned it, so at least two BP'ers have heard of it. lol 
I'm currently researching the gulf coast vs N GA vs Smokies. My wife and I plan to buy a rental by the end of the year. CSB was on my list, but prices there are currently excluding me from wanting to participate. 

I'm assuming, based on the city you have listed, that when you say you spoke to the county it is Douglas county? If so, then Horizon Public Health is the licensing agency. Every STR is required to be licensed.
Google Douglas county short term rental regulations and you will be able to quickly find the local regulations.

 What Chris said. Make sure you let them know you will be occupying the str. Owner occupied seems to be a lot less restrictive, as an overall generalization. 
It sounds like a great plan!

@Joshua Watts Love it! Very detailed, makes it really easy to follow. Thanks for sharing and best of luck on the next project. 

@Angela Holmes
Welcome to BP. I really like the track you are on and I think you'll be very successful! Have you thought about paying all cash and then getting a HELOC? There are a few national banks/credit unions that will to 80-85% of appraisal. That would be kind of like having your cake and eating it too. You would own the property free and clear, while having ready access to the cash when another opportunity arises.
PenFed credit union doesn't list it on their website, but they do 80% refi on investment properties. My brother refi'd with them within the last 18 months. I can't post a link on this site, but google pen fed credit union. I'm not affiliated with them in any way, aside from my brother having done a refi with them. Feel free to dm me if you want. I can get you the name of the guy my brother worked with if you would like. (I don't remember it offhand, I would have to get it from him.)

Thanks for setting this up!

Awesome!

Welcome!