Hey guys, So I live in Arizona where its much cheaper to buy a property. I make around $130K a year in finance and can comfortably acquire 1-2 investment properties a year. I try to keep my cash on cash returns to 15%+ after taxes. I currently own 6 rental properties that net me $48K a year after taxes at an 18% cash on cash average in what I assume to be pretty hands off investments. I self manage but have plumbers, maintenance, and other people on call who help me take care of any issues. I spend 0-2 hours a week managing eveything. My question is this. Has anyone had experience with AirBnB arbitrage? Instead of a traditional rental where you put 10-20 percent down, you instead sign a lease with a landlord and with their permission rent out their property on Airbnb? For example, you rent a place for $2K a month and then Airbnb it for $4K a month. After expenses and fees you net $1.5K a month. Annual cash on cash return is 1.5K * 12 months = 18K. Divide that by the cost to furnish the place lets say 15K. 18K/15K is 120% cash on cash return. I’m asking because I think I could scale things faster than Ive been doing with traditional longer term rentals. Instead of acquiring 1-2 long term rentals a year... I feel like I could get 4 of these AirBnBs. Even if I only made 1000 average profit a month(obviously have to pick good properties) thats 1000*4*12 = 48K and Ive doubled my yearly cash flow. Do this for two years and then quit my job and live off the $150K semi passively working maybe 10 hours a week
I used to do Airbnb in Minneapolis for my spare room. This is a really cool idea, I definitely want to think on it as well now!
Whats vacancy rate for your properties
I’ve never had a vacancy on my long term properties but have budgeted for 5 percent. In fact I’ve had people commit and then back out but I kept their deposits so my vacancy rate is technically negative ? 😂
Very nice. Ima enter your market 👀 i love cash flows
I’ve done this and it works well IF the property is unique in a touristy enough location. With Airbnb, you want to look at hotel rates in the area and that’ll be your pricing metric
Where have you done this? Cities? Profits? Furnishing cost? Would love to know details
I'm shocked to hear an owner would let you sublet their property on airbnb.....ie let strangers pay to stay in their property when they are legally responsible. But kudos to you if you can make it work profitably
I’ve never done it but have talked to two owners interested. The pitch I make is their home will actually have less wear and tear on it as it will be professionally cleaned multiple times a month whereas a normal tenant might hardly ever clean. To mitigate risk they have to have a short term rental clause in their insurance which is a few hundred dollars more expensive then standard rental insurance so I offer to cover the cost.
If I were them, I'd demand a cut of your revenue.....(and I wouldn't care about that cleaning argument, tenants always make messes and are on the hook to clean it the end anyway), but good luck....
Check out Tweener homes: tweenerhomes.com. Safer bet than Airbnb
What about support/housekeeping/damages ? Also where in Arizona is the rental market good?
I live in the Phoenix area and my long term rentals span Phoenix Gilbert Mesa Tempe. Are you referring to housekeeping and damages for Airbnb? For my long term rentals the repairs and maintenance and capital improvements are baked into my 48K profits a year. Really I haven’t had many of those yet so I’ll probably have closer to 60-70K a year. But you always want to account for that stuff happening
Right. Airbnb guess can be a pita. A lot more hands-on.