$47k/Month in Rent & 0 Doors Owned through Rental Arbitrage
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- Опубліковано 11 лип 2024
- Rental arbitrage is a form of subletting that allows long-term tenants to make massive cash flow off of short-term rentals. Someone who’s done this to an extreme is Rafael Loza. Rafael was working the night shift as his W2 job when he found out about short-term rental arbitrage. He sat on the idea for a few months, but ultimately tried out the concept on an apartment. This one apartment took home a massive profit, allowing him to quit his job and scale to fourteen units in just nine months.
Now, Rafael has twenty-four active units, all grossing thousands of dollars a month in rent for him. Back in March of 2020, Rafael was projected to bring in forty-seven thousand dollars in revenue in one month alone. But, the pandemic hit, forcing him to pivot, switch strategies, and take advantage of the flourishing short-term rental market. He has his sights set on ownership, but now he’s simply raking in the short-term stacks.
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Episode 520
Show notes at: www.biggerpockets.com/show520
0:00 Intro
2:49 Quick Tip
3:24 24 Units Without Owning ANY Property
8:49 What is Rental Arbitrage?
14:13 Smaller Startup Costs for Arbitrage
17:14 Cash Flow vs Long-Term Appreciation
22:23 How to Pitch Your Idea to Landlords
34:59 A 2020-Sized Pivot
40:01 Negotiating Lease Terms
42:51 Deal Deep Dive
49:24 Famous Four
If you are reading this right now, I wish you the most ABUNDANT year of your life.
Thank you!
Love our hosts! Very practical and focused.
This is one of the most informative episodes I've seen. Bravo!
Great job Rafael. It was great meeting you in New York last weekend. Keep it going.
This is a great video with tons of good information. Awesome cast. Ashley and Tony, you guys did great as hosts. Thank you
Very informative and much appreciated. Currently working on our own projects and look forward to more excellent content.
Watching your interview was a pleasure; it was educational and I learned a lot. This is a show that I strongly suggest.
Congrats Rafa! Super happy for you man
Great information!
One of the best informative video that I’ve watched .keep it up
Great show guys
Brilliant idea! This guy is awesome. Thanks for sharing brother...
Great show
I could have sworn the male cohost was David Greene; he sounded very similar to him when I heard this podcast episode through ITunes. You did a great job, Tony and asked top-notch questions. Rafael was a solid, informative guest.
This is EXACTLY what I've been looking for to explain what I want to do. THANK YOU SO MUCH for this episode!
You guys are awesome! Great job!!
This was such an amazing podcast! Very informative.
Great episode! Definitely have me thinking...
Love seeing and hearing .. guest , hosts .. brings new voices and insight .. Brandon and David will always be the OG ‘s of .. Bp
I just stumbled across this episode a few days ago. I’m so happy and thankful for this. I’ve already consumed a ton of info on this. Im forming my LLC, creating a website and speaking with Rafa or a member of his team in a few days. Best of luck to everyone with your investing.
Absolutely great video content! Love it. Wish you the best of luck and success!
Such useful information I must watch everything!!!!!
Dam , this Rafael guy is good ,at what he does . Just great content .. BP
One of the most direct and comprehensive videos on How to do Short Term Rental Arbitrage.
FACTS. This really put the business into very straightforward terms and made it a much more realistic model to consider. THANKS!
Amazing content and answer to why some fail and some win.
Rock star man! Great successful story!
Bravo! One of the best episodes ever. Rafa, how do you furnish the places? Do you hire an interior decorator? And budget? Thanks!
Very helpful
I enjoyed this podcast learned something new
You're exactly who I'm looking for. I'm looking for someone to arbitrage my units. I get higher than normal rent and you manage the properties.
What market are you in?
@@jonathantate6422 The market I'm interested in having someone arbitrage is Wichita Kansas. May not work with my units, but I'll let the STR entrepreneur make that determination.
Why not just get a property manager?
@@gloriousgamers6172 More money, less cost and risk.
A manager I have to pay. If a tenant damages a place I pay to repair and clean it up.
I you rent it from me you're responsible for ALL damages. In fact the contract can act as sort of a triple net lease.
🔥🔥🔥🔥🔥 amazing !!!
I love this idea. I hate the idea of the traditional route and this is exactly what I care about: cash-flow.
Amazing!! So much great info!! Are you offering more than market rent per month??
I’m in Myrtle beach area where there are numerous property management, rental companies, and even Airbnb brick and mortar right on main Hwy 17. What’s my best way to compete against these already existing companies who have a good hold on the area already?
BLESSINGS 🙏🏼🌹
Good video. I definitely didn't think about hitting the small mom and pop owner. How does this model work in city that aren't tourist attractions?
Go to the city that attracts tourists it's not like brrrr method where u have to live there
I so agree with Rafael on using a strategy such as rental arbitrage to build capital to then segue into other investment strategies. It's exactly why I wholesale right now even though my long term goal is to build passive income.
I'm so surprised rafael doesn't have a youtube channel. I hope he starts one to share his experience!
Congrats guys!!! Ashley where is your Airbnb?
Question: how do you deal with the damage that people do to your furnishings or floor? I have eaten ALOT in ruined mattresses, water-stained funishes on bedroom furnishings, scratched LVT on our rooms. How do you determine what to charge them? I'm clearly lousy at this!
From what I’ve learned so far you charge them a deposit. If they cause damage, you take it out of the deposit. If you’re on Airbnb they have you covered with a million dollar policy, as well.
@@dominiquewhitehair1999 in most instances, their damages are NEVER fully covered by their deposit, not even close…I'm sure this is what the poster is saying
@Maria Alexandria
Oh that makes sense. But, if you’re going through Airbnb, etc don’t they have a $1m policy?
Kind of disheartening that this very valid and pertinent question has yet to be definitively answered 4 month later.
Hey, a few things here; 1: never rely on Airbnb policy because you get what the reps think you should get after you file the claim 2: charge a deposit 3: have your own insurance, if it's major damage, you can file a claim. 4: implement things to mitigate risk, if you keep getting trouble guests, look at how you're vetting and the type of customers you're attracting. There is probably something there. We can go into a lot more detail but to keep it short, that's the basics.
I have 5 one bedroom apartments in 2 triplexes with this model. It’s great.
what do you advise for/how to search for the right property
I like how he's strategic with a long term goal.
*Here I am with 68 STR doing only doing $16k/month in PROFIT. I'm amazed at how some people promote this and yet aren't super transparent about theirs costs and the DIFFERENCE BETWEEN REVENUE & PROFIT! I guess you need to sell courses , information or a "cheat sheet" to hedge your down side and leave new other people holding the bag*
If you don’t mind me asking what’s your pricing strategy? What software are you using for dynamic pricing? What does your typical listing look like? And last but not least what market are you operating in?
@@lacton7814 We use Wheelhouse & every aspect of the business has been audited to ensure we're operating efficiently. If you truly value your time & outsource all mundane tasks & are only left with managing your manager, the profit margins are razor thin to the point where it isn't worth. I own 24 of the 68 units so the depression & equity build up is the only reason why I'm still doing STR's to fund other acquisitions.
Poor mans real estate investing. Way too much risk. Ordinances change, rates dip, etc and you’re stuck in all these leases with no or low income.
Your right but as long as you have paying people how can you loose. I agree though in my experience renters want assess to basics and many are not preoccupied with making sure they can pay their rent and utility bills first.
Do you get a STR permit for every unit you rent? Apparently you are required to post a permit number and you are only allowed 1 STR. Could you elaborate more on that?
This is a pretty cool idea! I don't think it's for me because the tax on it would hurt (I'm not sure how America works, but in Australia, your income is taxed at a higher percentage the more you earn.), and I'm more concerned with equity and appreciation.
ouch
That's actually , though seems small, a great point about the fact " this place looks the same year round...clean" fantastic point to a property owner.
(Lol ok, hadnt got to the part yet when Ashley mentions same thing. )
I love video. This is exactly his I would love to start building my rental property empire. Any help is welcomed 😁
Hi Rafael, could you share your location, what city/state you live in…great show anyway
One more thing, lol …how do you avoid getting younger people throwing parties at your rentals? You guys need to do one more episode on this for us 😍🙏🏼
You have to vet better, I am 26 so I kinda know what to look for when renting to anyone younger then me. I am on these fuckers like white on rice lmao but not everyone knows what to look for or how to read someone/catch their angle. If anyone is under the age of 27 generally I ask them why do they want to rent my airbnb and who will be attending, going in and out etc. These are not questions that should be up for debate. This is your home and or asset and you must protect it at all costs. If a renter cannot answer my simple and straight forward questions they are not worth the time or money renting my place out too.
- Vet the guests
- Use a ring doorbell as it shows you who is going in and out of the unit
- Use Minut noise detectors inside the unit
@@rafaloza 🔥🔥🔥
How do you protect yourself from the landlord putting a stop to the air bnb? For example landlord says it is ok then 6 months later he tells you he doesn't allow? Do you just simply get it in writing on the lease that air bnb is allowed?
you probably haven't finished the whole podcast but he says that you should definitely get on a legal contract that during the period of the lease you can do short them rentals. If you guys agree on 6 months then after the 6 months he changes his mind he is allowed too.
@@Darnelletienne ok thanx I will listen to the rest of the podcast in the future.
This rental arbitrage sounds like a great way to build capital. Gotta hustle a little with negotiating with landlords to allow it but it can pay off once you get one to give it a shot....
I want to find business partners to just go ahead and purchase a small 8 or 10 unit apt complex and reap the benefits of appreciation as well as not having to worry about any issues with landlord....
@@macknumber9 I can't speak for others but I have found renters more interested in having a place to stay. Many of them are not worried about how they can or will pay for access at asking price. The major problem will be finding people with capital to pay for access to the properties. Finding other professionals who can be bought to preform task is much simpler.
Curious as to what the systems are that Rafa talks about at 5:18?
Be careful everyone, big profit margin comes with big risk. I know a guy who built up an arbitrage empire and it came crashing down hard. Rafael is doing a better job to mitigate risk, but at the end of the day you are at the mercy of code/law change, change of ownership, owners changing their minds etc.
@rafa ! Amazing
Rafa, how are you doing STRs in the OC when most cities have banned STRs?
That's what I'm wondering
Sublet clause is great! Maybe a natural disaster (COVID) clause.
How do you do str in a place like LA with the str restrictions in place? It took months to get the license on my own apartment. Even without rent control is still very difficult to get a str license and you can't list on airbnb Airbnb without the license. It's not adding up to me.
I was thinking the same due to the housing shortage in California
Any issues with city’s short-term limits?
It's not called Arbitrage. It's called sub-leasing. And most landlords do not allow sub leasing. I'm wondering how he was able to convince the landlord to sub lease. In the California lease agreement, it says you can't sub lease without the landlord's consent. Good to see you are successful at this.
Following
You pitch the landlord on the idea before you sign the lease. A lot of landlords find this idea attractive because you’re handling all the maintenance and paying on time every month.
Aristotle, when you have done 1000's of these deals like J. Massey, then you can name it what ever you want.
@@improvechannelonrealestate5487 But that fact of the matter is that this is sub-leasing. Not arbitrage. I'm not going to call wholesaling something else, like pawning.
I’m assuming find some kind of smaller apartment complex to do this
Also, what about insurance? The owner of the property probably has to get extra insurance? And you as the person holding the lease would have to get extra insurance? Also, are you managing everything yourself as far as dealing with customers on a daily basis?
PS I absolutely love you guys! I’m so grateful for all the helpful information you share! I am so ready to buy my first investment property! I can’t wait to get to the point where I can meet everyone in bigger pockets and be on the show! I will get there!
In seasonal areas like Florida, how does that play out financially? Doesn't the big bucks paid during in season get eaten up during out of season?
Phenomenal, I think I may permit rental arbitragers to do this with my house.
Do you have any homes available? I’m a rental arbitrageteur
I want to get in on this
How do you fully furnish an apartment for only $10k? Your apartments on instagram look like they cost way more than $10k. When you first started did you let the apartment maintenance work on your apartment like a normal tenant or did you personally fix maintenance issues?
Can somebody tell me the name for the book on real estate, his favorite one.
Good episode. Great way to make some cash, but not without a longer term wealth strategy. Read Rich Dad Poor Dad books!
Did Rafael list his rentals on air bnb or some other form or listing.. interesting , creative investing
Question?.... if you need 2yrs experience..how did you do your 1st can you please explain thankyou
Can you do short term rentals in NYC
Quick question: What if the owner of the property is also doing Airbnb on the same rental as the Rental Arbitrage??
Hello, I was wondering if you had any experience in Los Angeles County? 2 of my partners are getting nervous due to all the new regs. I only want to do rental arbitrage (I lease the apt, and I rent it out) I figure, as long as the owner is ok with it and I have all the proper insurances and lease addendum, I should be good, right?
I have the same question as well. I want to get started with rental arbitrage in LA country but I noticed there are regulations in almost every city. Did you come up with a solution for your rentals?
LA city requires you to live in the house. Most cities in LA county do. Lots of regulations coming in California due to short term rentals worsening housing shortage. I would pick a different city for you business.
Raffle you're so amazing i could like to be on your team, I'm a Newbie with bigger pockets I'm ready to invest
My question would be if you are locking up these rentals for 6 months to a year are you paying the total run for that time period upfront??
Buddy not playing no games
How do you find your short term business renters? Also, the nurses? Is there a place where you advertise, other than Airbnb?
Furnished Finder for travel nurses.
Is there a way that I could possibly get Rafael to mentor me? (Currently 19 and I’m going to school soon to get my real e-state license) I have no experience in sells, business, etc. I don’t have a business nor do I know how to set one such as this up. I’d like to learn all this as I feel like it would be very helpful and beneficial for me in the the short term long run (to get me up to be able to own actual apartment complexes, and above). I’d like to learn where I would need to start, all the things I would have to do, etc. Working for the long run, and not short (meaning not spending the money I get right away, but instead reinvesting it back into the business. I don’t have much experience with phone calls either, but if I need to call x amount of apartments a day, I’d do it. I feel as if it’s necessary to build your ability to sell your pitch, and to be able to have eye opening conversations that could change a lot. I’ve been trying to find mentors for ideas that interest me, that I could see myself actually getting into, but I haven’t had any successes.
I did no hear well. What is his favourite real estate book?
His biggest problem ... when he decides to purchase ... those properties could cost be tens or hundreds of thousands dollars more!!!
Is there any legal risk to the owner of the apartment buildings since they are now being run as hotels and not residential?
Great question. Following
And in some cities that prohibit Air bnb, you can still apoeal to the city to allow short-term rentals to medical or traveling business people.
The guy probably knows pimp and prostitutes so they come out n work almost every night ..
How do you screen tenants?
Since you have a leasing contract Between you and your landlord . Your landlord allows you to rent your apartment to Third Party?
Take a shot🥃 every time Rafa says “right”🥴
🤣🤣🤣
Right?
How do you find enough short-term renters?
Do you need to open LLC for this?
Definitely should to avoid personal liability.
I have one house and that's what I'm doing subleasing believe it or not 6K a month 4K after expenses
What do these property managers get if you come in and say I’m a short term rental corporate leases
you make all this money what does the property manager or owner to this mom and pop get.
Do you give them a security deposit do you do anything any money do they get anything
Or are you just paying their rent and you’re renting it out for more
You should be able to retire at 65 without having to have a million short term units lol
In what city is he doing this in??
What did you do during the pandemic when no one was staying in bnbs?
I have no desire of being 60years old letting my body deteriorate even faster by my lack of physical on a beach, I do want a large amount of passive income
You can do physical on the beach
I don't understand landlords saying they work so hard. WTF when I was a landlord my renter who paid me got almost nothing of long term value in exchange while I paid the bills and made a profit sometimes.
@@donaldlyons17 weak troll. Clown
Is the 47k a month revenue or profit?
He's making $1,500 net from one unit every month? What's his total net from all of his 23 units? Did he say that at some point during the interview? Maybe I missed it...
How can i request for Rafael to be my mentor?
I did $105k in net profit on $200k in revenue this month. Would you want to interview me?
small units 8rooms
why does it cost $12,000 to set up and furnish a 1 or 2 bedroom apartment?
does he pay the entire 1 year lease upfront?
Following. I was wondering this too when he kept on saying it.
Furnishing alone can easily cost $12K
@@larsrefvik2456 How? I've furnished my apartments for way less than that.
@@larsrefvik2456 who spends $12k on furniture on 1 bdroom apt?
Who was the mentor
I don't care what anyone says, you still need MONEY to play the game, period.
Of course you do. I didn't hear anyone say you don't need money for startup.
Air BNB is in the toilet right now.
David changed color
dang Ashley is gorgeous… great episode too
You must find cheap maid services. I don't know how it's profitable without a cheap maid service.