💸 $12k with Airbnb Arbitrage

GM. This is Work "After" Work. Where we wrap side hustles in bite size treats. Like Reese's Pieces. The best kind of Reese's.

What we got for ya today:

• 🏘 Airbnb Arbitrage

• 😂 Meme of the day

Time to get goin: 3-4 weeksEst. start-up cost: $3,100Potential return in 6 months: $12,000

AIRBNB ARBITRAGE IS NOT DEAD

When I was going over the list of businesses I've been creating over the years and saw "airbnb arbing", I thought, there's no way you can still make money doing this.

And boy was I wrong. A couple quick google searches and I see it's actually thriving.

Our reddit friends are making a killing. Check this out 👀

Along with that, AirDNA, a popular data software that tracks Airbnb & Vrbo rentals, shows STR's (short-term rentals) are up 55% vs 3 years ago and have been pretty steady for some time now. 👀

So who's to say we can't capture a little slice of this big pie? No one! And that's why today's side hustle is Airbnb Arbitrage. 👊

What is Airbnb Arbitrage?

When you were younger did you ever buy a fidget spinner then try and sell it to one of your classmates for more? Just me? 

Well that's pretty much the same concept behind Airbnb arbitrage. You're signing a lease, paying rent every month, then turning around and turning that apartment or house into a hotel. 

A hotel anyone can come stay in for 1 night, 3 nights, a week. Doesn't matter. Just short-term.

The basic math behind this is you pay a monthly rate for an apartment. Let's say it's $1,700. That makes your daily rate $56.

Have you ever seen an airbnb or hotel for $56 a night? Yeah, me neither.

We're more used to $90-$150 a night. That's where "re-renting" the property for short-term durations becomes valuable. 

You're banking on that daily rate being so much higher than what you're paying that it's going to reach your rent payment, and then some.

4 STEPS YOU CAN TAKE TO GET STARTED:

1.  Look at your local restrictions

Over the years as Airbnb arbitrage has exploded, many cities have put laws on STR's to protect their hotel businesses. 

This means Airbnb arbitrage might be illegal where you live. Usually they do this by outlawing any rentals "under 30 days".

To see if there's legal issues with STR's in your city, call up your city hall and ask or google your area's laws.

If you get lazy and skip this step, this is your city council when they find out what you've been up to:

Not really... but you'll definitely get fined, and we don't want that!

2.  Find a property & run the numbers

Go on AirDNA, search up your city and see what the rents are.

If your rent is $3k/month and your daily rate is $100, will you be able to flip a profit selling rooms for $150/night at an 80% occupancy rate?

The answer on paper is, yes. You'll bring in $3.6k/month, but what about those cleaning, restocking, and utility fees? Now there's no way.

If we had the same scenario but your rent was only $1.5k/month.. now we're talkin! You'd be bringing in $1.6k/month and after expenses, you'd definitely be making money. 

These are the type of things you need to be looking at.

Real life data 

Here are the top 10 cities for Airbnb Arbitrage according to AirDNA.

Takeaways

• Savannah, New Orleans, and San Diego have seen the fastest growth YoY - all these cities are warm places people go on vacation

• In New Orleans, it only takes 4.8 nights to cover rent - that's only a 16% occupancy rate to break even every month.. bonkers 🤯

3. Talk to the landlord

Alright, so you've found a property you think you can make money on. Now comes the hardest part of the whole thing, convincing the landlord to say yes.

Landlords don't like the idea of STR's because they think their property is going to turn into a frat house. Noise complaints, holes in the walls, trash everywhere is what they're imagining.

It's your job to convince them otherwise. This is what you say to do that:

• Your livelihood depends on keeping the apartment in tip-top shape. If it's trashed, you won't get 5 star reviews, and that's bad for business.

• You're running a lucrative business making money. You're not a tenant your landlord has to run around and worry about collecting rent from.

Once you've convinced them, make sure you get it in writing. Remember! Nothings official until it's in the contract.

4.  Start an LLC

One of the downsides of this business is legal issues. 

If someone slips in the shower and breaks their arm, they're going to sue you. That's where our friend Mr. LLC comes into play. 

They can't touch any assets outside what your LLC owns.

That nice car you have. They can't touch it. That nice watch you got. Don't even think about it. 

That's the benefit of an LLC.

Whenever you start a new business, I'd recommend you start an LLC too.

And when you set it up, look into Incfile. I use them for registering all my LLC's. It's simple and easy. Plus, it's free! *subject to state fees*

DOWN THE ROAD 

As you grow this business and add more properties, you'll want to start automating tasks to make your life easier.

Running multiple properties is a lot of work, and you're a busy person. So let modern tech take care of your headaches and look into these software when you're ready:

• Property management system - automates your guest communications, assigns tasks to people you hire, and much more.

• Dynamic pricing app - changes your rates depending on seasonality and holidays automatically.

• Cleaning coordination software - when you hire out, this will save you countless hours of texting and calling with your cleaning crew.

• Payment processor - you'll need one to accept payments from different listing sites (you'll market on every platform, not just Airbnb)

Once you're fully automated and run 4-6 properties, you'll be making a pretty penny with little to no work. Now it's time to go relax on that beach! 

MEME OF THE DAY

This really how it be.. 😂😂

And that's all for today, ladies & gents!

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.