Sarah Karakaian: [00:00:05] You are listening to the Thanks for Visiting Podcast. We believe hosting with heart is at the core of every short-term rental. With Annette’s background in business operation–
Annette Grant: [00:00:14] And Sarah’s extensive hospitality management and interior design experience, we have welcomed thousands of guests from over 30 countries, earning us over $1,000,000 and garnering us thousands of five-star reviews.
Sarah Karakaian: [00:00:28] We love sharing creative ways for your listing to stand out, serve your guests and be profitable. Each episode, we will have knowledgeable guests who bring value to the short-term rental industry.
Annette Grant: [00:00:39] Or we will share our stories of our own experiences so you can implement actual improvements to your rentals. Whether you’re experienced, new or nervous to start your own short-term rental, we promise you’ll feel right at home.
Sarah Karakaian: [00:01:03] Welcome back from the great week. My name is Sarah Karakaian.
Annette Grant: [00:01:05] I am Annette Grant, and together we are–
Both Sarah & Annette: [00:01:07] Thanks for Visiting.
Sarah Karakaian: [00:01:08] This is an AMA episode where you can call in, record a question–
Annette Grant: [00:01:13] And really can’t call in. You have to go to your computer first. This isn’t that–
Sarah Karakaian: [00:01:18] Always dial you in.
Annette Grant: [00:01:19] I’ll just say– no pun intended– dial in you in. I am. I’m just saying this isn’t like old-school radio.
Sarah Karakaian: [00:01:25] No, you don’t call it. You go to our website. You go to thanksforvisiting.me. There’s a big red button at the top right-hand corner that says, Ask TFV. You press that button, you record your question. And if we think it’ll benefit everyone who listens, we will answer it here on the show. So this week we’re going to talk about rental arbitrage.
Question: [00:01:45] Hi, Sarah. Hi, Annette. My name is Celia. I am not in the short-term rental business just yet. I’ve been doing extensive research and listening to all of your amazing episodes, which thank you so much for all of that information. It’s been so, so helpful.
Somebody mentioned to me a little while ago about subletting or I guess it’s called rental arbitrage. My question is, how do you ask the property owner for permission, obviously, if it’s in a state, city, county that allows it? How would you word that?
Annette Grant: [00:02:26] Thanks. All right.
Sarah Karakaian: [00:02:27] We have thoughts for you, Celia.
Annette Grant: [00:02:29] My first thought is I want to let all the listeners know this is not our area of expertise. And there are plenty of people out there that are experts in this space, specifically rental arbitrage. So please seek them out online. But I do have extensive research– not research, experience. I partnered with a developer, landlord, all of the above when I first got started.
So my advice for you, Celia, number one is to approach more of, for lack of a better term, I would go the mom-and-pop route, someone that you potentially already know and lead with full transparency, exactly how you intend to utilize the property by renting via an OTA. I would absolutely start there.
I know there’s a lot of people out there that maybe don’t do that and try to fly under the radar or do their personal property. So number one, I would just lead with exactly your intentions of the property. And then two, I just think much warmer lead if you can, if there’s someone in your personal network that you know, that owns properties that you can really sit down, explain to them how you want to use the property and have a great relationship with them, that’s how I would start.
Sarah Karakaian: [00:03:51] The cool thing is, is in 2023, now that we’re in, Airbnb is no longer this thing where people don’t know what it is or they don’t understand the success it can bring. So the conversation that you have with a landlord is going to go a lot easier than it did back in 2015, ’16, ’17, ’18. So there’s that.
So watch it. Annette, I don’t think there’s any other option than to be completely transparent because you don’t want to break the law and you don’t want to sign a lease that you’re responsible for and not have a full understanding of what that lease means and whether or not you and the landlord are on the same page.
But I’m telling you that it’ll be rare. I think it’ll be more rare now for you to find a landlord who wouldn’t understand what you’re trying to do than back in the day. Also, there are so many people who want to, quote-unquote, “get in on the Airbnb game” but not manage themselves. So this is going to be an easy conversation for you to have.
Educate yourself a little bit, understand what you’re signing yourself up for. You are responsible for rent each month. Make sure you do your numbers correctly. But I think another place, if you don’t have it in your immediate circle, go to real estate meetups. People who are trying to leverage their property in diverse ways, they’re going to love this conversation with you.
Annette Grant: [00:05:03] I know. Sarah and I just went to a meetup recently and there was a plethora of landlords in there because Sarah and I spoke on short-term rentals and they came up to us afterwards wanting to diversify their portfolios, wanting to get into the short-term rental game, but not having the time, the bandwidth or the knowledge. So they were asking us and we’re like, we don’t do that.
So definitely get in the rooms with people that own the properties that you could potentially sublease from them. And then I think when you’re reaching out to them, Celia, just some hot tips here. Let them know how close you’re going to be to that property. Let them know it’s going to be cleaned, maybe weekly, biweekly, the type of care that you are going to you’re going to assume because you’re going to be hosting guests there. It’s different than a long-term rental.
I know I’ve been in some long-term rentals before where it was never cleaned. It was a disaster. I would just talk about how well you were going to keep that property. And then also, really, I don’t want you to get too far ahead of yourself, but you could let them know like if this goes well, you are going to continue to write year after year after year. So they could have a long-term tenant in there, extended periods of time and have that relationship with them. And here’s the best part. Start with one person, see what questions they ask, and then the next time, just improve on your pitch.
Sarah Karakaian: [00:06:20] Honestly, I think, Celia, the thing that I don’t think you’re asking the question that maybe you’ll want to ask is, yes, what do you ask the landlord? But not only in terms of getting permission to do this with them, but also interviewing them as landlords. Because since you don’t own the property and you’re not in a managerial position with them, like as their property manager, you are a tenant, what kind of landlord are they going to be for you because you are now going to– at the mercy of them taking care of whether the– what happens when the furnace goes down or the fridge breaks. I know some arbitrageurs will assume they’ll just take care of those things. Are you allowed to do that?
So just make sure you understand too what that tenant-landlord relationship is going to be like in the special circumstance because you don’t want to get in a relationship with someone. You got this business up and running and actually your landlord is a linchpin in your success.
Annette Grant: [00:07:10] Making sure that you can get those five-star reviews. And we’ll talk about it on this episode, but we have a ton of them. But we really do encourage people to look into co-hosting or finding another way as opposed to arbitrage because obviously, you’re going to be responsible for the entire lease. You’re going to have to furnish the entire place and then just really want to make sure that you know your numbers ahead of time.
So thanks for calling in. Let us know if you get that place. But don’t stop at one, no. The folks that I do follow online, there’s normally a bunch of nos before you get that yes. So don’t feel discouraged if it’s not a yes from the very first person that you reach out to.
Sarah Karakaian: [00:07:47] That goes with anything honestly. Just if you believe in it, go get it. With that, I am Sarah Karakaian.
Annette Grant: [00:07:51] I am Annette Grant. And together we are–
Sarah Karakaian: [00:07:53] Thanks for Visiting.
Sarah Karakaian: [00:07:54] Talk to you next time. Thanks for listening to the Thanks for Visiting Podcast. Head on over to the show notes for additional information about today’s episode. And please hit that subscribe button and leave us a review. Awesome reviews help us bring you awesome content. Thanks for tuning in and we look forward to hanging out with you next week.