Desert Rock BnB Planning On Rental Arbitrage: Grows Future Profit
- John Shachter
- Apr 4
- 5 min read
Let me say this: We here at Desert Rock BnB are in the business of making money as we care for people. This is not a side hustle or part time gig: but a full business with income and expenses. Currently, we rent out rooms in our home, but this is just the start. Along with other ventures (Especially Assisted Living Homes): we are looking at expanding our footprint in providing housing for people, short term, mid-term, and long term rentals.
Before getting too far, let me tell you how we first come to doing rentals. As many people discovered, doing short term rentals through Airbnb was a great way to make extra income by renting out a home or even extra space in a home. Starting in February of 2020, we did exactly that...renting out an unused bedroom in the home we lived in. Even with COVID, we did very well in this venture. At our peak, we were taking in revenues of about $1200/month for just one room - and this is after all discounts (given to guests) and our expenses.
We always viewed our guests as extensions of our family, and treated them even as a part of our own. This philosophy garnered us the distinction of being a "Super Host" almost every month that we were with Airbnb, but then things changed. It wasn't our service that changed, but rather, Airbnb that changed. They started to use AI to "rate" properties starting in about 2023, based on what we can only figure to be: how the property looked compared to what they thought it should look like.
It didn't (in our opinion) factor in the fact that we were super hosts, or that we had great reviews: it was purely of esthetics. Sure, our home is an older home, and may have looked "less than ideal" - but we took care of people, and that was the important thing. So our home was pushed so far down, that we couldn't even find our own listing without knowing where we lived. In the last year that we did have guests, it was a trickle of what once was. We usually stayed at or near 100% occupancy, but the last year, it was more like 50% or less.
Somehow, we discovered another platform that would work for us: and that was Furnished Finder (FF). This was much different than what we were used to, as it is not considered a "Short-Term" rental platform, but rather for "Mid-Term" rentals. What that looks like, is a person will need a space for a minimum of 1 month, with most people renting for about 3 months at a time. The tenants (not guests) are generally traveling professionals: especially traveling nurses, who are on temporary assignment.
Thus far, we have had several tenants over the past two years, but only one was actually a nurse. We have had other medical and non-medical people: including a hospital administrator (going into his 2nd year with us); a masters degree student; a sports medicine individual associated with Major League Baseball (MBA) and others.
With Furnished Finder, we needed to learn about collecting rents, creating leases, having house rules, providing items such as a 7.5cuft refrigerator/freezer in the rooms (As opposed to just a mini-fridge.). We also started upgrading the rooms themselves, by removing carpeting and putting in new flooring; purchasing new bed frames and mattresses & nightstands; mounting 55" Internet TV's, and added work stations.
Door View Of Our J1 Room
There is so much more that we want to do, such as get better window treatments, update the closets, get a modern bladeless ceiling fan & light. The important thing is two-fold: taking good care of our tenants, and by doing so, learning what we need to do be able to expand our operations.
So this brings us to the topic at hand. As we wish to scale this business, we need to look at creative ways of doing so. As we, at least at this time, do not have the resources to just purchase properties: we need to be creative in how to obtain properties. One method that I have learned, though not put to practice yet, is what is called a Rental Arbitrage: in which we would rent the property from a owner for a longer lease, and then rent out the property for shorter durations: basically subletting the property to someone else.
All the legal things aside, rental arbitrage grows profits, if it is structured correctly. The question would be: where do we get our properties from? Well, that is actually pretty easy, as there are many sites that specialize in showing properties for rent. The difficulty would be in finding a property that meets the desired esthetics, and a landlord/owner who is willing to partner with you in this venture.
One area that I never thought of until today, is looking for motivated people, who have attempted to sell their property, and for whatever reason, were not able to sell. They might just be interested in working out a mutually profitable deal, especially if you can have certain assurances in place. You can see a video on this subject by going to HERE. This video Podcast comes from industry leader Turbo Tenant. PLEASE NOTE: We do not have any relationship with this company, and don't receive any compensation for putting their name here.
Finding these motivated landlords can help you find great properties, but can come with some understandable objections. This is especially true if you are doing short-term rentals through companies such as Airbnb or VERBO. The problem here, as has been shown in many news broadcasts and articles: are the people who violate the terms of their rentals by having boisterous parties and other issues.
Technology can help here, with items such as sound monitors, glass break monitors and other technologies that can be used for access and security as well. However, this might still be a problem, as these short-term rental companies don't really do an adequate job in running background checks on the guests: meaning pretty much anyone can rent a space through them. Even with having very good house rules and penalties, once damage is done, you will still have to deal with the owner/landlord: who most likely will not be too happy.
This can possibly be mitigated by using companies such as Furnished Finder, where, through their sister company KeyCheck, you can very easily do background checks on the tenants, and also create the legal documents as well as charge & collect cleaning fees (in advance) and security deposits. As these are (generally) traveling professionals, you can have more peace of mind that these people are not going to trash the place. Additionally, you can do the work yourself finding these people, or even put this up on the many travel sites.
We are still babes in this field, and realize we don't know what we don't know. However, you will never learn everything in life you need to know, without the willingness to get out there and fail. Failure is one of the greatest teachers, but even better, is to learn from others who have gone before you. Network with people who are doing what you want to do, and learn how you can do it too.
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