Airbnb Arbitrage: How to Get Started


hey what’s going on guys this is daniel
one-half of the Kwak brothers and we got my
friend sam the other half of the Kwak brothers that’s right baby and today
we’re going to talk about Airbnb rental arbitrage yeah baby hey what’s going on guys it’s the Kwak
brothers it’s daniel and she and Chi right yeah it’s not sam right
it’s chi right which is like the Airbnb
version of sam right almost I would say right but today we’re
talking about uh the method of Airbnb rental arbitration yep yep
yeah Airbnb arbitrage is super cool in case you guys aren’t familiar it’s
when you rent a property from up from a landlord and then you put
it on airbnb to make a profit so for example if you
rent a property for three grand everything you make after
that is your profit that’s arbitrage right and i i love that you know because
you don’t you don’t need to own the property
right you don’t need to own any real estate you don’t you don’t have to have
a whole lot of capital to start right and it’s a very minimal way of of
building some great cash flow right but let’s go before we go ahead
and dive into the nitty gritty of certain things
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topic all right we got that over with let’s go
ahead and start with question number one so you already kind of answered
what is airbnb rental arbitration right and so first question would be number
one cheat how do we find stuff like this how do we find these
opportunities super easy the most important thing that you need to do
when you start your arbitrage business is to find out what you can earn first
right so you find what you can earn then you
find out how much it costs you to to obtain a property that can earn
that amount so the first thing you would do is go to
this site called airdna.co okay put in your zip code or wherever
you want to start your airbnb property and then scroll through it’s
going to show you a map with all the listing currently on airbnb
and just highlight your cursor over those listings and it’ll tell you
two things one it’ll tell you what these properties are charging per night
and two it’ll show you how often they’re booked
so the occupancy rate once you have these two parts
you can figure out approximately how much the property generates per month
with that number you can now go to zillow for example
and figure out how much it costs to rent that property
so you put two and two together if people are making say
eight thousand dollars a month with the property and it cost them say three
thousand dollars to rent it then there is roughly about five
thousand dollars of profit don’t forget to subtract your utilities
and your cleaning fees yeah which is typically how much of your
gross income would you say sure so so the the rule of thumb i use is not
100 accurate but i just use it quickly to forecast is 10 percent of rent for
utilities and 20 percent of rent for cleanings
so back to our example if the property is three grand
then 300 would be utility 600 would be cleaning so
your total all-in price would be 3 900. if you make 8 grand that’s 4 100
of profit yeah and that’s pure cash flow pure cash flow 100
like you know like there’s i can’t think of anything else that makes this much
cash flow this quickly because if i really wanted to i can go out there
right now and go jump on zillow and lease a property in
chicago right now probably in the next hour right
and then have all the properties have all the furniture shipped
and started airbnb and it’ll take us one day to start airbnb
imagine having to close a real estate transaction in one day it’s not possible
yeah but with there be with rental arbitrage you can it’s
it’s fast it’s executable right you know so
yeah so we kind of covered step number one which is you know hey you want to go
on zillow you want to see what the rents are
you know you want to find the data in terms of how how much you’d be able to
make right on airbnb for that market and you
want to kind of see what the most bang for your buck
let’s move on to step number two right what is step number two is it
approaching the landlord with this idea yeah so after you find the property that
you want the next thing you have to do is make
sure the landlord is comfortable with your idea be
transparent be open and be on the same page
a lot of a lot of times i hear these horror stories and in fact
i i was once part of a horror story because i didn’t know that
it was against protocol to put their property on airbnb without letting them
know without it without putting it on contract right
without consent so what ends up happening is that they
if you don’t let your landlords know of course they’ll be upset not
everybody’s into the idea of having multiple people use their
property right but as long as you let them know ahead of time and they’re okay
with the idea there’s nothing wrong with it 100 legal
uh whether it be local or on airbnb’s terms
of service the last thing you need to do is
research your local regulations if your local regulation supports airbnb
or if there’s no laws at all means it’s okay for you to do it avoid
cities with an all-out ban you know i’ll give you i’ll
give you an example like like hawaii has an all-out ban new york city has an
all-out fan but most other most other cities
have supportive law so they they want to support you
when you start your airbnb the only thing they’re asking for is a transient
rental tax usually falls about uh 10 to 12 you know
very similar to the hotel tax but once you have that covered you’re
good to go yeah now obviously a lot of people will probably be asking well chi
where where would i go to find out about these
regulations and things that i should foresee
yeah super easy so your local city hall will definitely have all the answers
just call them up and and they’ll tell you or if you’re you
know if you’re too lazy to go to city hall like i am i just asked my good
friend google yeah that’s google’s a great guy you
know i’m sorry it’s 20 20. great person right both
female and male step number three let’s say they agree
the landlord said you know what she you’re solving my problem because i’ve
been trying to rent this thing out for months and i can’t find a good tenant
right and they’re more comfortable with you
let’s talk about furnishing so once you kind of get that agreement
right what’s step number three is it furnishing the place what do you do
yeah 100 so it depends on what you end up renting right so
what the cool thing about airbnb is that you can rent or put
any type of property onto their site and rent it out to people
you know whether it be a tent or a yacht or an rv but typically in the arbitrage
space it’s either a home or an apartment if you have either a home owner
apartment the next step is to furnish it right
um i would suggest that you avoid things like craigslist
or let go you know there’s a lot of paid courses out there that suggest these
things which blows my mind because there’s absolutely
no way you can scale your business doing that
imagine trying to coordinate you know a craigslist meeting for
one chair and then another one for a sofa and another one for
for a dining table and they’re all at three different parts of
of your city i mean how much work is that you just have to carry everything
loaded you know and negotiate what if they
flake right that craigslist you know it’s just not
reliable so what you do is you create your shopping
list and have it ready and just have everything delivered to
the property you know this way you can scale you know that
that list is repeatable it’s profitable it’s proven
and you can scale really really really quickly
yeah and i’m actually really glad you brought that up because well you know at
the end of the day with airbnb you’re providing an experience for your
guests you know and they’re sitting and laying down in some
dingy old couch that’s got stains or something like that’s not a good
experience you know it it depends on the look that
you’re going for you know some people go for the eclectic
look but i just like a nice clean polished look
yeah absolutely and you know and most most people would just based on your
experience depending on the size of the unit
right or the property what’s a good rule of thumb you know
in terms of furnishings yeah so so for me
in the san francisco bay area it typically cost me between
twenty to twenty five thousand dollars to start one airbnb property
and out of that twenty to twenty five thousand dollars
usually around eight thousand dollars of that is my first month’s rent and
security deposit so it’s about ten thousand to properly start up a good
airbnb with decent furniture and all your linens and towels
and and all your replenishables like shampoo
and which would you say that’s probably for like you know a four bedroom house a
three bedroom house or is that for like a studio apartment
um that’s that’s for a larger property so i no longer do with
smaller properties just because in my model it works better with a
larger property so i used to get a lot of smaller properties
and they are profitable and they’re easy to run but
i just don’t have enough cleaning staff or i don’t want to manage that many
cleaners to have them go to every individual you
know little studio so for me it’s all about automation i’d
rather make a little bit less money and just have a super smooth sailing
system that’s right so before we go on to the next step i want to get a little
bit more specifics i’m sure there’s a lot of people who
are detail-oriented who are thinking about this so you mentioned stuff like
you want to have shampoo conditioner dish soap what are some other things
that a lot of people don’t foresee that for you as a host
you know it’s a it’s a demand right it’s a necessity to have in the unit
it’s not it’s not a material thing is just
reliable staff members right most people fail in this business because they can’t
find reliable cleaners so i think that’s probably one of the key
components of starting a successful airbnb business is just having reliable
staff because there’s a lot of turnover right
so yeah you definitely reliable cleaning staff is is very key so last step here
so we got you know we got the property we got the area
landlord agrees right we furnished the unit now it’s
time to put it on the platform right it’s time to put it on airbnb what
are some helpful tips that you would give to people
in terms of getting exposure to your listing uh
in terms of you know how it is how it’s presented pictures obviously is a big
thing what are some helpful tips in terms of
putting it on airbnb yeah so if you guys go on airbnb right now or
even tinder you know use just make sure that you
just just observe on observe
the photos that you see you’re more than likely going to connect with somebody
with a high quality photo right so if you’re not a photographer don’t use a
camera and try to take your own photos for you know for your
airbnb property because at the end of the day your listing is really online
dating and whether or not someone books your
property or swipes left or right it’s up to your photo you’re telling
your story based off of your photo so hire a
professional to take care of it and let them do their
job you know let them put your best face
forward and this all goes back to the furniture
as well because again if you have craigslist or let go you have a property
that looks like a garage sale whereas if you have uh if you do you
spend a little time to plan you’ll have a
really solid design you’ll have the right color scheme and everything
to really have the property to have its own personality you know
and you want to be able to present that with the audience yeah and design is
huge you know and especially when you’re
talking about families traveling you know it’s such an emotional decision
you know a lot of times when you make a decision on where you want to stay
it’s like oh my gosh that place looks cool that place looks awesome
you know that’s that’s everything you know so we’ve kind of covered the whole
basis in terms of starting out what’s step one
all the way to hey we’re putting this thing on a platform like airbnb
what would you say after doing all that some important key things for our
audience to consider in managing the unit hire help
definitely hire a lot of help like for me i’m terrible
at responding to emails and texts so the first person i hired was my
inquiry manager right an assistant to just answer everything for me
i didn’t hesitate so just it’s up to you personally because
my inquiry manager has no problem doing that you know she can handle
500 properties all on her own but wow it’s just like
for me i can’t handle even one like i’m just like that guy that can never
properly text or respond uh through email
it all plays down to what your strengths are and what your weaknesses are
yeah and so you hired an inquiry i’m sure you also hired cleaners yeah tons
of cleaners you hired a maintenance guy right because i’m sure things happen
right so here’s here’s uh one pro tip i like to work
with immigrants just because you know not
not to say that us americans are anything wrong with us it’s just
naturally i found that they tend to work a lot harder because they have more on
the line they gave up a previous life to come start a brand new one here so
they tend to be more willing to contribute and to work
to make sure that they don’t lose their job with you you know because they have
families to feed and they made a conscious decision to move their
entire livelihood from way where they were comfortable to come
to america to start a better life right so
they’re always putting their best foot forward you know what that makes a whole
lot of sense because you know we’re working together and i’m an
immigrant so you know you’re you’re practicing what you’re preaching right
now man yeah i mean so you know we talked about
you know somebody who takes care of your inquiries
cleaner maintenance guys you know all all immigrants of course right
is there any other uh person on your team
that you feel like that you you’ve got a lot of value from um
that’s that’s pretty much it you know higher i mean
like the rest of it just falls in place naturally if you’re starting a bunch of
property one area you can end up working with the same
photographer same movers things like that like all that
all that is pretty easy to figure out but
um the most important part of this is you know hire the right cleaning people
hire a great inquiry manager and it’ll relieve you of probably like 90
of all your tasks yeah and speaking of which what’s a good way to hire the
right person it’s all up to you you know it’s all up
to your gut feeling and interviewing the right person if
they feel good to you you know and you connect with them you feel like
you can communicate well then that’s the person for you like there’s
there’s a million different ways um say for example for cleaners you know
you guys can try craigslist but there’s you know there’s a million
other ways you know i can go on forever yeah and you know one of my favorite
ways to acquire even for my real estate team
my contractors and attorneys you know the best way has been referrals
you know i go to somebody i trust somebody i have a good relationship with
already say hey do you know a good cleaner do you know a good contractor
so that’s been a good way that i’ve found people and i’m sure you’ve gotten
a lot of referrals as well yeah tons tons so after i hired my
first cleaner they referred more and more cleaners as we expanded you know
so referrals 100 a very good legitimate way
so in terms of rental arbitrage you know what any last words to our audience and
viewers before we close this video out 100
go for it do your research first make sure you’re making at least 2 000
of net profit after all expenses are paid and then
don’t hesitate it’s predictable it’s repeatable
just go for it absolutely and thanks for being with us and thank you guys for
watching don’t forget to subscribe uh like this video and share it with all
your friends thank you guys so much i’ll see you guys in the next one oh wait
don’t forget chi at the b b university that’s right
that’s right we can’t forget that

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