New Airbnb Idea or Over-Saturated Business Concept?

In this video, Matt reacts to the idea of rental arbitrage. Is it a new idea that could make many millions? Or is this just another way to sell a course?

There are tons of people out on social media giving business advice. Some of it is good advice, but most of it isn’t good. In this series watch CapForge’s owner react to different advice videos. He’s an expert in all things business and has 20+ years of experience under his belt. Some of the things he reacts to might even surprise you!

Video Transcript: 

Business Advice Video: 

Person one: What’s something really important that you should have been taught in school but you weren’t?

Person two: One good Airbnb property can literally set you financially free. And the crazy thing is you don’t even have to own that property. I made multiple 7-figures with hundred plus Airbnbs and the fact is I don’t own most of them. It’s called rental arbitrage model. Basically, you’re renting an apartment or a house to sublease legally to rent it on Airbnb. And you make rent on top of your rent. And I have few luxury properties, luxury Airbnbs that I don’t own that make me over $30,000 net profit every single month. I’ll break down the numbers for you guys in my next video. So make sure to give me a follow.

Matt’s Reaction:

Okay, this is not a new idea, this has been around pretty much since Airbnb came out. And the idea is you find somebody who’s renting a property to a long-term tenant, maybe 12 months at a time, and you convince them that this is better off as an Airbnb and you will manage it for them. And if let’s say they’re getting a thousand bucks a month from a long-term tenant that they can get, you know, have $3,000 or $4,000 a month. If we convert the long-term property into a short-term Airbnb rental then you collect the $4,000, you pay the Airbnb fees, you pay the property owner 1500 bucks and then you take the balance that’s your profit for managing this. Sounds good on paper. There are some challenges with it. Not every property makes a good Airbnb and a lot of the owners would say “Well that’s great. I could turn my rental property into an Airbnb short-term rental but I can do that myself. Why am I gonna pay you to do that?” There’s also lots of professional management companies that will do that, so if you just show up with this idea, you know, they’re not gonna necessarily jump right into your arms to have you do it for them. They’re gonna look at other options, doing it themselves or paying a property management firm that’ll do it for a lot less than you’re wanting to charge them. So this was a good idea ten years ago when Airbnb was getting started. Most people didn’t know how to manage an Airbnb or how to take care of a property like that or have it get cleaned every few days instead of not having to worry about cleaning it all as a long-term rental. So yes this is a potentially viable business opportunity, but it’s not nearly as simple or as easy as this video makes it sound. And most of the property owners who are thinking about doing an Airbnb have already done one. So it’s gonna be competitive to find people with long-term rentals that could be good Airbnb’s that wanna do this that will work with you instead of other options that aren’t gonna charge them as much as you’d like to charge them. And if you wanna do this as the property owner yourself, then you’re back to sort of you have to be able to buy and afford a rental property yourself, that you can use as an Airbnb instead of long-term rental.

And the other challenge again is regulation. It’s getting harder and harder to convert things to Airbnb and short-term rentals. Cities and communities are deciding they don’t want a ton of short-term rentals in their area because those come with a lot more problems, more foot traffic, more parties, more noise, etcetera. And the units get a lot more wear and tear than they would with a long-term rental. So it’s a great business model but like so many of the ones that you see online, it was great when the person who’s talking about did it five – ten years ago. Just like with a lot of e-com business ideas. “Oh start an Amazon store!” That was a great idea eight years ago. It’s a lot harder now. So they’re talking about things they’ve done in the past that would be much harder for you to replicate today. Yes, they are probably making, hopefully, unless they’re just straight-up scammy, making the money they’re talking about making. But that’s not to say that anyone can jump in and do it as easily as they did because times have changed and now it’s easier to sell a course about doing it than it is to actually do it. Usually, when all the courses come out that’s a sign that the opportunity is basically finished. The window is closed and all the people who’ve already done it are now wanting to tell people how they did it, how you could do it in theory. But it’s no longer really possible to do the way they did. It just not the same opportunity.