How To Negotiate Airbnb Arbitrage Leases

Summary

This video script outlines strategies for growing a rental arbitrage portfolio during the slow season of December to February. The speaker shares negotiation tactics that have enabled rapid business growth, focusing on securing concessions like lower security deposits and free rent periods to optimize cash flow and investment returns. By leveraging market cyclicality and effective negotiation, the speaker aims to expand their portfolio significantly, emphasizing the importance of seizing current opportunities in the rental market.

Takeaways

• 📈 The slow rental season from December to February is the best time to grow a rental arbitrage portfolio due to increased concessions and lower competition.
• 🔍 Negotiation is key to securing the best deals, including lower security deposits and reduced upfront capital, which can significantly impact cash flow and returns.
• 🏢 Building owners are more willing to offer concessions during the slow season, which can include free months, reduced security deposits, and no last month's rent.
• 💰 The speaker leveraged a large vacancy to negotiate a two-month free concession, saving a significant amount of upfront capital for furniture and other expenses.
• 🤝 Finding a middle ground in negotiations is crucial; the speaker often starts with a higher ask than expected to meet in the middle with the property owner.
• 💼 The speaker emphasizes the importance of not paying last month's rent, as they plan to renew contracts indefinitely with quality tenants.
• 💡 The speaker uses the slow season to expand the business aggressively, taking advantage of market conditions to secure more units at favorable terms.
• 🌐 The speaker suggests using business credit and leveraging credit card offers to rapidly scale the business during the slow season.
• 🚀 The ability to negotiate effectively and secure concessions can lead to a rapid expansion of the rental arbitrage business, as demonstrated by the speaker's growth plans.
• 💡 The speaker highlights the importance of timing, suggesting that the current market conditions provide an unprecedented opportunity for starting and growing a rental arbitrage company.
• 🌞 The speaker contrasts the hard work during the slow season with the ability to enjoy life during the high season, as profits accumulate without additional investment.

Q & A

Why are December, January, and February considered the best months to grow a rental Arbitrage portfolio?

These months are typically the slow season for the rental market, which provides an opportunity for rental Arbitrage businesses to negotiate better deals and secure more units with concessions.

What is the importance of negotiating lower security deposits and upfront capital in rental Arbitrage?

Negotiating lower security deposits and upfront capital is crucial to maximize cash flow and return on investment, allowing for quicker expansion of the portfolio without tying up too much capital.

How did the speaker leverage the vacancy situation at an apartment complex to negotiate a deal?

The speaker called the building before meeting with the property manager to find out the number of vacant units, which provided leverage to negotiate a deal for two months free rent.

What is the typical request for security deposits in the rental market, and how did the speaker negotiate it down?

Typically, buildings ask for the first month, last month, and security deposit. The speaker started by asking for no security deposit and negotiated it down to as low as $350 in some cases.

Why does the speaker never pay the last month's rent in their rental Arbitrage business?

The speaker never pays the last month's rent because they plan to always renew the lease with the building, making the payment of the last month's rent unnecessary.

How does the timing of concessions affect the cash flow and return on investment in rental Arbitrage?

Starting concessions at the beginning of the lease allows for immediate savings and quicker return on investment, as it reduces the initial outlay of cash.

What is the potential profit for the speaker from 20 apartments with negotiated concessions over the next 60 days?

With the negotiated concessions and assuming an average monthly income of $3,000 per apartment, the speaker could profit between $26,000 to $27,000 per month for the next 60 days.

How does the speaker plan to use the savings from concessions to expand their business during the slow season?

The speaker plans to use the savings to pay off furniture costs and business credit cards quickly, then reinvest the profits to acquire more apartments and scale the business during the slow season.

What is the speaker's strategy for scaling their business during the high season?

During the high season, the speaker focuses on enjoying life and letting profits accumulate without spending, using the saved capital to expand the business rapidly during the slow season.

What is the speaker's current goal in terms of expanding their rental Arbitrage portfolio?

The speaker aims to increase their portfolio to a minimum of 250 units by the end of the winter season, leveraging concessions and negotiations to speed up the process.

How does the speaker ensure that both parties in a negotiation feel they have gained a fair deal?

The speaker aims for a 'sweet spot' in negotiations where both parties feel they have made some concessions, ensuring a deal that is acceptable but not overly favorable to either side.

Outlines

00:00

📈 Maximizing Rental Arbitrage During Slow Seasons

The speaker discusses the optimal time for expanding a rental arbitrage portfolio, which are the slow months of December, January, and February. They share personal negotiation experiences that have allowed them to rapidly grow their business while maximizing cash flow and minimizing upfront capital. The speaker emphasizes the cyclical nature of the rental market and the importance of leveraging this knowledge to negotiate better terms, such as reduced security deposits and rent concessions. They provide a detailed account of how they secured a deal for 20 apartments with significant concessions, including two months free rent, by leveraging the property's vacancy rate. The summary also touches on the strategy of negotiating lower or no last month's rent and the benefits of these concessions in terms of cash flow and return on investment.

05:00

🌞 Capitalizing on Seasonality for Business Growth

In this paragraph, the speaker describes the strategic approach to the seasonal nature of the rental arbitrage business. They explain how they use the slow months to expand their portfolio aggressively through negotiations and hard work, while enjoying the profits and traveling during the high season. The speaker is currently in the process of negotiating for 120 new apartments, focusing on securing the best possible terms to speed up the return on investment for furniture and other costs. They highlight the importance of concessions in expediting the payback period for initial investments and the potential for rapid business growth during the slow season. The speaker concludes by encouraging viewers to follow their journey on social media for insights into the industry and to seize the current opportunity to start or grow a rental arbitrage company.

Keywords

💡Rental Arbitrage

Rental Arbitrage refers to the practice of acquiring rental properties, often at a lower cost, and then renting them out at a higher price to earn a profit. In the video, the speaker discusses how to grow a rental arbitrage portfolio by negotiating with property owners during the slow rental season to secure better terms and higher cash returns.

💡Negotiation Examples

Negotiation examples in the context of the video are specific instances where the speaker has successfully negotiated terms with property owners to reduce upfront costs and increase profit margins. These examples illustrate the speaker's strategy for quickly expanding their rental arbitrage business.

💡Cash Return

Cash return is the amount of money generated from an investment. The video emphasizes maximizing cash return by negotiating lower security deposits and concessions, which allows for a quicker return on investment in the rental arbitrage business.

💡Concessions

In the rental market, concessions refer to the benefits or discounts offered by property owners to attract tenants. The speaker mentions using concessions such as free months of rent to reduce upfront costs and improve cash flow in their rental arbitrage strategy.

💡Security Deposit

A security deposit is a refundable sum of money paid by a tenant to a landlord to cover potential damages or unpaid rent. The video discusses negotiating lower security deposits as a way to minimize the initial capital required to acquire rental properties.

💡Leverage

Leverage in the context of the video refers to the bargaining power the speaker has when negotiating with property owners, often based on the number of vacant units they have. The speaker uses leverage to negotiate better terms for their rental arbitrage business.

💡Vacancy

Vacancy refers to unoccupied rental units. The script mentions using the high vacancy rate as a point of leverage to negotiate more favorable terms with property owners, which is crucial for the rental arbitrage strategy.

💡Seasonality

Seasonality in the video refers to the cyclical nature of rental markets, with certain periods being slower than others. The speaker capitalizes on the slow season (December, January, and February) to negotiate better rental terms and grow their portfolio.

💡Expansion

Expansion in the context of the video is the process of growing the rental arbitrage business by acquiring more properties. The speaker discusses using the slow season to expand their portfolio quickly by negotiating favorable terms with property owners.

💡Investment Return

Investment return is the profit or loss made from an investment over a period of time. The video focuses on strategies to increase investment return in the rental arbitrage business by negotiating terms that reduce costs and increase revenue.

💡Business Credit Card

A business credit card is a financial tool used by businesses to manage expenses and build credit. In the video, the speaker mentions using a business credit card to finance the upfront costs of acquiring rental properties and then paying it off quickly with the profits from the rental arbitrage.

Highlights

Best times to grow a rental Arbitrage portfolio are December, January, and February due to market slowdown.

Negotiation examples shared to demonstrate rapid business skill development in rental Arbitrage.

The importance of understanding market cyclicality in both Airbnb and rental Arbitrage for strategic planning.

Successful negotiation for 20 apartments with one month free concessions due to high vacancy.

Leveraging knowledge of vacant units to negotiate better terms with property managers.

The strategy of asking for more than desired in negotiations to find middle ground.

Negotiating lower security deposits to minimize upfront capital.

Avoiding last month's rent by planning for indefinite tenancy with quality tenants.

Saving significant upfront costs through concessions, especially during slow market periods.

The impact of concessions on cash flow and return on investment in rental Arbitrage.

Scaling business rapidly by leveraging concessions and credit during the winter months.

Using profits from summer operations to fund winter expansion and furniture costs.

Current negotiations for 120 new apartments with a focus on maximizing concessions and favorable terms.

The goal of expanding to 250 rental Arbitrage units by the end of winter.

The financial benefits of securing concessions in reducing the time to return capital on furniture investments.

The art of negotiation where both parties walk away with a slightly unfavorable agreement, indicating a balanced deal.

The current market conditions as the best in two years for starting and growing a rental Arbitrage company.

Engagement with the audience through social media for behind-the-scenes insights into a seven-figure Airbnb operator's life.

Transcripts

as a rental market itself slows down

over the next few months December

January and February are the best times

of the entire year to grow your rental

Arbitrage portfolio I'm going to go over

a few negotiation examples that I've

done over the last year that's allowed

me to skill this business so fast and

such lightning speed and making sure

that my cash and cash return is the

highest it can possibly be with

concessions lower security deposits and

negotiating to make sure the least

amount of upfront capital is used every

business has its own season and a lot of

markets are cyclical Airbnb short-term

travel and Rental Arbitrage are no

different for the majority of markets

their slow season is December January

and February just like in the

multi-family space the slowest rental

period is also December January and

February since both Industries are at a

disadvantage over the next three months

you have to find the symbiotic

relationship on how you can both work

together to fill their vacancy and to

secure your units last December I

pitched an apartment complex for 20

Apartments because of how much vacancy

they had they offered me one month free

concessions just by calling the building

prior to that meeting with the property

manager I was able to ask a leasing

agent exactly how many vacant units are

in the building then I know exactly how

much leverage I have to play with what I

wanted was at least two months free so I

decided to ask for three now when I'm

asking for three months free that

doesn't necessarily mean I'm gonna get

it in negotiations and sales you always

have to find some Middle Ground between

two parties now let's see the building

denied my offer of three months and

decided to give me two months to meet in

the middle the next thing I would have

to solve as security deposit the three

things a building usually asks for is

your first month last month in security

for this example let's say the average

rents are two thousand dollars if I were

to pay a first month last minute

Security on that two thousand dollar

apartment I would be out of pocket six

thousand dollars in cash not including

Furniture now the next thing I have to

ask for is a lower security deposit I

always start by saying I don't want to

pay a single Dollar in a security

deposit why because we never plan to

leave will you give me the best tenants

in your entire life we will always be

renewing with you so that security

deposit is tied up indefinitely now of

course for insurance reasons you can't

ever get away with no security deposit

majority of the time the building is

going to require something there have

been buildings where I've negotiated

security deposit of five thousand

dollars all the way down to 500. this

building in particular I negotiated all

the way down to 350. now the last thing

you want to negotiate is your last

month's rent I never in my entire life

of running this entire business have

ever paid a last month's rent so in last

month's rent will never actually happen

because we never plan to have a last

month now let's say you got the two

months free let's say you got the low

security positive 350 and I have no last

month's rent now the actual concessions

themselves I have to make sure they

start at the front of the lease you're

not going to get this every single time

but in the winter it's a lot easier

during the summer of July and September

I actually got one month free but the

building wouldn't let the concession

start until after 12 months so

unfortunately I was in the situation

where I did not have a lot of Leverage

because it was summertime there was a

lot of leasing going on and the market

was pretty hot I had to then negotiate

and settle for that one month free but

on the 13th month now just from our

current example of these 20 apartments

on a two-month free concession no last

month and a three and a half dollar

security deposit just in the concessions

alone I saved about eighty thousand

dollars in total rent then another forty

thousand dollars in last month so now my

cash and cash return is a lot higher my

initial return on investment period is a

lot higher every single time you have

two months free up front your cash and

cash return gets returned to you very

quickly within the first 45 to 60 days

if each of those apartments on average

are gonna bring in three thousand

dollars a month so for the next 60 days

in all 20 Apartments my only expenses

are utilities and cleaning I should be

able to profit 26 to 2700 a month on all

20 apartments for the next 60 days

bringing the total time to return my

investment into the furniture a lot

quicker if I didn't have those two

months free that's why I can't stress

this enough right now multi-family is

hurting they're willing to give two

months three month concessions if you're

picking up 5 10 20 30 40 apartments at

one time the only reason and the only

reason why I've been able to expand so

quickly and so fast is because of these

concessions if I did not have these

concessions up front and all of these

leases there'd be zero percent chance of

me expanding so quickly because all my

Capital will be tied up in paying off

all this furniture because I had those

two months free the time to pay off all

the furniture took only 45 to 60 days I

would then take all that profit pay off

that business credit card and then run

the cycle again for another 20 another

30 Apartments during winter if you're

good at negotiating and you're getting

concessions and you have these two Amex

platinum credit cards you can actually

expand your business by 40 to 60

Apartments just in the next 90 days

alone now you're not going to make that

much profit over the next 90 days that's

fine because now you have this unit

secured your teams are in process the

automation's built out this is systems

are created just in time as we go into

the high season I live my life now on

the seasonality of this business during

the slow months I'm expanding I'm

grinding I'm working hard every day

negotiating flying out to buildings

getting more apartments and scaling as

fast as I can during the summer time I'm

literally vacationing traveling the

world enjoying my life and not spending

a dollar and letting all the profits

stack up and that's exactly what I did

over the last summer I saved every

single dollar that I made and now I'm

using it to expand as fast as I possibly

can I'm currently in negotiations and

negotiating with landlords and

developers on a 120 new apartments over

the next 90 to 120 days and I'm

negotiating everything from these

concessions to carry deposit terms

conditions last month's rent everything

you could possibly think of I'm making

sure I'm walking away from these deals

with the huge advantage on my shoulders

to make sure the time to return the

capital on my furniture is faster than

ever currently right now I'm at 180

rental Arbitrage units but at the end of

this winter going into March I should be

walking out with 250 at the very minimum

just a Furniture alone for those 70

units that I have planned is going to

cost me about 500 000 in cash or

Furniture alone not counting first

month's rent not counting security

deposit but with two months free three

months free one and a half months free

even my time to get all that money back

pay off those business credit cards and

make a profit is a lot faster by getting

concessions on all your deals literally

speeds up the process and saves you

three to six months of time the best

negotiations and the best deals are the

ones where both parties walk away a

little sour from the terms I'm always

asking for three months four months

sometimes even five months free majority

of the time Boons are laughing I mean

saying you're insane but they'll come

back with how about two months how about

two and a half months and that's a sweet

spot and that's exactly what I plan to

do do not let this opportunity go to

waste right now is the best time in the

last two years to start and grow a

rental Arbitrage company if you want to

film me behind the scenes on my

day-to-day life of a seven figure Airbnb

operator follow me Below on my tech talk

on Instagram where I post daily and make

sure you guys are seeing the actual ins

and outs and behind the scenes of this

industry thank you all for watching I

hope you enjoyed the video until next

time