How to Make “Guaranteed” Millions with Rental Arbitrage “Contracts”

Summary

In this episode of the Bigger Buckets Real Estate Podcast, hosts Dave Meyer and Henry Washington interview Noble Crawford, an expert in the mid-term rental market. Crawford discusses his unique strategy of securing long-term contracts with government clients and businesses, offering a consistent cash flow and higher profits compared to traditional short-term rentals. He explains the benefits of direct bookings in B2B over B2C models, the types of contracts he offers, and how listeners can break into this lucrative market. The conversation highlights the potential for significant earnings in real estate investment through strategic, less competitive avenues.

Takeaways

• 😲 The interview discusses an innovative real estate investment strategy focusing on direct bookings with government clients and businesses, rather than traditional B2C short-term rentals like Airbnb.
• 🎯 Noble Crawford, the guest, has specialized in securing long-term contracts in the mid-term rental market, which can range from 30 days to 5 years, offering more consistent cash flow and higher profits.
• 🏢 Direct bookings are defined as B2B transactions, targeting corporations, government agencies, healthcare, higher education, and other entities for housing needs, avoiding the competitive short-term rental market.
• 💰 The strategy is described as a 'Blue Ocean' approach, seeking less competitive spaces in the rental market, which can yield higher revenues due to the nature of dealing with organizations rather than individual consumers.
• 📝 Contracts with the government, such as those using the GSA lodging per diem rate, offer guaranteed revenue and can be a significant source of income for investors with the right real estate assets.
• 🤝 Noble's background in hospitality and sales, along with personal experiences, led him to real estate investing, where he found success in short-term rentals and pivoted to the more profitable B2B model.
• 🔑 Success in this strategy requires having a professional business setup with an entity, EIN, business phone and email, and a professional website, which is appealing to government and corporate clients.
• 🏫 Leveraging past experience in specific verticals can provide an edge in securing contracts, as Noble did with his background in healthcare and higher education.
• 💼 Creating a 'Capability Statement' is essential for marketing to government agencies, summarizing the business's competencies, past performance, and relevant industry codes.
• 🤔 The interview highlights the importance of understanding the needs of government and corporate clients, which may differ from traditional short-term rental guests, and the potential for significant profit through lease arbitrage.
• 🚀 The strategy is not limited to areas with a strong military presence, as government and business housing needs can be found across various markets, debunking the myth that location near a base is mandatory.

Q & A

What is the main focus of Noble Crawford's real estate investment strategy?

Noble Crawford focuses on direct bookings in the mid-term rental market, securing long-term contracts with government clients and other businesses and agencies.

How does direct booking differ from using platforms like Airbnb or VRBO?

Direct booking involves business-to-business (B2B) transactions, where contracts are made directly with corporations, organizations, or government entities, rather than business-to-consumer (B2C) transactions on platforms like Airbnb or VRBO.

What types of organizations does Noble Crawford work with in his direct booking strategy?

Noble works with a range of organizations including corporate entities, healthcare, higher education, relocation services, military, federal government, and aviation sectors.

How long do the contracts that Noble Crawford secures typically last?

The contracts can range from as short as 30 days to as long as 5 years, offering flexibility from mid-term to long-term arrangements.

Why does Noble Crawford prefer working with direct bookings rather than short-term guests?

Noble prefers direct bookings because they offer less competition, higher revenue, and more consistent cash flow due to the nature of the clients and the longer contract durations.

Can you provide an example of how the government's GSA lodging per diem rate works in Noble's business model?

An example given is a pilot staying for 30 nights at a rate of $167 per night, generating $5,100 per month. This rate is part of the GSA lodging system, which sets a cap on the amount the government will pay per night based on market rates.

How does the lease arbitrage model work in the context of Noble Crawford's strategy?

Lease arbitrage involves leasing properties, such as apartments, at a certain rate and then renting them out to government or corporate clients at a higher rate, generating profit from the difference.

What was Noble Crawford's background before he got into real estate investing?

Prior to real estate investing, Noble Crawford ran a marketing agency and had a background in hospitality, working for major hotel brands and later in tech sales.

How did Noble Crawford's personal life events influence his decision to pursue real estate investing?

Noble's wife's illness and the need to care for her while maintaining financial stability led him to seek a more flexible and independent source of income, which he found in real estate investing.

What is the process like for securing government contracts according to the interview?

Securing government contracts involves having a professional business setup, registering as a federal vendor, and creating a capabilities statement that showcases the company's competencies, past performance, and industry codes.

How does Noble Crawford's approach to real estate investing differ from traditional short-term rental operations?

Noble's approach focuses on B2B transactions, targeting specific verticals like government and corporate clients, and leveraging long-term contracts for consistent cash flow and higher profits, rather than the traditional B2C short-term rental model.