Don’t Start an Airbnb Arbitrage business before watching this

Summary

In this video, Sean Rock, an experienced Airbnb operator with 150 properties, shares insights on subletting without owning property. He emphasizes the importance of obtaining a landlord's permission, often through a lease addendum that modifies the original agreement. Rock provides tips on negotiation, securing favorable terms, and choosing the right properties and landlords. He also discusses the benefits of rental arbitrage, especially during a recession, and invites viewers to join his Facebook group for further advice and community support.

Takeaways

• 😀 You can operate an Airbnb without owning the property through subletting, provided you have the landlord's permission.
• 🏘️ Sean Rock has been managing 150 Airbnb properties for 7 years without owning any, making millions in the process.
• 📝 A lease agreement or addendum can be used to secure permission from the landlord to operate an Airbnb business.
• 📑 A lease addendum is a one or two-page document that modifies the lease, and if it contradicts the lease, it takes precedence.
• 🤝 Negotiation skills are crucial when dealing with landlords to get the best terms for your Airbnb operation.
• 💰 Never agree to pay more than market rent or share profits with the landlord; these terms can negatively impact the business model.
• 🛡️ It's beneficial to negotiate for minimal or no security deposit, and consider using a security deposit bond for better cash flow.
• 🆓 Seek to negotiate free rent periods or rent discounts as part of the lease agreement to increase profitability.
• 📈 Rental arbitrage can be advantageous, especially during a recession when property prices may decrease, and costs for supplies or labor could be lower.
• 🔍 Choose properties and landlords carefully, ensuring the property is in good repair and the landlord is cooperative and not overly demanding.
• 🌐 Joining a community of hosts, such as a Facebook group, can provide additional insights, support, and diverse opinions on various aspects of hosting.

Q & A

What is the term used for renting a property to list on Airbnb without owning it?

The term used is 'subletting'.

Is it illegal to list a property on Airbnb without owning it?

No, it is not illegal, but you need the landlord's permission.

Who is Sean Rock and what is his experience with Airbnb properties?

Sean Rock is a person with 150 Airbnb properties and has been doing this for 7 years without owning a single one, making millions in the process.

What is a lease addendum and why is it used?

A lease addendum is a document that modifies the terms of a lease. It is used when landlords are hesitant to change the entire lease, allowing them to agree to specific terms on a separate page.

What does a lease addendum typically include?

A lease addendum typically includes the parties involved, the address of the property, and the terms of the agreement that modify the original lease.

What is the purpose of the terms in a lease addendum?

The terms in a lease addendum are meant to outline the relationship modification between the landlord and tenant, and if they contradict the original lease, they overwrite the conflicting terms.

What benefits should one try to negotiate with a landlord for Airbnb subletting?

Benefits to negotiate include no or a small security deposit, the ability to use a security deposit bond, free rent or rent discounts, and a longer lease term.

What is a Master Lease and when is it typically used?

A Master Lease is a comprehensive document used for managing large deals involving multiple properties, such as 20-40 doors at a time.

Why is negotiating with a landlord important when setting up an Airbnb property?

Negotiating is important to present the arrangement as a benefit to the landlord, potentially leading to more favorable terms and a better business relationship.

What are some terms that should not be allowed in a lease addendum according to the script?

Terms that should not be allowed include sharing profits with the landlord, paying more than market rent, and having the landlord have access to a co-hosting account to see guests.

What is rental arbitrage and how does it compare to buying property for Airbnb?

Rental arbitrage is the process of renting a property and listing it on Airbnb for profit. It is less capital-intensive than buying property because it requires a smaller upfront investment and can potentially offer higher cash flow with less money out of pocket.

What are some strategies mentioned for negotiating better terms with landlords?

Strategies include negotiating for no or reduced security deposits, using security deposit bonds, and negotiating for free rent periods or rent discounts.

What are some considerations when choosing properties for Airbnb rental arbitrage?

Considerations include the state of repair of the property, the landlord's responsiveness to repairs, the potential for value creation through improvements, and the market demand for the type of property.

How does the script suggest starting an Airbnb business during a recession?

The script suggests that starting during a recession could be advantageous due to potentially lower costs for supplies or labor, and less competition in the market.

What is the role of a Facebook group mentioned in the script?

The Facebook group serves as a community of hosts who share knowledge, experiences, and advice, providing a platform for new hosts to learn from others in the industry.

Outlines

00:00

🏢 Airbnb Subletting and Lease Agreements

Sean Rock, an experienced Airbnb operator, discusses the possibility of operating Airbnb properties without owning them, a practice known as subletting. He emphasizes the importance of obtaining a landlord's permission, which can be formalized through a lease or a lease addendum. The addendum is a one or two-page document that modifies the original lease terms and outlines the relationship between the landlord and tenant, specifically for the operation of a short-term accommodation business. Rock provides insights into what can be included in the addendum, such as the landlord's understanding of the tenant's business and permission to conduct it, and the importance of negotiation to avoid unfavorable terms like profit sharing or higher rent.

05:02

🤝 Negotiating Terms and Conditions with Landlords

This paragraph delves into the negotiation process with landlords when setting up Airbnb properties through rental arbitrage. Rock outlines various terms one might want to negotiate for, such as no or a small security deposit, the use of a security deposit bond, and rent discounts or free rent periods. He also mentions the strategy of 'security deposit burnoff,' where the security deposit is gradually returned over time. The importance of selecting the right property and landlord is highlighted, along with the potential issues that can arise with lower-quality properties, such as the need for repairs and the landlord's responsiveness. Rock also touches on the benefits of longer leases for the cash flow and risk profile of the business.

10:02

💰 Strategies for Rental Arbitrage and Market Opportunities

In the final paragraph, Rock explores the concept of rental arbitrage in depth, discussing the financial advantages of setting up Airbnb properties through leasing rather than purchasing, especially in a potential market downturn. He suggests that a recession could present an opportunity for starting an Airbnb business due to reduced competition and possibly cheaper costs for supplies and labor. Rock advises on the benefits of negotiating favorable lease terms, such as lower rent and longer lease durations, and the potential for growth in the business by managing multiple properties for a single landlord. He also mentions the possibility of transitioning from rental arbitrage to property ownership as the business scales up, and encourages viewers to join a Facebook group for further advice and community support.

Keywords

💡Airbnb

Airbnb is a platform that allows individuals to rent out their properties, or in this context, properties they do not own, to guests for short-term stays. It is central to the video's theme of rental arbitrage, where the host, Sean Rock, explains how he has successfully managed 150 Airbnb properties without owning any, emphasizing the potential for profit in this business model.

💡Subletting

Subletting refers to the act of renting a property that one has rented from a landlord and then renting it out to another party. In the script, subletting is presented as a legitimate way to engage in Airbnb hosting, provided the landlord's permission is obtained, which is a key aspect of the rental arbitrage strategy discussed.

💡Lease

A lease is a legal agreement between a landlord and a tenant that grants the tenant the right to use the property for a fixed term. In the video script, the lease is highlighted as a critical document that can include permissions and terms for Airbnb hosting, which is essential for those who do not own the properties they list on Airbnb.

💡Lease Addendum

A lease addendum is a document that modifies or adds to the terms of an existing lease without altering the original agreement. The script explains that a lease addendum can be used to include specific terms for Airbnb hosting, such as permissions and conditions, making it a useful tool for hosts who need to formalize their arrangement with the landlord.

💡Rental Arbitrage

Rental arbitrage is the process of renting a property and then renting it out for a higher price to make a profit. The video's theme revolves around this concept, with the host sharing his experience of making millions through Airbnb by engaging in rental arbitrage without owning any properties.

💡Negotiation

Negotiation is the process of discussing and reaching an agreement with another party. In the context of the video, negotiation is crucial when discussing lease terms with landlords, as it can lead to more favorable conditions for Airbnb hosting, such as reduced rent or waived fees.

💡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 script discusses strategies for negotiating the terms of security deposits, such as reducing the amount or using a security deposit bond, as part of the租赁 arbitrage process.

💡Free Rent

Free rent refers to a period during which a tenant is not required to pay rent, often used as an incentive by landlords. In the video, the host mentions getting free rent as part of negotiation strategies, which can significantly reduce the initial costs of setting up an Airbnb property.

💡Master Lease

A master lease is a comprehensive lease agreement that covers multiple properties or a large-scale rental agreement. The script mentions a master lease as a document used for significant deals involving multiple properties, which is a step up from individual lease agreements for those scaling their Airbnb business.

💡Housekeeping

Housekeeping in the context of Airbnb refers to the cleaning and maintenance services provided between guest stays. The video discusses the importance of managing housekeeping costs, suggesting hiring housekeepers by the hour as a cost-effective strategy for maintaining properties.

💡Value Creation

Value creation in the script refers to the process of enhancing a property's appeal through improvements or unique features to attract guests and command higher rental rates on Airbnb. The host shares his experience of transforming ordinary properties into desirable Airbnb listings through strategic renovations and styling.

Highlights

You can operate an Airbnb without owning the property through subletting with the landlord's permission.

Sean Rock has successfully managed 150 Airbnb properties for 7 years without owning any, making millions.

A lease agreement can include permission for Airbnb operation or use a lease addendum for modifications.

A lease addendum is useful for landlords hesitant to change the entire lease, offering a one-page modification.

The addendum clarifies the relationship and can overwrite contradicting terms in the original lease.

Negotiation is key in securing favorable terms in the lease addendum for Airbnb operation.

Landlords may require specific insurance, higher security deposits, or access to a co-hosting account.

Avoid agreements that require sharing profits or paying more than market rent.

A Master Lease is a comprehensive document for larger deals, provided for free to Sean's students.

Landlords should understand and permit the nature of the short-term accommodation business.

Negotiate for no or a small security deposit, and consider a security deposit bond as an alternative.

A 'security deposit burnoff' can be negotiated to gradually return the deposit over time.

Free rent or discounts can be negotiated as part of the lease agreement.

Longer leases are beneficial for recouping furniture costs and spreading investment over more revenue periods.

Choose properties and landlords carefully to ensure good repair and maintenance practices.

Rental arbitrage can be advantageous in a recession due to potential opportunities in the market.

Starting an Airbnb business during a recession can provide a competitive edge with less market competition.

Sean Rock offers a free Facebook group for hosts to exchange knowledge and experiences.

Transcripts

yes you can Airbnb without owning any

property but you knew that already

everybody knows that it's called

subletting but it's not illegal you just

need the landlord's permission there's a

lot to this conversation but we're going

to make this pretty short my name is

Sean Rock I have 150 airb properties

been doing this like 7 years never

owning a single one of them made

Millions it's been fun you can do this

too let's go Welcome Back YouTube world

so yes uh this is my area of expertise

so just fast facts you can have a

property that you don't own you can sign

a lease for it the landlord can and will

give you permission if you present

yourself the right way you can either

write that into the lease your

permission just Hardline it into the

lease or you can use something called

the leas adendum and now the leasa denm

is probably something we should talk

about so subscribe for more of course

just at least give me a subscribe that's

all I'm asking for now what's in the Le

and denim could be really interesting

there's some basic stuff and there's

some big stuff that you can add in it's

basically what you think you can get

away with the premise of Alisa Den it

outlines a relationship modification

that could go in the lease but we use a

Lisa denim because sometimes landlords

are too too scared to change the lease

in its entirety in a lease of denim it's

easier for them to read like one page

and go okay this is cool I'll sign that

but it modifies the whole lease in a way

what a leasa denim would say is that

this one page of terms if it contradicts

with the lease then the page of terms

overwrites anything in the lease that it

contradicts does it make sense the lease

and denim will outline the parties it'll

say you are the tenant the landlord's

the landlord it'll mention the address

it'll just reference the address usually

called premise or property and then

it'll say this onepage document or

two-page document uh is purposed to

outline the terms of an agreement

between the landlord and tenant you know

while at least is active at premise and

then we start putting the stuff in the

Lisa Denim and we're going to talk about

what goes in there now there's things

that you need to put in the Lisa Denim

and there's things that you're going to

want to put in the lisad denim now I

have a Lisa denim for my cracking

superos students but you can really just

use this video in combination with a

video I already shared years ago guys

I'm going to put a link to that in the

description and just click on the link

here if you want that one also I have

something called a Master Lease it's a

big fat document cost me thousands and

thousands of dollars to get to make to

pay to have made now that is a document

I also provide for free to my cracking

superos students and it's rarely ever

used it's only used for like my absolute

biggest deals you know how I'll do 20 30

or 40 doors at one time so Master relase

is helpful for that if you want that

thousands of dollars document you'd have

to join that but you don't need it yet

if you're still you know playing a small

game so you're good there landlord

understands that the nature of the

tenants business is to provide this

location or premise as an accommodation

for very length of stays including

shortterm stays as applicable by local

regulations landlord shall allow the

tenant to conduct all matters of

business required in order to profitably

run their short- terminal accommodation

business landlord understands what you

do they understand what your business is

and they're giving you permission to

conduct your business activities now

there's going to be stuff that you're

going to want in there and there's going

to be some stuff that landlords want in

there and this is where negotiation

becomes super important another video

that's normally in cracking superos but

I also have it for free here on on

YouTube is my video how to negotiate go

watch that video because if you've never

done sales before you've never

negotiated for before you come to a

table with a landlord to try to get

permission to Airbnb their property

you're going to want to learn to

negotiate because you want to pitch this

as a benefit to them because if you can

get them to really like this idea

they'll give you more cool stuff and

they'll ask for Less stuff in return if

you don't do a good job negotiating the

landlord might require you in this

addendum they might modify it that

you'll have to have a certain type of

insurance policy that you're going to

have a higher security deposit the

landlord will have access to a

co-hosting account where they can see

the guests that you're taking in the

landlord can make you responsible for

repairs stuff like that now there's

things that you should never allow a

landlord to add in like you're not going

to share your profits with them or

Revenue you're not going to pay more

than Market rent you'll never going to

do that now a lot of you might go well

what if I need to to get my first deal

you shouldn't because the reason why is

the nature of this type of business

model getting a landlord to rent you

their property and you put it on the

market you're taking a spread out of the

market you're not going to make more

money because you you paid more rent

you're still going to collect the same

amount of cash so paying more rent

automatically makes the deal worse it

just does in addition a landlord who's

asking you to pay more rent or you know

asking you to share your profits he is

now in the mindset that he is doing you

a favor and he wants some topside off of

your deal and that is not how we pitch

our business model now I have a very

strict sales system that I teach my

students one of the premises of the

sales system as we make our approach is

really to align this as a benefit for

the landlord we're looking for landlords

who are willing to see this as a benefit

to them cuz they need a red check too

right and if we can make this seem

Mutual they're not going to have this

high on their Force kind of approach

where they're dogmatic they're all up in

our business they're trying to raise our

rent all the time they're being douches

we can have good business with good

landlords and everybody is happy you do

not want a landlord who thinks that he's

getting one off on you right you do not

want a landlord who thinks he can charge

you more money you will not like that

business relationship things that you

would like to negotiate for some of

these might be hard to digest but yes

you can do these is either no security

deposit or a flat small security deposit

like $300 per door the ability to use a

security deposit Bond instead of an

actual security deposit which is like a

non-refundable Bond you pay 10 or 15% of

its value and it's held for the landlord

still at a smaller rate like maybe

$1,000 Max so you're paying $150 for a

security deposit Bond but you never get

that $150 back because hopefully you

never move out of the unit anyway it's

not going to matter you you just don't

want to lock up money into security

deposit it's bad for your cash flow so

you want to negotiate a different type

of security deposit agreement for places

that have made us pay like full month

security deposits we've done what's

called a security deposit burnoff where

after a half a year and then a year and

then a year and a half we slowly get

that security deposit back so we've done

burn-offs before that's a cool Pro tip

you also want to negotiate free rent or

discounts on rent or both and yes you

can do that we'll get 8% off market rate

we'll also get eight or 10 weeks of rent

for free my last deal in Houston we got

nine weeks of rent for free the deal

that I was just working on in Austin

where we painted all those walls I got

10 weeks of rent for free there it is

just honestly a part of the negotiation

and if we sell the deal the right way we

can get the free free rent that of

course is a cracking suos thing like I

said um there's some things that will

stay private because if I gave everybody

in the planet my script for free rent

then it takes away my ability to get

free rent I'm sorry there's some things

I just won't give you guys for free

because we can't spit it off into the

whole world I still like my free rent

and I want to keep that but for those of

you with sales experience um it might

start making sense and you might

actually find your own way to a free

rent script eventually otherwise for

those of you without sales experience

like I said cracking super host

surprisingly you want a longer release

than a shorter release this actually is

good for you the reason why is because

you're getting possession of a property

and you're going to buy furniture and if

you're only able to make money on that

property for one year so you return an

investment is weighed against your

furniture costs and then a year of

Revenue but if you can spend the same

amount of money for furniture but then

get two years of Revenue off of that

lease it's much better for you that's

much better for your again your risk

profile the longer lease is actually

good for you further since we're

negotiating with a landlord there's more

at play here that we really want to be

careful for we want to take a look at

the property and we want to get to know

them a little bit because you need to

make sure you pick the right property

and the the right landlord everybody

would love an A-Class high-rise new

build property problem is the rents can

be pretty high on those so you'll have

to do your market research and make sure

that it looks like the market can

support that because the more rent you

pay like I said the less room for a

spread there is you're going to have to

find new ways to create value the

housekeeping Market is pretty high on

cost right now and so I would probably

recommend doing cheaper properties where

you can get slightly longer stays on

average to keep your housekeeping cost

down until you can learn my system for

hiring housekeepers by the hour and yes

this is an another thing that we do we

pay $4 to $17 an hour for our

housekeepers right now a lot of people

don't believe it but imagine if you

owned a housekeeping company that was

charging you to clean your house what is

that housekeeping company paying their

housekeepers the W the hotel right

across the street from me they pay about

$4 or $15 for their housekeepers too

businesses pay hourly all the time and

you can do that if you did more average

properties ones that aren't as

impressive there might be more room for

what you would call Value creation you

take a property that doesn't seem so

good on paper necessarily it doesn't

seem so good as a long-ter rental and

you can do some magical stuff in order

to make that property look way way cool

in the photos and now if it's well

marketed on Airbnb you can keep your

calendar full at a good nightly rate and

you have more room for margin I recently

just did a video where I took very plain

units in Austin the same one where I got

the 10 weeks of rent for free now that

I'm Renning the company again I went

down and I refurnished those you take a

very boring place it's very cheap and

then you can flip that into multiple

different looks I have two separate

green looks one is super masculine and I

love it cuz green is my favorite color

one is this blue and green very neutral

gender neutral but also very vibrant and

fun and then the other one's pink pink

and purple and I actually love this unit

to death it's so playful and it's

probably one of everybody's favorites so

far from what I've been told but I'd

actually like to know what you think in

the comments out of the three which of

these would you stay in which would you

prefer because I'm still looking to

paint a few more another couple of

colors and I could probably use some

direction on that so thank you and with

that said these cheaper properties will

then have things that you need to look

for that landlord may be more of an

absentee landlord that doesn't do

repairs and so when you go and tour

property you want to see what state of

repair is the place in do you trust this

landlord to repair things quickly when

you report them we have a property in

Houston that we are having some issues

where the building is just flooding in

part of it whenever it rains and of

course the landlord's trying to fix the

rain problem but he just doesn't seem to

understand his building enough to know

where the water's coming from they

reflashed the whole building is what I

heard but the next rain came and we

still had a flood so we have these

cheaper properties that look great but

one of our four-month long tenants just

reported that they are having a a flood

issue in the their living room a small

one but it's still there and these are

the kinds of things that could happen

with a b-class property so you do want

to be careful for the properties that

you choose you do want to ask enough

like thorough questions to make sure

that the state of the building is good

and as you have this conversation with

the landlord you can find out if the

landlord's a generally nice person or

not if you have a landlord that has a

lot of ego and kind of combative and

dismissive you're going to find that

your relationship with them isn't going

to be largely positive now the cool

thing about rental Arbitrage especially

right now housing prices might actually

pull back they could legitimately pull

back this next year so to buy a house

doesn't really have an advantage because

you're not going to get appreciation

over the next year now a year from now

if the market pulls back you might find

a cool buying opportunity and then there

would be more advantages to buying but

with rental Arbitrage if you're not

looking to get appreciation from the

property that you own it cost about 1/8

of the price to set up an Airbnb as an

Arbitrage as opposed to buying because

when you buy investment properties you

have to put 20% down put this all

together into one big enchilada if you

find a landlord who's cool who is

willing to do business is willing to

grow with you is trying to buy some

properties that's just all they do if

you can pick up eight times as many

units by doing Arbitrage than buying you

could give that landlord a lot of

business you can give them a lot of

leases so if you get a landlord that you

like and they like you and you're doing

good business as they go buy more

properties and they're spending all the

money to get the appreciation and The

Debt Pay down then you can just pick

those properties up as rentals and

hopefully get a sweetheart rent deal and

you can continue to make a high cash

flow business with very little money out

of pocket you might find that you grow

to a position where you have 20 30 50

doors and you might want to switch to

buying because you just can't grow

anymore there might be a point that you

as a business owner owner just have a

hard time running 50 properties so if

you're going to run 50 Max and you're

already at 50 you might as well switch

to ownership at that point because you

might make more money per property that

way right you make more money per dollar

with Arbitrage and I will say on that

note if you are thinking about doing

rental Arbitrage a recession could be a

cool time to do it chat GPT seems to

think that starting a business in

recession could be a good idea because

there could still be strong demand in

certain sectors but there's less people

getting into business because of the

recession and you might have an

opportunity to get supplies or labor at

a cheaper cost and what's funny is in

previous videos I had to talk about this

right now if you were to start an Airbnb

business whether you bought or do

Arbitrage you could get People's

Furniture on the cheap there's people

exiting the industry right now and as

suppliers leave the industry and guests

stay in the industry there'll be less

suppliers and more money for all the

suppliers and you as a host would be

technically a supplier cuz you're

supplying an apartment chat GPT seems to

agree start your business in a recession

learn to fight while it's tough get good

at this while it's tough that way you

don't have to learn to get good at this

if a recession smacked you in the face

face in the middle of being a business

are I think starting while it's hard is

probably a cool way to do it because

then you have this humble sense of

respect for the industry instead of

thinking it was so easy and then getting

smacked like everybody else is right now

a lot of people who are quitting right

now were good hosts when it was easy

they're not good hosts when it's hard

hunt down some furniture from people who

are looking to sell to get out make them

a payment arrangement you don't even

have to pay full price for the furniture

up front you'll say hey I'll make you

payments over 6 months you find a

landlord to sign a Lisa denim with you

remember watch the video that I did

years ago on the Lisa denim just for

another Breeze through of what all goes

in there cuz it's a legal document it's

pretty much all the same and with that

said I'm not a lawyer guys I'm just

telling you what I use from the lawyers

that I've paid these are the documents

I'm using from lawyers that I've paid

for this stuff so yes I paid thousands

of dollars tens and tens of thousands of

dollars to multiple lawyers as a

business owner it just comes with a

territory so I hope that my expenses and

experience can give you guys an

opportunity at making your first

$100,000 a year seven figures a year I

hope that for you guys I was able to do

it it's a pretty easy industry I think

anybody can if you care enough to grow a

business and stay disciplined you can do

it this is going to be fun and I'm here

to help if you need anything put it in

the comments as always and of course I

have a free Facebook group with about

50,000 hosts that know a lot of stuff

too and we all chat in there so if you

want more of a court of public opinion

approach to a question and you don't

want just my answer alone go into the

free Facebook group the hosts of AR andb

automated to ask your question to a

bunch of hosts you can even get some

answers on What markets are good what

type of furniture is best maybe some

opinions on different softwares that

people are using and other stuff down

there's a lot of stuff to know lots to

learn and you can do it and again thank

you for watching this video as always

I'll see you on the other

[Music]

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