welcome back Airbnb family so a subscriber posted a comment asking for
clarification on the margin that I charge and how it's possible doing
rental arbitrage so in the video that he posted the comment I stayed it's I
implied if you pay $2,000 a month in rent you should charge $3,000 a month or
make that your goal at least to charge that for your short-term rental per
month cost or that's what you're collect would be so you wanted to know like how
is that actually possible to get somebody to pay that much money for a
month-to-month well let me walk you through the landscape of the business
and that this will help you out so when you're looking for a lease let's say
you're I'm in downtown Houston right now but just choose any city you go to an
apartment complex downtown and say I would like a lease and here's my budget
let's say your budgets $1,700 the building will say okay so here's the
building's layouts floor plans that we have that are at $1,700 a month and you
can get that $1,700 a month if you sign the lease for a 12 or 15 months then
that would be how you achieve the $1,700 a month now let's say you go back to
that same building and you say okay I'd like to stay here I'd like this unit but
I would like to sign a four month lease that same leasing agent will say okay so
for four months what we have is the rate will be twenty two or twenty three
hundred dollars a month for four months lease for this unit that's unfurnished
no bills paid you still have to get your own electricity if you want less than
three months that starts to get short-term for them and the rate starts
to go up if you do a month-to-month lease which some buildings don't even
allow right you cannot get a residential month-to-month lease if they do allow it
they'll charge somewhere a ballpark double of rent so you're looking at
three thousand a $3,400 a month with some property management companies to
get a month-to-month the reason why is because the building suffers risk if you
sign a lease for a month and then don't renew it then they have to go through
and make sure that the place is fine and then list it again and try to get it
occupied so they're down days get rolled into their cost that you pay when you
pay your rent so what does this mean for people looking to stay short-term if you
pick up a lease for a year a premium value you become the one
that's at risk of the day's not getting filled up right so you're gonna pay your
$1,700 a month the building is happy because they get that lease you know 100
percent occupancy on that lease for the whole year and now you are the one who's
stuck paying the rent you know didn't no matter what happens so now you take it
you furnish it let's say that adds another three hundred dollars a month in
hard costs over the course of your lease which makes your lease instead of
seventeen hundred with furniture you cost us two thousand a month if nobody
stays you lose two grand a month right so you charge your cost plus your
premium and if a person wanted to say at the building month by month anyway no
furniture they're still gonna pay three two thirty four hundred so now you can
charge three to thirty four hundred with furniture and you're a value right
that's that's really now you're competitive with the building itself but
you're offering that extra premium which is the furniture and you're gonna pay
the Internet and the electricity corporate housing companies they
actually use this thousand dollar markup models that I listed or that I refer to
in this previous video so what they'll do is when shell or GE comes and says
we'd like ten apartments for three months what can you get for us what
they'll do is they'll go and they'll secure a bunch of leases for two or
three months they'll rent the furniture get the electricity set up all that
stuff and then they'll take their hard costs and they'll add a thousand dollars
per month for each unit as a profit and they'll get the company to pay that
price and that's how corporate housing companies they make their money is they
take this post cost markup of about a thousand and that's their target and
that's actually where I got that number from so you can use that same measuring
stick pretty much in any other city to know that corporate housing companies
they are profitable and lively businesses with that margin so the
thousand dollars above your cost is actually not a hard number to achieve
one of my actually in the same building that I'm in I have a two-bedroom
apartment my costs are like my rent is just under two grand so my other costs
you know with utilities and stuff is probably about twenty two hundred I
spent about seven thousand dollars on all the furniture etc and I had a one
month booking I think goes like 27 days and my
collectors like 4400 are just under 4,400 on Airbnb so I'm more than doubled
my money for a month on booking so people are glad to pay this money so
don't worry about that also in this building there's a company
that this corporate housing they don't do Airbnb but they do like
corporate housing like I mentioned and the leasing agent at this building told
me that their base nightly rate how they calculate it is I think a hundred and
ten dollars per night so if you get a month-to-month lease with them you're
paying a hundred and ten dollars a night which is thirty three hundred dollars a
month plus for your corporate housing so if you make that your your goal that
thousand dollars a month markup and you can get leases at a good value you will
have no trouble making you know a profitable business out of it and having
a high percentage on occupancy so the only guideline to come away from here is
don't pay too much in rent for an apartment
and if you'll as long as you follow that one rule you should be fine of course do
your market research and see what other people are charging and how other people
are doing by following the webinar that I posted earlier on market research and
happy hunting guys use it be successful make a lot of money and of course any
other questions leave it in the comments so thank you for watching Airbnb
automated and I will see you on the other side