Julian Sage:                       00:00                    Is Airbnb rental arbitrage dead due to the Coronavirus? Let’s talk about that.

Julian Sage:                       00:06                    Vacation rental machine helps hosts just like you learn how to start, grow and scale your short term rental business. The show’s all about creating systems that help you automate your business, give any more time and money freedom. If you’re ready to start living the vacation rental life, then subscribe to this podcast today, come and join us on our Facebook group, the host nation where we’ll be talking about starting automating and scaling a short term rental business. Now onto the show.

Julian Sage:                       00:32                    Hey, welcome back, host nation to another episode of vacation rental machine. I’m Julian Sage and I’m with Jon Bell. John Bell, the professional Airbnb rental arbitrage host. You have over 24 listings that you did scale up to around 18 months using rental arbitrage. Now, when you have that many properties, that many leases that are dependent on you being able to pay them, let’s just give a quick rundown for those of you that know about or don’t know about rental arbitrage, how does it work? And how is this going to be affecting your business moving forward?

Jon Bell:                              01:05                    Rental arbitrage is simply just going out and renting a property and then re-renting it to other people or sub leasing it as most people call it. Of course, you do that with the blessing of the landlord or the property managers. So as long as you’re covered in that way, you are permitted to go out and then re-rent it to anybody that you want to as long as you can market it online. How is the business being affected by this virus? Of course, right now people are canceling left and right. That does have an income deficit on the bookings that are on the calendar. So yes. Am I in some way feeling the hurt of all of this? Yes, but will I close my doors because of it? Absolutely not.

Julian Sage:                       01:48                    We see companies like we work, which is basically like another type of a rental arbitrage model where they’re basically taking space and then they are furnishing it and then re-renting it to individual people that come in and use their WeWork shared space. The rental arbitrage model is the same thing where you’re basically doing just taking that and then re-renting it. But like we saw with WeWork, if you aren’t able to make that income, you’re going to have to close your doors and you, Jon, you’re not a company. You’re not like this really, really big multi-million dollar venture backed company. You’re just a guy that wanted to capitalize on this really profitable business model. But on the flip side, it can also be pretty scary I imagine. You have over 24 plus properties that you are using this model with and though those rent payments are going to be coming due. How do you survive that if all of your bookings are getting canceled? Is this a business that you just won’t be able to survive out of?

Jon Bell:                              02:50                    Well just like you said, this is a highly profitable business. This, this comes down for those of you that have been doing it a while, you should have had months and months of profit that you have either been collecting and hopefully not spending or wasting. So in this sense, this is just when you go ahead into those profit reserves that you have and you just cover the bill. I mean you have to sustain yourself until this wave is over and just be ready for the next one to come. Of course, not everybody will make it out of this unscaved, unharmed, or without feeling any type of pain. So one thing that is uncertain at this moment is really how the government is going to respond in aid to small businesses. It’s not passed just yet, but maybe there will be some support or something that we can actually use to help hedge some of our losses during this time. That could come even with the new 0% interest that is out at with the fed on maybe borrowing or getting some extra capital just based off of your personal credit to sustain things. So we need to be creative. I’m not one that always pushes that you need to go out and get a credit card to do certain things. But this could be the time that something like that needs to happen if you feel the effects harder than most,

Julian Sage:                       04:18                    I think a lot of people online are talking about how Airbnb rental arbitrage is dead and “Oh look at you guys, you guys are profiting and now you’re having to pay the man his, his salary, his income.” But I think we also need to consider that this is not just for the rental arbitrage that is going to be hurting with this. Regular businesses, your restaurants, Amazon, FBA people, all these different businesses are being affected by this. And having some type of relief such as like government aid to be able to maintain a business is what people are going to have to be doing. People are getting put out of jobs. You can’t say “Oh, because of the Coronavirus that all you people that have jobs, you’re going to be hurting.”

Julian Sage:                       05:05                    It’s like, yeah, that’s true. We’re going to be put into situations where we are going to either need to have saved up enough extra capital and tapped into that reserves. And, fortunately with this model the arbitrage model, you have seen those really profitable seasons, but being able to pivot and being able to depend on the government when a time like this does happen, then that’s probably also a reality. I don’t think maybe people understand that it’s not just arbitrage hosts. It’s also co-hosting. Can you talk about your co-host clients and how that’s impacting their business and how that’s also impacting you?

Jon Bell:                              05:44                    Of course, of course. I mean, I am not paying their bills, but they still have bills that need to get paid which if they thought that this was something that they could use to not only pay the bills, but also profit. At this point, they’re feeling the exact same thing that the rental arbitrage hosts are feeling. They’re not making any money. When they’re not making any money, you know what that does? That keeps your phone ringing. Everybody wants to “Hey, what’s the strategy? How are you going to get my place book?” That might add extra stress to somebody who doesn’t have anything coming in. I mean, if you’re not making money for your co-host, you’re not making money yourself. So this thing is just wide spread. Of course, you don’t have the big debt hanging over your head, but your business could still be affected by this. You could lose co-host clients just because, “Hey, I tried it. This didn’t work out. I need to go back to a long-term method. I need to use somebody else.” Simple as that.

Julian Sage:                       06:43                    So rental arbitrage isn’t dead, but it is also willing to weed out the people that haven’t been able to survive it. So maybe if you were coming in during that slow season, maybe you were scaling and you haven’t had enough backup reserves enough to be able to safeguard yourself in case something did happen, if whatever the reason might be. And that’s why you know, right now, John and I are also interested in looking at your businesses. So if you are a rental arbitrage host and maybe you picked up a lease, you furnished a property and maybe you’re in a situation right now where you’re looking to cut the lease, maybe you’re interested in selling the furniture, just kind of selling the business altogether. Jon and I are interested in taking a look at your business and potentially even picking it up ourselves.

Julian Sage:                       07:24                    We don’t know the future. We don’t know how it’s going to be. But if you’re in a situation and there’s no other options for you, maybe you’re just not looking to continue doing this, go to cohostit.com. You can click on one of the tabs on cohostit where you can put in your information about your property, your contact information, and Jon and I can take a look at your business, see if it’s something that we would want to potentially purchase from you. Furnishing the lease you can sell your business to somebody else. That is an option. So go to cohostit.com if you are in that situation and we’d love to be able to take a look at your business.

Julian Sage:                       07:56                    And with all that being said, host nation, keep on hosting. Hope you hosts found value in this episode. If you did, please go on over to iTunes and leave us a review is that would greatly support the show. If you’d like to connect with Jon, the community, and I then, go on over to our Facebook group, the host nation, talk to you hosts in the next step episode. Keep on hosting.