72. HAVE This in Your Lease Agreement (Lease Arbitrage)
Mar 30, 2021
Discover the ins and outs of lease arbitrage and why it might be the perfect entry point into short-term rentals. Learn about essential lease terms that safeguard your investment and how to negotiate favorable agreements. The discussion includes vital clauses to include in your lease, such as penalty-free opt-out options and utilities. Plus, explore the operations of lease arbitrage and strategies to maximize profits while keeping capital intact. It's a treasure trove for aspiring investors!
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volunteer_activism ADVICE
Must-Have Lease Out Clause
Always negotiate a lease out clause for poor financial performance or regulatory changes.
Use occupancy and nightly rate metrics to define when you can exit without penalty.
volunteer_activism ADVICE
Lease Terms for Security and Repairs
Ensure your lease allows changing door locks to secure your short-term rental.
Get permission to renovate or do interior repairs as part of your lease agreement.
volunteer_activism ADVICE
Negotiate Long Lease Terms
Negotiate a long lease term with low rental increases to reduce risk.
Include options to extend but keep a protective out clause to avoid losses.
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You may have heard prior episodes where I talk about the benefits of owning your properties vs. sub-leasing them. Well, I still think owning them is the end-all goal but for many, lease arbitrage IS an easier way to get in the game.
It’s an easier way to make great (potential) cash-flow without having a lot of money up front. It’s also a great way for an investor to hold on to their capital and learn the business at the same time before investing in short-term rentals. I came to a great agreement with an owner to rent what was once a historic hotel and I want to share some details with you in this episode but also the essentials you must have in your lease if you’re going the lease arbitrage route. Last week we talked about the numbers, this week let’s talk about the lease terms
Negotiating your lease arbitrage terms
What you MUST HAVE to protect yourself
What’s included in the lease
How long is it, options to extend?
Why lease arbitrage can be a great option for many
The operations - are they different?
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