rental arbitrage

Master Leasing, Highest-Best Use. Increase Your NOI with Airbnb. Oh, my.

In Chicago, as of 2018, the multifamily market is in flux. 8,800 apartments are coming on-market in 2018, according to Crain's Chicago, and Landlords are uncertain because the market appears soft.

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Deals in Chicago's transition areas, which were once selling for 8-9% cap rates, are only trading for 6% cap rates now. If real estate is your preferred investment vehicle, what do you do with your money now? Is a 6% cap rate worth it? 

What if you could turn a 6% cap rate into a 8%, or even a 10%? How do you get highest and best use in multifamily investing for your money? 

How Master Leasing Helps

With a Master Lease you lease a property as a tenant and then sublease it to occupant tenants (or, in the case of short-term rentals, guests.) The tenant, also known as the lessee, secures control of the property with the Master Lease, and then manages the property. 

The goal is to increase the cash flow from the property and pocket the difference between what your master lease payments are and what you are collecting.

Why would a property owner agree to this?

A common reason is the owner is just tired of managing the property.  They have what we refer to as ‘tired owner” syndrome.  Another common reason is someone or a group of people have inherited a property and have no idea how to manage it.

In the case of short-term rentals, a single unit in the property may be vacant. The owner may want rental income from a short-term rental operator, rather than let it sit empty.

Marrying Short-Term Rentals and Master Leasing

The key tenet in the section above is the ability to increase cash flow from the property. How do you do this? One way is with a proven Short-term Rental Program.

This is commonly known as rental arbitrage in the short-term rental operator world, and many large Landlords have began to use short-term rentals in order to fill vacancy and increase their NOI.

Redefine Highest and Best Use.

With a proven short-term rental system and a market that warrants higher short-term rental revenue than long-term revenue, short-term rental operators can signs leases in your new (and old) developments, accelerate lease-ups and boost your NOI.

Proven short-term operators can lease and manage a number of units with a building, and fully design and outfit these spaces to host clients for monthly or nightly stays.

Taking Short-term Rental Master Leasing to Market

The Idea is simple:

  1. EXPEDITE YOUR LEASE-UP - Obtain 100% occupancy on day one after completion; no lease-up and no ramp-up.

  2. NO VACANCIES - Eliminate vacancies, credit loss, ongoing maintenance, leasing commissions, and turnover costs.

  3. CREDITWORTHY TENANTS - Virtually guaranteed monthly income; on-time, every time.

  4. INCREASE YOUR NOI - Increase the value of your building by increasing your cash-flow.

With too much money in the market, and real estate investors seem to be chasing yield. There are creative solutions to increase your returns. If you’re interested in increasing your multifamily returns with a proven short-term rental system, we’re here to help.