Are you desperate to get into Airbnb investing but low on cash? Do you worry that you’re too young or don’t know enough to be successful? Have you wondered what the whole Airbnb arbitrage thing is, and if it works?
If so, Episode 74 of the Host Coach Airbnb Investing Podcast episode is for you! Ali Mae shares how she hacked her way to launching an arbitrage boutique hotel inside an apartment building - on a teacher’s salary!
Read on to understand how to operate a legal Airbnb arbitrage property that generates $50k per year, and scale from there!
Topics discussed in this episode:
- The importance of investing in yourself as an investor
- How to use Ali Mae’s systems to build an Airbnb arbitrage empire
- Why understanding county STR laws is critical to success as an investor
- How to appeal to your guests’ 5 senses with surprise and delight items
- A new way to create a revenue stream at your Airbnb(s)
- The latest Airbnb trends to lean into as a host
Host Coach Airbnb Podcast Episode 74 Show Notes:
What was the inspiration or motivation behind opening an arbitrage boutique apartment hotel?
It happened as an a happy accident. It was just what started as wanting one Airbnb to supplement my teaching income. That was my first step into the world of real estate to achieve my original dream that kept come to me a few years before. So probably four or five years ago, I had traveled to a lot of hostels and I knew that eventually I wanted to open one of my own. I heard about the arbitrage opportunity and opened my first Airbnb unit. That one really took off in February of 2023! It did really well. And so, by July of that year I expanded with another, and then I expanded to a full eight-unit accidental arbitrage hotel by July of 2024. It definitely caught me by surprise. I did the arbitrage method, so I took over a lease as like a traditional corporate renter and then had permission from the landlords to rent it out to other people.
Okay, and so one starts to do well within this building, and you get the second and the third all within the same building. You're up to seven or eight within that building. Wow!
Relationship Building Is Key
How did you develop that relationship with the, property manager or building owner, to make that possible?
There were other arbitrage operators in the building when I started there, and I just brought this level of professionalism to the table that they were not seeing from these other operators. I had actually gone through a mentorship - invested in myself to learn about arbitraging, and through that I was able to acquire the correct and professional documentation, contracts, and stuff.
When I came to the management office lwith those things coupled with a really solid understanding of our city ordinances that I was really seasoned on, they saw that as valuable to them to not only better their systems with their current operators, but also that I knew what I was doing. I inquired about the second unit when I scaled, but then in July, 2024, the management office brought me a six more units! They said, "We want you to have all of these. We didn't want to work with an operator anymore, and we want you."
STR Knowledge Is Power In Negotiations
What is a piece of information or an approach that you came to the table with that you feel really set you apart?
I think just having that really solid knowledge base on our city ordinance was super helpful. So, San Antonio Texas has a short-term rental ordinance and we actually have a board of advisors that works really closely with the city. So we're not really in a situation like New York where it's going to get banned. Our a situation like Austin, where it's always teetering back and forth on legistlation. We have a really good relationship with the city, so when I was able to bring that to this management office and explain to them the process and show them that I have a solid understanding of the rules, the regulations, and what kind of guests I would be having in their building... I think that they saw that as valuable, especially because of their side of things. They also would get letters from the city regarding operators in their building that were illegal! So I think that they were really happy to see that I was going to be working alongside them and actually almost helping them maintain compliance in that area.
I can say from our experiences of being long-term rental owners - short term rental sounds a little scary until you experience it and you're like, "Oh, instead of having delayed maintenance of a year or two years or three years and not seeing a space and then walking in and being like, oh, we have to replace the carpet and repaint and do all these things." Every three to five days someone's in there checking it out, making it perfect. So I could see having someone like you walk in, knowing all of the ordinances and showing them how beneficial it could be to them, not just financially, but for the integrity of their building. That they would be like, "wait a second, let's try this." And then when you started succeeding, "let's just let this woman run the show over here."
Absolutely. That was definitely one of my selling points. The other major one was insurance. So a short term rental unit actually has more insurance coverage than any traditional tenant unit ever would, so that was also really appealing to the owners.
How Much Building Owners Make on a Airbnb Arbitrage Lease
Does the owner your lease make a little more or a little less than they would on a traditional one year lease?
The building owner actually makes the same. I actually make about 2.5 x on that unit.
Do you hear that listeners? 2.5x on the traditional annual lease!!!! This is the beauty of the short term rental and of arbitrage.
I'm curious because I'm the person that does all the design and furnishing of our places. How did you finance furnishing your first hotel room and then the others?
Financing Here First 8 Airbnbs
So we have all one bedroom king suites, and I've developed a number around what that square footage is like, and and then everything with arbitrage you have to consider your deposits as well as your first month rent compared to if you were in like your own home. And so for the very first one, actually, I was just out of college in my teaching career. So I actually poured literally, and when I say this I mean it in every aspect of the term, every single penny I had available to my name, plus some!! I took out any line of credit I could find to get my hands on in order to furnish that very first one.
In order to scale though to the second one, I knew from the start that my bigger dream was to get to the hostel that I want to buy and open, and so I held onto every single piece of profit and left it within the business so that by the time the opportunity came to scale to a second unit I had all the funds from the profit that I had earned from the first unit! And that's how I was able to scale and furnish the second one, and then the third, and then all six was with all of the saved profits from that first one.
Airbnb Decorating
Are each of the second through eight, are they exactly the same? Are they variations on a theme? How do you handle your decor like that?
So San Antonio, we have a main avatar, and then we have some sub avatars for who our ideal guest is. Our main avatar is definitely couples that are coming to just do the whole walkability thing. I'm directly on the river walk, so they're really looking for just that kind of slowed down - but busy schedule at the same time. So we cater to couples and then we also have our sub avatar, which is like mother-daughter or girlfriend-type of trips. And San Antonio is really fiesta and vibrant and has so many music festivals and river parades throughout the year. So every unit has its own unique style but a lot of pops of color. Of course, we also have a brand and a color scheme going on as well. But they're very vibrant, very fun, and have a little bit of southern Texas thing going on as well.
How Suprise and Delight Impacts Guest Reviews
Tell me a little bit about how you're keeping a brand through amenities, surprise and delight, whatever you're doing... so people realize that there is an Ali Mae brand that they're be experiencing.
When I realized that now I had eight units, I suddenly had a boutique hotel opportunity. I knew that I could compete not only in the Airbnb space, but I could also compete in the hotel space at this point. So that's when I also had had this epiphany around what was my purpose and my passion in this space as being a host, as being a, short-term rental investor. Did I want to do coaching? Did I want to do property management? And I realized that I really enjoy bringing the guest experience.
It was at that time that I created my high-touch, 5 senses guest experience. I implemented these little branded touches and created that hotel-like Airbnb amenities line to implement into all of the units. Some of those items are: organic loofah scrubbers that are right near our showers with a specific-scented shower steamers that have our logo on them. In the shower we always have a fresh eucalyptus bundle hanging that's mixed with lavender. So just those three little touches. And then one of them, I'm able to just stick our brand right onto those shower steamers and guests just love it. They always comment about the little touches.
We saw a change in our reviews and guests were like, "oh, I was gonna go out, but I stayed in because it feels like a spa here," and all these kinds of things. That was really awesome! Another one of the big areas I focused and did a lot of research around is the bedding and the linens and the quality that I was implementing across all of these units. That has also created amazing feedback. I've actually been able to open an Amazon store because so many people want to buy what I have in my unit!
What a great extra revenue stream. Every short term investor is looking for ways to add additional revenue to their existing properties, and I had never thought of having an Amazon store because people ask us about our mattresses all the time. That's a great idea. Think about what items guests continuously ask you, where you bought it or comment on... and perhaps there's a way to have an Amazon store available to them.
Airbnb Investing Goals
Your goal going in was to build a boutique hotel and you're at this eight units. Have you met your goal? Where your goal is leading you in terms of financial freedom or growth?
Like I said at the start of this, it was supposed to be one Airbnb and then I guess I didn't really have a straight vision of how was that going to lead to my boutique hotel or hostel I should say. It was a happy accident. I scaled to the eight units and now that I have it, I actually stumbled upon a couple of mentorships around the boutique hotel scene, including Blake Daley's and Brittany Arneson and Sujay Mitta all of their boutique hotel academies. And so that's really when I was like, "okay, I'm gonna go full force with with moving forward." Now I am fully ready and on the path to purchase my own building and scale to a boutique hostel.
We should address the word hostel because when I lived in Budapest in the late nineties, the hostel experience was blow drying your hair under a hand dryer... if you were lucky. No one had eucalyptus sprig. So I think that you making a posh hostel is a very good play on words.
Yes. So that's really where we're at right now - getting into that acquisition and we're looking to move and be under contract on something by June. My passion is to bring that communal experience to the United States more because we see the hostels mostly in Europe and Central and South America. But I want to bring that experience that I find so genuine with those connections that happen inside of hostels to the American traveler, but then also of course bring a more posh boutique level to the space.
From Teacher to Full-Time Airbnb Entrepreneur
So you're using your cash flow from the arbitrage that you started by barely scraping together enought money for furniture, and now I'm hearing that you're looking to buy a building?
Yes, that's correct. So right now I'm actually looking at, some buildings that have been operating as hotels, one is an old school supply warehouse in downtown Kansas City with rooftop event space. I'm a huge fan of obviously hacking anything, right? So I hacked how to open a hotel in someone else's building, and now I'm really into mixed-use real estate. I want to have this hostel with some of those luxury-style dormitory rooms, but also private suites rooftop event space. We're going for the whole package here with capsule units that we see in LA or New York kind of popping up. And then of course co-working space down on the main retail level and also a speakeasy mocktail bar, because I really value the sobriety scene that is finally having a social space as well. So we're really targeting all of the things that a remote worker or a remote traveler or solo traveler is looking for, as well offering the experience for that connection whether you're introvert or extrovert and looking for those just genuine connections that happen in these spaces.
Watch out world Ali Mae is to make a very big splash in the hospitality scene. That is such a fantastic and unique vision. I am delighted to know about it and can't wait to stay in it when it actually is up and ready. We'll be some of your first guests!
The Biggest Challege of Airbnb Arbitrage
What's the biggest challenge you've faced operating a boutique apartment hotel inside of someone else's apartment complex?
Definitely one of the biggest challenges at the start of this was meeting the criteria of being able to get into a 6 story, luxury apartment building on the San Antonio River Walk. They have a very established corporate rental process, and being someone who was totally new to real estate - I never had an LLC up to this point. No business credit. It was really quite a hurdle at the start to qualify for their corporate leasing agreement. And then, as I was getting into that the debt to income ratio with a teaching salary and student loans, and no other assets... it was definitely an uphill battle. That was definitely one of the biggest challenges - getting into the apartment complex. Then, of course, once I was in there were a couple other challenges that then presented themselves!
Did the apartment building owner needed you to have certain financial requirements or certain financials, certain monies in the bank?
Yes. So they were looking for two years of business credit history as well as three times the amount of rent on the unit. And so ultimately someone else through my mentorship was able to come on as a guarantor with her LLC that was more established and I was able to enter that way.
That's fantastic and a great hack.
Financial Freedom from Airbnb Investing
I'm curious are you still teaching to supplement income or has your arbitrage empire backfilled your salary given you more life balance?
Yes, the balance has been the biggest thing to understand, right? Turning into an entrepreneur and then managing these multiple areas of life. Getting married as well. Having my first baby, it was a lot at one time. But no, I'm no longer teaching. I was teaching through the first year of investing and then my husband and I found out we were expecting. I taught all the way up until we had our daughter, and now I'm a stay at home mom now working on continuing to expand the portfolio and focus on the boutique hotel scene.
That's awesome. I also got into entrepreneurship so I could be home with our son when he was born and had the best of both worlds 90% of the time. Then there's that 10% where you're like, "Wow, I'm doing all of it all the time."
$50,000 per room — and growing Airbnb Hosting
I'm curious how much does one of your boutique hotel spaces make annually?
We have eight rooms there and we were just able to pull the full T-12 on the first three units that were operating, and we did just just over $50K in revenue per room.
That's amazing! That's fantastic! So again, listeners, if you're young, if you're just starting out in a career in a family, but you want something more, this is an amazing example that you can find a way to figure things out and start making an extra $50,000 per unit. And not all, we can do the math pretty fast times eight.
The Power of Investing In Yourself
Allie, I love that you did it basically through knowledge. I asked the question about how did you get into the hotel and how did differentiate yourself getting the lease and how did you overcome the financial obstacles? You did that through investing in yourself and knowledge. I love that!
Yeah, I definitely think that there is no better expense that you can spend by investing in yourself. Actually, one of the things I was facing when I started this arbitrage path was I was unhappy in teaching. I was four years in and loved my students, but I was experiencing teaching burnout. And the hours were just insane. It was not a nine to five. So I knew I wanted to do something else. So I had this internal debate where I was like "do I want to go and do a master's degree at a university? Or do I want to do more of a trade?" And that's really when I stumbled upon the Airbnb arbitrage opportunity and how that would line up with my original passion. Of course, I try not to lead my business with passion. I like to look at the data and the numbers when I'm investing. But it definitely was the more appealing move. to start investing in myself in, why would I go spend hundreds of thousands on a master's degree when I could invest in myself and see a quicker turnaround on something.
May I ask how old were you when you invested in your first arbitrage unit?
I was 25, just turning 26 years old when I got my very first one.
You can never be too young, too old, too anything to be in short-term rental investing and I love hearing wild success stories like yours, and I feel like yours is just beginning. It's going to keep growing, and we're all going to be hearing more and more about you.
The Latest Trends in the Airbnb Industry
In your position, do you see any new trends happening in the Airbnb industry and boutique hotel industry?
Yeah, so I actually find this really interesting and it just gives me so much motivation because we know that the day and age of throwing together a hodgepodge Airbnb is gone. It's not gonna work, it's not gonna be successful. I'm in a couple of hosting Facebook groups actually, and I can see the frustration from those original owners. They're just not willing to change. They're not willing to evolve, right? So anyway I always try to encourage those people in our Facebook groups.
I'm seeing branded experiences are what people are leaning into. Travelers are really looking for something that's setting these spaces apart with the experience that they're feeling from a unit or a location, and then also the amenities that are there. They're also seeking connection and not just from their destination but from their actual accommodation. So this matters in regards to design and experience alongside a more budget accessible, I wouldn't necessarily say budget-friendly. We see at our units a whole spectrum of wealth that walk through our doors.
We know, especially that in the hostel scene, hotels like the Hilton that have actually moved to create a model that's more like hostel-friendly, more of that experiential unique hotel stay. They've created their line of hotels that's called Motto. So you're seeing this top player in the hotel industry, the Hilton, is seeing that from the traveler in the hotel space but then also in the Airbnb space with these professional interior designers that are coming out and using actual data through design to project ROI. And then implement that. So that's really where the trends are going.
It's definitely a shift towards high professionalism and that set it and forget it, bring your own sheets type of hosts aren't really thriving the way they were, maybe pre Covid. The people with the dead animals and doilies are like, "I don't understand what's happening!" You do have to be on trend and listening and learning continuously so you can serve your guests in a way that makes their stays memorable and that you can replicate that for all of your guests.
How to Start Your Qwn Arbitrage Journey
How can our listeners contact you if they want to learn more about your spaces to stay in them or learn more from you about the whole arbitrage possibility when it comes to boutique hotel spaces?
So one of the really unique things that has come from this relationship I've built at this building was that the management company manages different apartment complexes all around Texas and they have some in Florida, different areas. They've actually brought me additional units at other buildings.
I saw this as an opportunity to acquire that arbitrage agreement to really just skip that whole painful step for entry to make it accessible to people who were starting out in real estate. So now you can connect with me through my Instagram at it's @MissAllieMae, and you can come and acquire these units that I have available for anyone who's interested to start their own boutique arbitrage hotel. Right now I have a 16 unit arbitrage opportunity available that's just like four miles up from me In San Antonio Texas, and they can come and do their own boutique arbitrage hotel.
What a bonus for those who listened all the way till the end. If you curious and want someone to have done all of the hard, scary work for you, and you can just plug and play, go visit Miss Hallie Mae.
Should you need an Airbnb coach to help you find the right market, property, and help you set yourself up for success - feel free to book a free 30 minute coaching call with us. We LOVE helping new investors avoid pitfalls and find financial freedom through Airbnb investing!
