You still have the right to hope for the best and move forward even if you face adversity just as you reach the pinnacle of your accomplishments. This 23-year-old entrepreneur is proof that hard work and determination can pay off.
Derek Cheung is a former college student who got into rental arbitrage. He was an intern when he discovered the company that operates short-term rentals for properties it doesn’t own.
In 2018, he began engaging in rent arbitrage by acquiring his first two apartments. Derek’s first steps weren’t smooth sailing. He did a lot and did extensive research to ensure he was following a solid business plan.
Derek learned the legal paperwork and communication skills involved in real estate and rent arbitrage transactions, especially since many landlords have specific preferences for working with such parties — he even went through around a hundred landlord leads.
He also made sure he knew how to service the property, maintain fixtures, decorate it, and approach landlords in negotiations. Since his first deal was with an agent who represents multiple landlords, his career took off from there.
Derek’s first annual leases were signed in February 2019. One-bedroom flats cost $1,215 per month while studios cost $999. He put down a $500 security deposit on each flat, plus the first month’s rent. Short-term rentals were permitted under the terms of his additional contract.
As a result of working part-time while in school, Derek was able to save $8,000. He also had a $5,000 credit card limit, which was sufficient at the time. He spent $5,000 on secondhand items from Facebook Marketplace. He rented U-Haul to move things and asked two friends to help. After he had set them up, he took photos of the units and posted them on Airbnb.
He kept moving forward with the strategy, and soon he was managing and cleaning six apartment blocks. He had reached a terrifying $10,000 in liability and rent expenses, but he was convinced that he had to risk money in order to make a lot.
Unfortunately, the pandemic hampered travel and bookings. At that time, he owed $20,000 in monthly expenses. He began calling builders, corporate movers, and insurance housing agencies weekly to offer his units, and advertised on Zillow, Corporate Housing by Owner, Furnished Finder, and Craigslist. His top priority was serving customers who had booked 60 days in advance.
When the pandemic subsided, he created a new plan to make up for his losses. Derek lowered his prices just enough to break even or make a small profit. He was also keen on securing long-term visitors and started taking reservations from people in the area who were in between leases, evicted from their homes, or were staying in hotels because their insurance wouldn’t cover them.
Derek had 50 properties by the end of 2021, with 44 of them being fully functional. His revenue increased by about 22% this year.
