May 10, 2025
The Importance of Legal Protection
Three years ago, after selling FM Security Inc., I decided to try something new and exciting: Airbnb hosting. I wasn’t quite ready to buy a rental property, so I explored Airbnb arbitrage, which seemed like a great way to test the waters without diving in headfirst.
Airbnb arbitrage is basically renting a property from a landlord and then listing it on Airbnb. You sublet the place for short-term stays, aiming to make more from your Airbnb guests than you pay in rent. It’s a cool way to get into Airbnb without the hefty investment of buying property.
I knew it would take a while to find someone willing to sublet their space for Airbnb, but I was up for the challenge. Having recently sold FM Security/Linus, I was looking for a passive income stream to fund other interests, so I wasn’t in a rush. I started working with a realtor, scouring sites, and emailing listing agents and property owners about my plan. To make it more appealing, I even offered to pay the entire lease upfront.
Homeowners, as you can imagine, aren’t usually thrilled about subletting their properties, especially for short-term rentals. But then, luck struck. I found a three-unit property in a prime location, close to nightlife, shopping, and right across from a hospital (perfect for hosting travel nurses!). The place was already listed on Airbnb, and the owner just didn’t want to manage it anymore.
Jackpot, right?
Initially, I was going to operate as a sole proprietor, thinking the protections for Airbnb hosts by Airbnb would be enough. But after chatting with my lawyer and having him review the lease agreement, he strongly advised me to sign the lease in a business name—specifically an LLC. This would protect me from potential issues with the homeowner, something I hadn’t even considered. Thank goodness I listened.
I set up an LLC and a DBA (Doing Business As), knowing I planned to start an events business soon after. I figured I’d use the LLC for both ventures and just differentiate them with DBAs.
Despite my initial excitement, the arrangement quickly turned into a nightmare. The landlord was difficult to deal with, and managing the property became a constant headache, between a persistent and undisclosed infestation of termites (my first guests actually found them IN THEIR BED), bad pipes, AC problems. After three months of non-stop issues, and requesting the landlord work with me on rent or in any capacity, I had no choice but to walk away and break the lease.
Luckily, I wasn’t sued, though I had enough evidence to probably win and recover my investment if it came to that. But let’s be real, no one wants to go through that hassle if they can avoid it. The real saving grace was the LLC. If I had been sued and lost, the LLC would have protected my personal assets. My IRA, my car, my personal income—none of it was at risk. The LLC was the only entity on the hook, and since I closed the business before vacating, there was nothing left for the landlord to go after.
This experience was a huge lesson in why forming an LLC is so important. It provided a crucial layer of protection that kept my personal assets safe from business liabilities. If you’re thinking about starting a new venture—whether it’s Airbnb arbitrage or something else—I highly recommend talking to a lawyer and considering an LLC. It can make all the difference when facing potential legal and financial challenges.
Starting a business is always a bit of a leap, but taking the right legal precautions can keep your personal life secure, even if the business hits some bumps.
Want more information about the benefits of an LLC? Read my blog The Benefits of an LLC: Separating You from Your Business.
Ready to make it official? Click here for a step-by-step guide on forming your LLC.
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