business plan for airbnb arbitrage

AirBnB Arbitrage Business Plan [Sample Template]

By: Author Tony Martins Ajaero

Home » Business Plans » Real Estate Sector

Airbnb rental arbitrage is a business that focuses on subleasing other people’s properties in order to rent them out on websites like Airbnb, VRBO, or HomeAway. The rental arbitrage aims at renting out houses on the long-term rental market, and then resale them on the short-term market.

This business has existed for ages, and it is applicable to all global industries. The market share of the vacation rental business is dominated by Airbnb. With a market share of around 20 percent of the whole vacation rental, Airbnb is projected to be worth about $93 billion.

Steps to Write an Airbnb Arbitrage Business Plan

Executive summary.

Olive Habor® Airbnb Arbitrage Company, Inc. is a standard and registered Airbnb arbitrage business that will be located in Hempstead Town, New York with an active presence and network across major cities in the United States. We have secured all the necessary permits and licenses required for us to participate in the Airbnb line of business across the United States of America.

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Olive Habor® Airbnb Arbitrage Company, Inc. is positioned to service the niche – Airbnb market in the United States. Jordan Winston is the founder of Olive Habor® Airbnb Arbitrage Company, Inc.

Company Profile

A. our services.

Olive Habor® Airbnb Arbitrage Company, Inc. will rent out a furnished apartment, house, and professionally managed resort-condominium complex on a temporary basis to tourists as an alternative to a hotel. We will also offer our guests services such as; front desk check-in, 24-hour maintenance, in-house housekeeping, and concierge service.

Our services are designed to give people accommodation options, security and the opportunity to enjoy the funs that comes with traveling to different destinations.

b. Nature of the Business

Olive Habor® Airbnb Arbitrage Company, Inc. will be formed as an independent limited liability company (LLC) with the idea of subleasing other people’s properties under the Airbnb real estate business model.

c. The Industry

Olive Habor® Airbnb Arbitrage Company, Inc. will operate in the real estate and vacation rental industry.

d. Mission Statement

Our mission is to make available comfortable, safe, and affordable short let rental properties available to tourists, visitors, and travelers under the Airbnb rental model.

c. Vision Statement

Our vision is to be listed among the top five Airbnb arbitrage companies in the States.

d. Our Tagline (Slogan)

Olive Habor® Airbnb Arbitrage Company, Inc. – Your Sure Plug, When It Comes To Airbnb Properties!

e. Legal Structure of the Business

Olive Habor® Airbnb Arbitrage Company, Inc. will be formed as an LLC. According to this agreement, each member (partnership) is responsible for the profits and losses the company incurs.

f. Our Organizational Structure

• Chief Executive Officer
• Facility Manager
• Marketing Officer
• House Keepers
• Customer Service Executive/Front Desk Officer.

g. Ownership/Shareholder Structure and Board Members

• Jordan Winston (Founder and Chief Executive Officer) 40 Percent Shares
• Godwin Joseph (Co-Founder and Chief Operating Officer) 30 Percent Shares
• Allen Poche (Board Member) 10 Percent Shares
• Felix Arlington (Board Member) 10 Percent Shares
• Carol Jonathan (Board Member and Secretary) 10 Percent Shares.

SWOT Analysis

A. strength.

• Services are reasonably priced
• Ideal location for Airbnb (thriving real estate and vacation rental market)
• Access to finance from business partners
• Robust relations with property owners and properties investment moguls
• Water-tight strategy on how to scale the business quickly
• Good returns on investment for investors and partners.

b. Weakness

• A new business that will be competing with well-established property developers and other Airbnb arbitrage companies
• Inability to retain our experienced and competent employees longer than desired.

c. Opportunities

• Hempstead Town, New York is a thriving market for Airbnb (thriving real estate and vacation rental market)
• Good support structure for Airbnb arbitrage companies all across the United States.

i. How Big is the Industry?

Airbnb arbitrage is one of the largest industries in the United States of America, and it is the market size of the real estate sector, of which it is a component estimated to be $156.2 billion in 2021.

ii. Is the Industry Growing or Declining?

The Airbnb arbitrage industry is fast growing, as a matter of fact, if you are persistent and prepared to put up the effort to get renters and maintain their satisfaction, short-term rental services like Airbnb and others can be very profitable.

iii. What are the Future Trends in the Industry?

Traditional methods of service delivery have been overtaken by SaaS (software as a service) and cloud computing integrated services. Subscription-based SaaS applications can be advantageous for businesses of all kinds. The solutions are used by businesses to automate operations and get rid of manual input, making them run efficiently.

Therefore, businesses could lower the sophistication and cost of on-premises deployment by combining SaaS solutions. In addition, SaaS systems let consumers examine information using any internet-connected device and from any location.

Multi-vendor technologies are simpler to integrate into existing applications due to the SaaS approach. Property managers could use a SaaS platform to combine their services with cutting-edge payment technologies in order to promote convenient and easy transactions.

iv. Are There Existing Niches in the Industry?

No, there is no existing niche when it comes to the Airbnb arbitrage business. This is because the Airbnb arbitrage line of business is a subset or a niche idea in the real estate industry.

v. Can You Sell a Franchise of your Business in the Future?

Olive Habor® Airbnb Arbitrage Company, Inc. has no plans to sell franchises in the nearest future but will open its doors to accommodate more partners and investors in the subsequent years.

• The arrival of new Airbnb arbitrage companies and vacation rental companies within our market space
• Unfavorable government policy and regulations
• Community resistance
• Liability problems
• Continuously changing consumer demands as it relates to style, and design of properties et al.

i. Who are the Major Competitors?

• June Homes™ Apartment Rentals
• Corporate Housing New York
• Octo Property.

ii. Is There a Franchise for Airbnb Arbitrage Business?

Presently, there are no franchise opportunities for the Airbnb arbitrage business.

iii. Are There Policies, Regulations, or Zoning Laws Affecting Airbnb Arbitrage Business?

Yes, there are county or state regulations and zoning laws for Airbnb arbitrage business, and players in this industry are expected to work with the regulations governing such business in the state where their business is domiciled.

Marketing Plan

A. who is your target audience, i. age range.

Adults above the age of 18 having the financial means to do business with us are our target audience.

ii. Level of Educational

There are no restrictions on the degree of education of those who are willing to engage with us as landlords or renters.

iii. Income Level

The people we are aiming to conduct business with will have an annual income between $40,000 and above $100,000.

iv. Ethnicity

There are no restrictions on the people we want to work with, rent their properties, or rent our Airbnb rentals to when it comes to their ethnicity.

v. Language

There are no restrictions on the languages individuals can speak, and we are eager to collaborate with them, create homes for them, or lease our Airbnb properties to them.

vi. Geographical Location

Everyone is welcome to associate with us or conduct business with our organization, regardless of their location.

vii. Lifestyle

No investor or client will be restricted from working with us or conducting business with us by Olive Habor® Airbnb Arbitrage Company, Inc. because of their race, culture, or way of life.

b. Advertising and Promotion Strategies

• Host themed events that can captive people’s attention
• Tap into text marketing
• Make use of billboards
• Share your events in local groups and pages
• Make your social media channels resources
• Develop your business directory profiles
• Build relationships with players in the real estate and brokerage industry.

i. Traditional Marketing Strategies

• Marketing through direct mail
• Print media marketing – newspapers and magazines
• Broadcast marketing -television and radio channels
• OOH, marketing – public transit like buses and trains, billboards, street shows, and cabs
• Leverage direct sales, direct mail (postcards, brochures, letters, fliers), tradeshows, print advertising (magazines, newspapers, coupon books), referral (also known as word-of-mouth marketing), radio, and television.

ii. Digital Marketing Strategies

• Social media marketing platforms
• Influencer marketing
• Email marketing
• Content marketing
• Search engine optimization (SEO) marketing.
• Affiliate marketing
• Mobile marketing.

iii. Social Media Marketing Plan

• Start using chatbots
• Create a personalized experience for our customers
• Create an efficient content marketing strategy
• Create a community for our target market and potential target market
• Gear up our profiles with a diverse content strategy
• Use brand advocates
• Create profiles on relevant social media channels
• Run cross-channel campaigns.

c. Pricing Strategy

Olive Habor® Airbnb Arbitrage Company, Inc. will be careful to account for profits, insurance, premiums, licenses, economies of scale, and the total package for each property when developing our pricing plan.

In all our pricing strategy will reflect;

• Cost-based pricing
• Value-based pricing
• Competition-based pricing.

Sales and Distribution Plan

A. sales channels.

Utilizing partners and third parties, such as referral partners, affiliate partners, strategic alliances in the real estate and brokerage industries, tourism, and freelancers to help direct clients to us, is a key component of our channel sales strategy.

• Airbnb website
• Alternative rental websites
• Travel Oregon site

b. Inventory Strategy

Olive Habor® Airbnb Arbitrage Company, Inc. will operate in an inventory strategy based on a day-to-day approach to follow for ordering, maintaining, and processing products in our warehouse because we will need the necessary toiletries, bedding, and other supplies on a regular basis.

We will approach the development of our strategy with the same level of care and diligence as we would if we were formulating an overarching corporate strategy.

We will make sure to deal with “Just-in-time (JIT) inventory,” says Olive Habor® Airbnb Arbitrage Company, Inc. (JIT involves holding as little stock as possible, negating the costs and risks involved with keeping a large amount of stock on hand.)

c. Payment Options for Customers

• Payment via bank transfer
• Payment with cash
• Payment via credit cards/Point of Sale Machines (POS)
• Payment via online bank transfer
• Payment via check
• Payment via mobile money transfer.

d. Return Policy, Incentives, and Guarantees

Guests have the liberty to cancel their reservation a maximum of five days before their arrival. They will obtain a complete refund, and the landlord would not charge them for the reservation. In the event of a late cancellation, guests would be billed for one night and would be reimbursed 50 percent of the leftover nights.

If somehow the guest cancels the reservation after arriving at the lodging, they would be billed for the length of time stayed, one extra night, and they will be reimbursed 50 percent of the rest nights not used.

e. Customer Support Strategy

We will solicit input from customers as part of our customer service approach. With their wants, experiences, and pain, we will be better to serve all of our clients and investors, and also provide them with exceptional Airbnb properties, returns on investment (ROI), and customer service. To accomplish this, we will work using a powerful CRM program.

Regularly, as part of our customer support plan, we will seek to improve our customer service team, and also leverage multi-channel servicing.

Operational Plan

Capacity, location, layout, quality, and method planning are all included in our operating plan. The plan will have a marketing, sales, and operations component, and overall, we want to increase our revenue by 25% in the second year.

Attracting investors (landlords who are interested in Airbnb arbitrage business model) would be part of the plan’s operations section and would allow the company to expand its assets and service offerings and support revenue development.

a. What Happens During a Typical Day at an Airbnb arbitrage Business?

• The office is open for the day
• Documentation and other administrative works are conducted throughout the day
• Airbnb apartments are rented out
• Marketers go out in the field to market our Airbnb properties and services
• If there is an ongoing property furnishing and makeover project, the required team and machinery are sent to the field to carry out the project
• The team and machinery return to base (office) after the day’s job
• The report for the day is written and submitted to the required authority
• The office is closed for the day.

b. Production Process

There is no production process when it comes to the Airbnb arbitrage business.

c. Service Procedure

No, there is no defined service procedure for an Airbnb arbitrage business.

d. The Supply Chain

Key figures in the real estate and brokerage industries will be relied upon by Olive Habor® Airbnb Arbitrage Company, Inc. to refer business deals to us. In addition, we have been able to forge business ties with wholesale suppliers of building materials and other items.

e. Sources of Income

Basically, Olive Habor® Airbnb Arbitrage Company, Inc. makes money from renting out a furnished apartment, house, and professionally managed resort-condominium complex on a temporary basis to tourists as an alternative to a hotel.

Financial Plan

A. what amount is needed to start your airbnb arbitrage business.

To launch our Airbnb arbitrage business in the United States, an estimate of $3.5 million is required. Note that this sum covers all of our staff’s salary for the first month of operation.

b. What are the Costs Involved?

• Business registration fees – $750
• Expenses for obtaining licenses and permits – $7,300
• Business consultant fee – $2,500
• Insurance – $5,400
• Rent/lease for our office facility- $200,000
• Other start-up expenses include stationery ($500), and phone and utility deposits ($2,800)
• Start-up inventory – $15,000
• Office equipment (cash register, security, ventilation, signage) – $4,750
• Website – $600
• Opening party – $3,000
• Miscellaneous – $2,000.

c. Do You Need to Build a Facility?

Olive Habor® Airbnb Arbitrage Company, Inc. will not build a new facility for our Airbnb arbitrage business, but rather we will work with landlords who are interested in making money from the Airbnb arbitrage business model.

d. What are the Ongoing Expenses for Running an Airbnb arbitrage Business?

• Cost of bedding, toiletries, and supplies
• Utility bills (internet, phone bills, signage and sewage et al)
• Repairs and maintenance
• Occupancy cost
• Salaries of employees.

e. What is the Average Salary of your Staff?

• Chief Executive Officer – $85,000
• Facility Manager – $72,000
• Business Developer/Sales and Marketing – $42,000
• Accountant – $40,000
• Customer Service Executive/Front Desk Officer – $30,000
• House Keepers – $25,000 Per year.

f. How Do You Get Funding to Start an Airbnb Arbitrage Business?

• Raising money from personal savings
• Raising money from investors and business partners
• Sell shares to interested investors
• Applying for a loan from your ban
• Seek funds from family members and friends.

Financial Projection

A. how much should you charge for your service.

At Olive Habor® Airbnb Arbitrage Company, Inc. our charge would be based on the location and type of property we want to put out for short-let.

b. Sales Forecast?

• First Fiscal Year: $1.2 million
• Second Fiscal Year: $1.8 million
• Third Fiscal Year: $2.5 million.

c. Estimated Profit You Will Make a Year?

The profit margin we hope to make at Olive Habor® Airbnb Arbitrage Company, Inc. will be between 16 and 20 percent on development costs. This refers to our profit as a percentage of our total cost.

d. Profit Margin of an Airbnb arbitrage Business Service

Profit margins in this sector frequently fluctuate, particularly because enterprises in the business sector are interested in sustaining their space and growing their society. At the end of each month, there are several factors and fixed expenditures for an operation. Even as the company grows, it will face associated costs and considerations that will reduce the potential profit.

Growth Plan

A. how do you intend to grow and expand, by opening more retail outlets/offices or selling a franchise.

Within the first five years of starting the company, Olive Habor® Airbnb Arbitrage Company, Inc. will expand its Airbnb arbitrage business by first creating more offices in major American cities, and then by enlisting more partners (landlords who are interested in the Airbnb arbitrage business model).

b. Where do you intend to expand to and why? (Geographical locations)

• Savannah, Georgia
• Charleston, South Carolina
• New Orleans, LA
• Nashville, Tennessee
• Jacksonville, Florida
• San Diego, California
• Tampa, Florida
• Miami, Florida
• Las Vegas, Nevada
• Austin, Texas.

The reason we intend to expand to this geographic location is that available statistics show that the cities listed above have the highest and most thriving real estate market in the United States. As a matter of fact, the median listing price of a home in Savannah, Georgia as of January 2022 was $274.5K, which was unchanged from the previous year.

The average listing home cost $165 per square foot. The average cost of a home sold was $259,000. There are more buyers than there are homes available in Savannah, Georgia, signaling a seller’s market.

Olive Habor® Airbnb Arbitrage Company, Inc. desire to merge with a global real estate firm so that, after the founders retire, the operation of the business can be in the capable hands of a reputable party.

The objective of merging two or more Airbnb arbitrage firms on a global scale is to attempt to achieve synergy, where the new company’s management team and board of trustees are well-organized and the total is bigger than the sum of its parts (the former two distinct entities).

• February 23, 2024

Step-by-Step Guide to Starting a Rental Arbitrage Business

The allure of entering the short-term rental market through rental arbitrage is growing stronger as entrepreneurs seek innovative ways to tap into the lucrative Airbnb economy without the significant capital investment of property ownership. Rental arbitrage, the strategy of leasing a property to then rent it out on platforms like Airbnb, offers a unique opportunity for business-minded individuals to generate income. This step-by-step guide provides a comprehensive overview of how to start a rental arbitrage business, from market research to launching your first listing.

Conduct Thorough Market Research

The first and perhaps most critical step in starting a rental arbitrage business is conducting extensive market research. This involves identifying cities or neighbourhoods with high demand for short-term rentals but lower competition. Look for areas with consistent tourist traffic, business travellers, or regular events that drive short-term lodging needs. Utilising tools like AirDNA can provide valuable insights into market trends, average daily rates, and occupancy rates, helping you make an informed decision on where to start your rental arbitrage venture.

Understand Local Regulations

Before diving into rental arbitrage, it’s essential to familiarise yourself with the local laws and regulations governing short-term rentals in your chosen area. Many cities have specific rules that might include obtaining permits, paying occupancy taxes, or even restricting short-term rentals altogether. Ensuring compliance with these regulations is crucial to avoid fines or legal issues down the line. Contacting the local government or consulting with a real estate attorney can provide clarity on what is required to legally operate your business.

Secure the Right Property

Finding the ideal property is a pivotal step in the rental arbitrage process. Look for properties that not only fit within your budget but also appeal to short-term renters. Factors such as location, proximity to attractions or transport links, and the overall appeal of the property play significant roles in attracting guests. Negotiating a lease that explicitly allows for short-term subletting is essential, as is ensuring the lease terms are favourable for your business model.

Furnish and Prepare the Property

Once you’ve secured a property, the next step is to furnish and prepare it for guests. The goal is to create a welcoming and comfortable environment that meets the needs of short-term renters. This means investing in quality furniture, ensuring reliable internet service, and providing all the necessary amenities and supplies. Remember, the presentation and functionality of your property can significantly impact your reviews and, consequently, your success on platforms like Airbnb.

Set Up Your Business Legally

Establishing your rental arbitrage venture as a legal business entity is crucial for several reasons, including tax benefits, liability protection, and professionalism. Depending on your location and business structure, this might involve registering your business, obtaining a tax ID number, and setting up a separate bank account for business transactions. Consulting with a business advisor or accountant can help you navigate this process effectively.

Create an Attractive Airbnb Listing

With your property ready, it’s time to create your listing on Airbnb. High-quality photos and a compelling description are key to attracting guests. Be sure to highlight any unique features of your property and the surrounding area. Setting competitive pricing, based on your market research, is also critical at this stage. Consider using dynamic pricing tools that adjust your rates based on demand to maximise your earnings.

Develop a Comprehensive Management Plan

Successful rental arbitrage hinges on efficient property management. This involves everything from handling bookings and communicating with guests to cleaning and maintenance. Developing a comprehensive management plan, possibly including hiring a property manager or using property management software, can streamline operations. Establish protocols for guest check-in and check-out processes, emergency contacts, and regular cleaning to ensure each guest’s stay is seamless and enjoyable.

Optimise for High Occupancy

To maximise profitability, focus on strategies to maintain high occupancy rates. This may involve tailoring your offerings to appeal to specific target markets, such as business travellers or families. Implementing flexible pricing strategies, offering discounts for longer stays, and optimising your Airbnb listing for search are all effective tactics. Additionally, consider listing your property on multiple short-term rental platforms to broaden your reach.

Collect and Act on Guest Feedback

Guest reviews are the lifeblood of any successful rental arbitrage business. Actively encourage guests to leave feedback and take the time to respond to reviews, addressing any negative comments constructively. Use this feedback to make continuous improvements to your property and guest experience. Positive reviews not only enhance your listing’s visibility but also build trust with potential guests.

Monitor Financial Performance and Adjust Strategies Accordingly

Keeping a close eye on your financial performance is essential for long-term success. Regularly review your income, expenses, and overall profitability. Be prepared to adjust your pricing, marketing, and operational strategies based on performance trends and market changes. Effective financial management includes setting aside funds for future property improvements, unexpected expenses, and slow seasons to ensure sustainability.

Stay Informed and Flexible

The short-term rental market is dynamic, with frequent changes in traveller preferences, local regulations, and market saturation. Staying informed about industry trends and regulatory changes in your area is crucial. Be flexible and ready to pivot your strategy in response to new challenges and opportunities. Continuous learning and adaptation are key to staying competitive and profitable in the rental arbitrage market.

Scale Your Business Strategicall

Once you’ve established a successful model with one property, consider scaling your rental arbitrage business. Look for additional properties that meet your criteria for profitability and guest appeal. However, scaling should be approached with caution—ensure that you have the operational capacity and financial stability to manage multiple properties effectively. Strategic scaling can significantly increase your income potential, but overexpansion without proper planning can lead to management challenges and financial strain.

Conclusion:

Starting a rental arbitrage business offers an exciting opportunity to enter the short-term rental market with relatively low upfront costs. By following these step-by-step guidelines—from conducting thorough market research and understanding local regulations to optimising property management and scaling your business—you can build a profitable and sustainable venture. Success in rental arbitrage requires diligence, adaptability, and a commitment to providing exceptional guest experiences. With the right approach and ongoing effort, rental arbitrage can be a rewarding path to financial independence and business growth.

Find out how we generate recurring income from real estate without owning or renting any property whatsoever.

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AIRBNB ARBITRAGE: A STEP BY STEP GUIDE FOR BEGINNERS

Airbnb arbitrage is all the rage right now, with get rich quick schemes galore all over the internet.

But what is it all about?

Is it something that’s actually profitable, or is it just a whole lot of bold claims with little to no substance?

Turns out that Airbnb rental arbitrage can be a lucrative proposition, but there’s a lot more that goes into it than meets the eye. 

So, if you’re looking to make a quick buck arbitraging short term rental properties you’re likely going to be sorely disappointed.

If you’re looking to create a high integrity rental business that’s profitable - and stands the test of time - then keep reading, as this might well be for you.

WHAT IS AIRBNB ARBITRAGE

Airbnb arbitrage is the process of leasing a longterm rental property, and re-renting it on the short term rental market on a platform like Airbnb for a profit.

The difference between the rent paid to the landlord and the rent collected on Airbnb is known as arbitrage, and that’s the profit that arbitrage specialists are looking for.

Not all properties provide arbitrage opportunities, withe some more lucrative than others.

The goal with this method of investment is to find the properties with the highest arbitrage yield possible.

IS AIRBNB ARBITRAGE LEGAL?

Airbnb arbitrage itself is totally legal and above board, if it has bee approved by the landlord of the property.

The reason it has a rather shady connotation at times is because people often try to do it on the sly without landlord consent, and this is what gives the industry a bad name.

If however a mutually beneficial agreement has been reach with the landlord in question, then you’re free to do as you will with the property under the terms arranged.

IS IT STILL PROFITABLE?

Arbitrage opportunities are harder to find nowadays with more speculators competing for a smaller stock of profitable dwellings.

So although it is still profitable, finding the profit opportunities may be more challenging.

Nevertheless, if you know where to look, and you know how to evaluate rental arbitrage opportunities effectively, you’ll find golden opportunities where others cannot.

The more experienced you get, the quicker you’ll be able to evaluate deals.

HOW MUCH DOES THE AVERAGE AIRBNB ARBITRAGE MAKE

According to XXXXXX the average Airbnb arbitrage deal makes roughly $500p/m

However, oftentimes these figures are bloated as they don’t account for all expenses, damages, vacancies, or unpredicted events.

So, instead of relying on average, sub optimal data, be sure to crunch the numbers yourself to mitigate any risks.

HOW TO FIND RENTAL ARBITRAGE PROPERTIES

Finding rental arbitrage opportunities becomes easier over time as you become more attuned to the rental market around you, the market value of long term rental properties, and the potential nightly rate chargeable on Airbnb.

You can find rental deals on all the major property rental websites including Facebook Marketplace, Craigslist, and purpose built platforms like Zillow too.

The more properties you view, the more you’ll attune yourself to the market around you, and over time you’ll be able to sniff out an opportunity in minutes.

STEP BY STEP AIRBNB ARBITRAGE ACTION PLAN FOR NEW HOSTS:

Ok, so now you know what Airbnb arbitrage is all about, and you’ve set realistic expectations - and you know the risks too - let’s get into the nitty gritty of how to get started if you’ve never done it before.

STEP 1. FIND A CITY/TOWN WHERE RENTAL ARBITRAGE IS LEGAL

It’s not that rental arbitrage is illegal parse, it’s more a case that renting properties on Airbnb are illegal - in some areas at least.

So you’ll want to clear that up before you start looking seriously for rental arbitrage opportunities.

Once you know the legal in’s and out’s of your area though and you’ve got the green light, move on to the next step.

STEP 2. FIND A RENTAL PROPERTY WITH GOOD ARBITRAGE UPSIDE

To find a good rental arbitrage oportunity you’re going to need to know your numbers:

• Long term property rental rates.
• Average short term nightly rates.
• Area specific discrepancies in pricing.
• Seasonal variations.
• Average short term occupancy rates.
• Average short term stay duration.

Once you have a deep understanding of the numbers specific to your area, with accurate, data backed information, you’re now qualified to uncover real arbitrage opportunities.

Naturally, you’re looking for low longterm rental costs, with the potential for high nightly rates on Airbnb.

Be prepared to spend money on furnishings and potential decorating costs to bring the property up to standard, so make sure to account for that in your figures.

STEP 3. NEGOTIATE WITH LANDLORD

So you’ve found a property with potential, you’ve crunched the numbers, and there’s arbitrage profits to be made.

Now comes the next step of negotiating with the landlord.

At first glance it might seem like a lopsided, no deal situation.

That may often be the case, but not always, and it’s these open minded landlords that you’re looking to do business with.

Remember, you’re coming to the table with an opportunity.

You’re taking on a landlords property in good faith, open and transparent about your intended use, and they’re getting reliable, trustworthy income each month guaranteed.

Now negotiating with a landlord like takes skill, and a certain tact. Remember to make it win win, and frame the positive outcomes they’ll get from the deal.

STEP 4. SHOOT FOR LONGER TERM LEASE

This might sound counterintuitive at first, but hear me out.

Oftentimes, arbitraged properties will need a little TLC, require furniture, a lick of paint, etc.

All these things cost money.

Longer term leases help to spread out that outlay over a longer period, minimising their impact.

STEP 5. DRAFT UP A LEASE ADDENDUM

A lease addendum is legal document that modifies or adds specific terms to an existing lease agreement.

It’s within this lease addendum that extra conditions can be added to update the agreement and make it work for both parties.

Thinks to consider are:

• Rental increases: limits can be applied to future rental increases.
• Maintenance responsibilities: make sure these are clearly outlined.
• Terms of use: Stipulate the permissible property terms of use.

A lease addendum is a legal document, as such, you’ll need professional help to help draft one as this is way out of my jurisdiction.

STEP 6. CREATE A COST PROFILE FOR FURNISHINGS

It’s important to be fully prepared for all the costs required to get the property unto the spec needed to rent it on Airbnb, as these are real costs that need to be factored in.

They don’t need to cost a fortune, and can be sourced cheaply if you know where to look.

Regardless of how much they cost, don’t dig your head in the sand when accounting for them - as it’ll come back to bite you in the butt.

STEP 7. LIST PROPERTY ON AIRBNB

If you’ve got this far you’re doing well, and you’re now ready to finally list the property on Airbnb.

Naturally you’re going to want to make your listing as good as it can possibly be, that’ll mean a full, complete listing, alongside pro-level photography.

Take your time with this, go through it with a fine tooth comb, and make it the best it can possibly be.

STEP 8. OPTIMISE PRICES

To get the best nightly rate possible, for every date range, you need to pay very, very close attention to your pricing.

What you really need is an Airbnb pricing strategy in place, something that’ll adjust with the ebbs and flows of the market demand.

Doing this manually is a very time consuming task, something that can be done, but is very difficult.

However, the whole process can be managed using a dynamic pricing tool, I personally use Wheelhouse.

This clever bit of software connects to your Airbnb account and automatically adjusts your pricing in real time, for every date range, for the next 365 day time horizon.

With a tool like this in place you’re guaranteed to be charging the best rate possible, every time.

The investment in a tool like this will pay for itself instantly.

STEP 9. HIRE A CLEANING SERVICE

If you’re going to do the cleaning yourself you can skip this section.

But if you’re looking to hire a cleaning service there are a few things you should know.

Good cleaners are hard to come by, and reliable good cleaners even harder.

So, you’re going to need to do some digging around to find a cleaner you can trust, one that’s reliable, that’s also flexible.

This is a lot to ask, but these unicorns are out there, you’ve just got to do your due diligence and keep looking to find your gem.

STEP 10. AUTOMATE EVERYTHING

Whether you’re a small time host, or you’ve made it big, you need to take advantage of the time savings and ease of the automation options on the market.

It’s now possible to automate:

• 90%+ of all guest communication.
• All cleaner and team reminders.
• All guest reviews.
• Answers to FAQ’s
• Nightly pricing.

My favourite tools for this are Hospitable (automates all guest communication, cleaner reminders, reviews, etc) and Wheelhouse (automates pricing).

If you’re serious about running an Airbnb arbitrage rental business you’ll need to utilise these tools compete.

I offer a service helping hosts to get set up with these tools which you can find out more about here.

EXTRA CONSIDERATIONS

The steps above will serve you well in getting you off the ground, but there are a few additional things you can do to increase your chances of success.

BUILD A DIRECT BOOKING SITE

Bookings that come through the Airbnb platform incur considerable guest fees, up to 20%+

These fees go straight into Airbnb’s pockets and not yours.

Bookings that go through a direct booking site on the other hand do not have these fees whatsoever, and all that extra cash can flow straight to you.

Furthermore, you don’t need any tech skills to create a direct booking site, simple sign up for a tool like Hospitable and their platform will do it all for you.

MARKET ON MORE CHANNELS

Airbnb is great don’t get me wrong, but it isn’t the only short term rental platform people use.

There are plenty of others like Booking.com, VRBO, Home Away, and more.

Advertising your property on multiple platforms like this can only increase your chances of getting more bookings at the best rates.

Managing this manually is virtually impossible, but using channel manager software like Lodgify, the whole process is easy.

You listing will be sold on multiple platforms, with a unified inbox for all your guest messaging, and real time calendar availability.

By now you’ve probably seen how involved arbitraging rental property through Airbnb can be, and the investment in time and money it takes to get things off the ground.

However, there is money to be made in arbitraging still - if you have the knowledge and skills to make it work.

Anyway, I hope this article serves you well, and wishing you the best of luck. 

About the author 

Rowan Clifford

Hey, I'm Rowan.  I'm a bit of a nerd, and froth a little too hard when it comes to Airbnb. And, I LOVE anything that makes my life as a host easier and more lucrative (which is pretty much exclusively all I write about on this blog). Tools, tips, tricks and sneaky hacks are my kinda thing...

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Airbnb Rental Arbitrage [And How to Succeed at It]

Get tips on how to use Hostfully to optimize your vacation rental business and make more profit.

What’s in this article?

As Airbnb continues to expand its offerings, people wonder how they can build a business around this platform. One misconception is that you have to own property to create Airbnb income. One way around the risks of buying and holding properties is with Airbnb rental arbitrage. As we’ll see below, it’s a technique that can be rewarding, but that also comes with its risks.

What is Airbnb rental arbitrage?

Airbnb rental arbitrage is the practice of renting properties and subletting them on the Airbnb platform. It’s becoming more difficult to own property as home prices have far outpaced median incomes since 1960. That’s why this strategy allows you to build cash flow without the stress and challenges of home ownership.

Imagine you rent an apartment for $2,000 per month. If you sublet that same apartment on Airbnb for the month at $150 per day, you could pay off your rent in just under two weeks. Once you’ve paid off the rent, the rest of the month is pure profit. With the possibility of $2,000 in profit each month in our example, after subtracting potential maintenance and overhead charges, short-term rental arbitrage allows you to grow your income and save without owning property. Of course, that’s an oversimplification. There are expenses to running short-term rentals.

Seems too good to be true? Yes and no. Airbnb rental arbitrage is a tactic that can work well in some markets. It’s a great way many investors use with cheap rental properties to make them more money. However, there’s a lot of due diligence required on your part before jumping in with both feet.

Is Airbnb rental arbitrage legal?

Airbnb rental arbitrage is legal, depending on the short-term rental regulations where you live. So do your research first. Short-term rental laws are evolving in most large cities across the world. You’ll want to make sure that rental options like Airbnb are allowed in the city you’re interested in or that there isn’t a limited number of nights annually, you can rent out to guests. In case vacation rentals are allowed in your area, you’ll also have to check if your city, township, state, or province will require you to apply for a hospitality license.

After that, make sure that the landlord you are renting the property from allows short-term and vacation rental arbitrage. Some landlords explicitly say in their leases that this is not permitted or is only allowed on a case-by-case basis. Always check with your landlord before subletting your apartment, or you can put yourself at risk of being evicted.

Once you have an agreement with your landlord, be sure that you are protected and covered in the case of damages, injury on your property, or even natural disasters. Airbnb offers  Host Protection Insurance  to get you started, or you can browse some of the other options for guest screening and insurance.

How do I convince my landlord to accept Airbnb?

You’ve done your area research, understand the rules and regulations and found a spot you think would be popular with tourists. You have a good idea your Airbnb rental will be profitable. Now you need to convince the landlord to accept the vacation rental on his property. How can you do that?

Go in any vacation rental social media group and search for arbitrage. You’ll find out that convincing landlords is the biggest challenge of Airbnb rental arbitrage. After all, you’re always running the risk that after you tell your landlord your plan to rent through Airbnb, they may decide to use that strategy instead and no longer rent to you. So make it beneficial for the landlord.

Here are a few discussion topics to try out with a hesitant landlord.

First, there’s the upside that you’ll care about the unit as much as the landlord. Scuffed walls, a beat-up floor and generally not keeping the place clean will not produce 5-star reviews. And that isn’t good for your business. In other words, you have a vested interest in making sure the apartment is always in top condition. That’s a more significant promise than a long-term tenant can ever make.

Second, you’ll be running the rental as a lucrative business. The landlord will always get paid on time every month with you as the tenant. They won’t have to worry about always running after a tenant who may be late on rent.

Third, running a vacation rental business is by no means passive income like a traditional long-term rental is. So by all means, the landlord could try and run the apartment themselves. However, if they agree to the arbitrage, they won’t have to be burdened with the work of managing it, keeping the unit clean or marketing the listing on Airbnb.

In short, you’ll take excellent care of the place, make a profit, they receive their rental payments, and it’s a win-win for everyone.

Other tactics to convince difficult landlords

Landlords sometimes bring up the issue of noise complaints and Airbnb parties. It’s a valid concern. If your short-term rental bothers other long-term tenants, it could mean that the landlord has to deal with higher turnover. Then there’s the issue of insurance. Who will pay for damages? This is where technology comes in. Depending on the resistance faced, you can make it part of the agreement that you’ll use one (or more) of these tools:

• Autohost  – Automatically screens problematic tenants.
• NoiseAware  – Noise sensors with the option of 24/7 call centre coverage (they’ll make calls if things get out of hand).
• InsuraGuest  or  Safely  – Their algorithms calculate risks and provide affordable coverage that goes above and beyond the Airbnb or Vrbo policies.

The best part is that these tools integrate with most major property management systems (PMS). As we’ll see below, you’ll need a solid PMS if you’re to operate a successful Airbnb rental arbitrage business. By integrating the service into the PMS, you’re getting the benefits of coordinating and automating those services at scale (because let’s face it, you’ll have more than one arbitrage property in no time).

What are the best cities for Airbnb rental arbitrage?

The best cities to invest in any vacation rental or short-term rental arbitrage will always be in up-and-coming real estate markets. Such markets offer that sweet spot between short-term rental income potential and cheap rents. The challenge is that these markets change consistently, so do your research. To estimate rental expenses in those areas, you have a few resources available:

• Zillow (and other real estate analytics), and;
• Local real estate professionals.

Unfortunately, free short-term rental analytics are hard to come by (we’ll explain why we think you should pay for great data later on).

On a macro level, you can use this short-term rental forecast . Otherwise, there’s powerful tech that can help you. Data aggregators like KeyData Dashboard , Wheelhouse Pro , and AllTheRooms Analytics track short-term rental markets and trends to provide actionable insights. All are great to get precise and data-backed estimates of your market’s income potential. If you’re planning on applying for a loan to seed your arbitrage business, such reliable metrics are critical to give your business plan credibility. Another great suite of tools you can use in your due diligence is AirDNA . AirDNA is a leading provider of short-term rental data and has a bunch of free tools that will help you estimate the markets for Airbnb arbitrage in the US (the Rentalizer and MarketMinder are incredibly useful).

Given the importance of due diligence in an arbitrage project, we recommend paying for some of the tools mentioned above. On their own, the free tools are great and will help give you context into a specific market. However, if you’re considering pouring life savings into your Airbnb arbitrage project, those extra nuggets of information you get from the paid subscriptions are worth their weight in gold.

With short-term rental arbitrage, you’ll want to be profitable even if you don’t rent out your property every day of the month. No matter how wizardly your marketing skills are, most properties don’t have 100% occupancy for several reasons:

• Orphan days: In most markets, Tuesdays through Thursdays between two reservations can sometimes be hard to book.
• High and low seasons:  Some markets are prone to seasonality fluctuations. In the low season, some of them don’t get mid-week reservations.
• Maintenance and cleaning:  Depending on the availability of cleaning contractors, you may end up having to book a day between reservations for cleaning. If the market your serve has low lengths of stay, those cleaning gap days will dig into your profits.

Getting an accurate estimate of  Adjusted Occupancy Rates (AOR) is critical to assess if your arbitrage will succeed. Here’s an example of a city where rent is $3,000 per month for a two-bedroom. If those types of vacation rentals only go for around $150 per day in that area and book on average 25 nights a month, you’re running too tight of margins. Once you factor in other expenses (i.e., tech tools, listing site fees, marketing expenses), there won’t be much left for you. One month with low occupancy and you risk running into the red.

How can I make my Airbnb rental arbitrage business successful?

Let’s say you’ve chosen the perfect city for your vacation rental arbitrage investment, and the landlord has agreed to it. The analytics check out. You see a booming hospitality industry on the horizon. What are the next steps to take to ensure that your short-term rental business is successful?

Grossly overestimate your starting costs

With any rental property investment comes initial, upfront costs. While they may not break the bank as much as purchasing a property, you’ll want to factor in the following to make sure you’re able to build a stable rental business:

• Application fee
• Deposit (ie. Does this include first month’s rent, last month’s rent, security, etc.)
• Insurance policies
• Maintenance and updates to the property
• Furnishings for all rooms
• Decorations
• Wi-Fi connection and new account fees
• Entertainment subscriptions
• Cleaning service fees
• Monthly utility expenses
• Toiletries and kitchenware

Factor in these costs before committing to a long-term lease. If this is your first run at vacation rental management, run different scenarios. What happens if your occupancy rates are 10% lower than estimated for the first six months? Similarly, create scenarios where recurring cleaning costs, furnishing expenses, and utilities are 10-20% more expensive than anticipated.

Between the research and implementation phases

Assuming your research checks out, you’ll have to furnish and decorate the unit. Some hosts or managers DIY this step. Others hire interior designers. This phase of the arbitrage process has more to do with decor than automation at scale, so we’ll fastforward a bit. Just remember to pay for (or upgrade) amenities guests are willing to pay for .

List your first short-term rental arbitrage property

Your goal is to advertise your properties on all the major listing sites and online travel agencies (OTAs). We’ve been using the term “Airbnb arbitrage”. But really, we shouldn’t forget about Vrbo, Booking.com, HomeToGo and TripAdvisor. And those are just the starter sites. There are niche travel sites you should also list on.

This strategy is called multi-channel distribution, and the goal is to boost marketing on these sites with automation. Why is that important? Broad distribution will contribute to low vacancy rates. And once you consistently book 90% of available nights, you can start raising your nightly rates.

If you want to learn more about multi-channel distribution, why it’s a winning strategy and how to implement it, check out this in-depth paper on the topic:

A few tips on optimizing your listings

Simply listing your property isn’t going to make you successful. No matter what platform you list your short-term rental property on, you’ll need to optimize the listing so that  it shows up in searches .

Consider the following:

• Do you have beautiful photos of the property?
• Do you have the  amenities guests expect ?

Check out  the complete guide to optimizing your listing , and make sure vacationers don’t scroll past your offering.

Consider building a direct booking site

Once you get reservations through listing sites and OTAs, it’ll be time to build a direct booking site (DBS). A DBS is a great workaround to paying commissions to listing sites. It’s also a great way to get repeat visitors and solidify your income stream. With a DBS, you take control over your building and scrap the  Airbnb  out of “Airbnb arbitrage”. To get a leg up on this later stage of your arbitrage business, consider reading this paper on the subject:

Tools you’ll need to automate and scale your arbitrage business

Arbitrage businesses have substantial overhead expenses: rental costs. You’ll likely need several units running at once to make a living. The problem you’ll face is that managing multiple vacation rentals by yourself is a logistical nightmare. And hiring staff isn’t an option until you become profitable. To get around these two challenges, you’ll need automation tools . Here are the basic ones you should look into:

• Property Management System:  for multi-channel distribution, automating guest communications, assigning tasks and analytics (and much more). A good  PMS like Hostfully  will also allow you to integrate other software into it (see below). The PMS will be the central hub of your business.
• Dynamic pricing app:  optimizes rates for your rentals according to market dynamics. This software integrates into your PMS. It’s a “set it and forget it” app that pays for itself multiple times over.
• Cleaning coordination software:  if you plan on hiring cleaners or contracting out this process, these types of apps will save you hours of work. Cleaning apps also integrate into your PMS. Alternatively, you can use the automation features of the PMS to get a similar result (this case study shows you how).
• Payment processor:  you’ll need one to accept payments from some listing sites. A payment processor like Stripe or PayPal is also necessary to accept direct bookings.
• Digital guidebook:  cheap and easy to put together. This is how you will communicate check-in instructions, house rules, and recommendations. If you’re not sure what digital guidebooks are, here are some  examples of real guidebooks  created by Hostfully customers.

Of course, many other software add-ons will make your job easier. The list above is just a start. If you want to see what else software can do in a short-term rental management business, check out  these case studies . There’s  much more you can with automation  once your business is live and you get more experience.

Wrapping up

You did it! You built a short-term rental arbitrage business, and it’s successful. Over time, you’ll likely want to acquire more and more properties to continue to develop your business. That doesn’t mean you have to work 70 hours per week to do so. You can use multiple tools to help automate your company and have it do the work for you. We’re here to help!

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Airbnb Rental Arbitrage: A Complete Guide for 2024

February 29, 2024

ARTICLE SUMMARY

Learn what Airbnb rental arbitrage is, if you're ready to jump into this growing business opportunity, and which markets are best suited for short and long-term leasing in 2024.

QUICK NAVIGATION

What Is Airbnb Rental Arbitrage? 

Is Airbnb Arbitrage Legal? 

Is Airbnb Rental Arbitrage Profitable in 2024? 

How to Start Airbnb Rental Arbitrage

The Formula for Successful Airbnb Arbitrage 

The Best Cities for Airbnb Rental Arbitrage in 2024

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Table of contents

Airbnb arbitrage: guide, tools and top markets, key takeaways.

Airbnb arbitrage is the easiest way to make money from real estate without buying and owning a property. That’s why it’s become a popular strategy among those with limited budgets or those not ready to commit to managing and renting out a property in the long run.

In this article, we will look at what the Airbnb rental arbitrage entails, how it works, how it is done, what the pros and cons are, and what real estate tools it requires. We’ll also provide you with tips on how to get started and succeed as well as the top US markets for short-term rental arbitrage.

What Airbnb Arbitrage Is

Airbnb arbitrage refers to renting a property from a landlord and subleasing it on a short-term basis, on a platform like Airbnb, Vrbo, or Booking.com. In this way, you are both a tenant and an Airbnb host who acts like a middleman between the landlord (the property owner) and the Airbnb guests.

What is great about Airbnb rental arbitrage is that it allows beginners to get a taste of real estate investing without the necessity to buy a property and commit to investment property ownership. As a result, it is a way to get into real estate with (almost) no money down. All the money that you need is to fix up the property (if necessary), furnish the vacation rental (if not already furnished), and provide the first round of supplies for guests.

How Airbnb Arbitrage Works

One of the key questions on the minds of those considering giving short-term rental arbitrage a go is how you make money with this strategy. The money that you pocket is the difference between the Airbnb income that you make from your guests and the rent that you pay to the original property owner besides all rental operating expenses.

To maximize your earnings from Airbnb rental arbitrage, you need to find a market and a property where the monthly short-term rental income significantly exceeds the monthly long-term rental income. You should also keep your operational costs low, without compromising the quality of the services and the experience that you provide to guests.

The monthly Airbnb income is determined by the average daily rate you charge and the occupancy rate that you can generate. To strike the right balance between the nightly rate and occupancy and to maximize your revenue, it’s important to apply dynamic Airbnb pricing. This means constantly adjusting the daily rate you ask for based on local seasonal supply and demand conditions.

Regarding the rent that you pay to the landlord, you can try to negotiate the rate before you sign a rental agreement. How much you’ll be able to bring down the rate depends on the state of the local rental market. If you’re operating in a hot rental market with a lot of demand from tenants and little supply from landlords, you’ll need to pay the originally advertised rental rate. If demand is weak, you might negotiate a few hundred dollars down.

Is Airbnb Arbitrage Legal?

Airbnb rental arbitrage is legal in the US housing market. However, you need to consider certain regulatory considerations when choosing a location and a property for this strategy.

First, when you look for a market where to start an Airbnb arbitrage business, check the local short-term rental laws and regulations. You need a city where non-owner occupied short-term rentals are allowed and do not meet limitations on the number of nights per year that you can rent out. You need a place that doesn’t require the Airbnb host to be the property owner or a property manager.

Second, you need to review the long-term rental contract and confirm that subleasing is not prohibited. Many landlords opt for preventing re-renting in order to preserve the wellbeing of their property. Even if the rental agreement does not explicitly state anything on the matter of arbitrage, it’s advisable to talk to the landlord and confirm that this is fine with them.

Last but not least, in case you rent a condo or another property governed by an HOA, you need to ensure that the HOA rules do not prohibit such activities. Many homeowners associations prohibit subletting and/or renting out on a short-term basis to maintain the safety and comfort of their residents and the good state of properties under their governance.

Once you check all these factors and confirm compliance, you should be ready with your Airbnb arbitrage project.

How to Do Airbnb Arbitrage

To get started with Airbnb arbitrage, follow this step-by-step process:

1. Determine Your Budget

The first step in any successful real estate investment is to set up a budget. You need to know exactly how much money you have available to invest in your Airbnb business. This is based on your savings and your income and expenses.

If your initial capital is rather limited, you can consider available Airbnb loans options. There are certain lenders who work only with short-term rental properties, covering things like furniture and other business expenses, not only buying a property.

2. Choose a Market

In Airbnb rental arbitrage, the location is as important as in any other real estate strategy. If you’re considering being a DIY Airbnb host, then you should check the macro-level real estate data in your local market. Make sure that short-term rental rates exceed long-term rental rates so that you end up with positive cash flow and good ROI.

In case you live in an area that’s not a popular tourist destination and is highly demanded by tenants, then you’d need to look elsewhere. Focus on markets that attract visitors year-round, whether leisure travelers or business travelers. Look for locations with affordable rents and high Airbnb average daily rate (ADR).

For the Airbnb part of the analysis, you can use the Awning Airbnb Market Data . You can access the average daily rate, the occupancy rate, and the annual revenue for any US market. Moreover, you can see the distribution of short-term rentals by the number of bedrooms to identify the most popular property size for vacation rentals.

3. Check the Short-Term Rental Regulations

After you’ve identified a potentially profitable location for Airbnb arbitrage, the next step is to review the Airbnb laws and regulations. You need to ensure that non-owner occupied short-term rentals are legal and can be operated by someone different from the property owner. Additionally, you need to know that you can rent out the property throughout the year, for as many days as you can get it booked. You should also familiarize yourself with the required short-term rental licenses and permits.

4. Look for Long-Term Rentals with the Potential to Convert Into Airbnb Rentals

The next step is the property search. Check out websites like Redfin, Realtor.com, and Rent.com to find rental listings in your selected market. Look for properties that have relatively low rental rates and that have the potential to convert into demanded vacation rentals. Focus on rental properties in central parts of the city, with amenities Airbnb guests like. Select a property that is as ready to be rented out to guests as possible; you don’t want to waste your time and budget on fixing up your landlord’s investment property.

Before you decide on a property to rent to sublet, figure out the Airbnb daily rate, occupancy rate, and revenue that you can expect to generate from this rental. You can use the Awning Airbnb Estimator . Simply enter the market, the number of bedrooms and bathrooms, the number of guests, and whether the property has a swimming pool and a hot tub. Immediately, you’ll get estimates of the short-term rental nightly rates, occupancy, and performance of comparable active listings in the market. Ensure that the difference between the vacation rental income and the rental rate you’ll have to pay to the landlord will be positive.

5. Review the Rental Contract and the HOA Rules

Once you’re ready with your choice of a property to start Airbnb arbitrage with, it’s time to contact the property owner and ask to see the rental agreement. If the property is within an HOA, ask for a copy of the HOA rules as well.

Review both carefully and make sure that renting out the property on a short-term basis is not prohibited. It’s recommended to talk to the landlord directly about your plans to sublease the property in order to avoid issues in the future.

6. Sign the Lease

If everything looks good on the legal side, you are ready to sign the rental contract. In case the local rental market is not too hot, it’s worth trying to negotiate the rental rate down with the property owner. This will help boost your Airbnb rental arbitrage income and profit.

7. Prepare the Property for a Vacation Rental

Unless you get a furnished rental, you’ll need to take care of this. Airbnb furnishing costs can run between $1,000 on a small budget and $50,000+, depending on your budget, property size, and expected quality. Since you don’t own the property, it’s not a good idea to go for a luxury experience. Look for furniture that covers the basic needs of guests for a comfortable stay without going overboard. You can consider hiring one of the best Airbnb furnishing companies . They’ll be able to get you a good deal on the furniture prices, and they usually include their fees in the comprehensive furnishing budget.

In parallel, you need to work on obtaining any necessary short-term rental permits and regulations. Most US cities require some sort of permit to operate an Airbnb business, and getting it might take anything from a few hours to a couple of months. It depends on the local requirements and procedures.

8. List on Airbnb

Listing your property on Airbnb is probably the most exciting part of starting Airbnb arbitrage. Now is the time to create an outstanding listing that shows all the positives of the space you’re offering. Focus on high-quality photos, Airbnb SEO -optimized listing title, detailed listing description, and all amenities. It’s advisable to include search suggestions in the description and to provide a guestbook.

Airbnb recommends turning on Smart Pricing and Instant Book for maximum ranking results. The former means that the Airbnb pricing mechanism will automatically adjust the nightly rates of your property based on seasonality, and the latter means that bookings by certain types of guests will be automatically approved, without your interference.

9. Choose How to Manage Your Airbnb Property

Finally, you need to decide if you want to manage the short-term rental yourself or find a trustworthy Airbnb manager . This depends on your proximity to the property, your availability, and your hospitality experience. If you don’t think you can devote enough time and energy to this, it’s worth considering hiring a vacation rental property management company. Unless everything runs smoothly with your Airbnb arbitrage business, you won’t be able to optimize occupancy and revenue.

Airbnb Arbitrage Pros and Cons

Like any other real estate strategy, short-term rental arbitrage comes with positives and negatives. Let’s look at them:

The main advantages of Airbnb rental arbitrage include:

• No property purchase : There is no need to buy an investment property, which can be a lengthy, tedious, and expensive process.
• No property ownership : As you don’t buy a property to rent out, you don’t need to commit to real estate investments in the long term.
• Flexibility : If you don’t enjoy being an Airbnb host or if your Airbnb business is not profitable enough, you can simply complete the lease and stop. All you have to do is to make sure that you inform the landlord early on. There is no need to resell a property.
• No long-term risk : Airbnb arbitrage is arguably the safest investment strategy. The startup costs are minimal, and there is an easy exit should you decide to discontinue.
• No long-term debt repayment : Because you are not buying a house, you don’t need to worry about monthly mortgage payments.
• Quick entry into real estate investing : You can get started with Airbnb rental arbitrage in a couple of weeks. As soon as you find a profitable market and a good property and get it ready for renting out, you can start making money.
• Easy way to make money from real estate : With this strategy, you eliminate the need to worry about mortgage research, hiring an agent, getting pre-approved, or paying closing fees.
• Learning process : If you’re a beginner, that’s a great way to get first-hand experience in real estate without committing in the long run. You’ll learn all you need to know about being an Airbnb host and can decide if this is the right thing for you.

The most important disadvantages of this strategy to take into consideration are:

• Limited furnishing and upgrading options : As you don’t own the property, you might face some limitations in how you can upgrade it to turn it into a vacation rental. You’ll need the owner’s permission for anything beyond basic furnishing.
• No appreciation : Since this is not your house, you will not make money in the long term from real estate appreciation. All the money you make is from Airbnb income.
• Issues with the landlord : Short-term rental guests bring significant wear and tear, which might cause problems with the property owner. Make sure that you have their agreement on running an Airbnb business out of their rental in advance and that they know that you’ll take care of any property damage.

Airbnb Arbitrage Contract

To run an Airbnb arbitrage business, you need to sign two types of contracts: 1) A rental agreement with the owner of the property allowing Airbnb arbitrage and 2) A short-term rental agreement with each guest.

Lease Agreement

When you rent the property from the owner, you need to sign a rental contract. This should have all the standard information like the rights and responsibilities of both the landlord and the tenant, according to local laws and regulations. The monthly rental rate should be clearly stated, and the process for raising rent should be specified. Again, it is important to check the local short-term rental laws and regulations before going down this path. Also, make sure to triple check with the HOA, if the property is part of one, that short term rentals are ok.

However, in addition, you need to include a clause which explicitly allows you to sublet the property on a short-term basis. In this way, the landlord acknowledges their permission.

Airbnb Rental Agreement

You should prepare a short-term rental agreement template that you ask all your guests to sign prior to check-in. This agreement should clearly state all their rights and responsibilities during the stay and your rights and responsibilities as a host.

Airbnb Arbitrage Tools

Doing all the work associated with starting and running an Airbnb rental arbitrage business is a very labor-intensive process. That’s why you should get access to the best real estate tools to help you optimize the process and the performance of your rental.

Here are the most important tools that will make your work not only easier but also more profitable:

• Awning Airbnb Market Data : You can use the short-term rental market data available on the Awning website to evaluate the expected performance of an Airbnb property in your location of choice. This will save you months of Airbnb market research and data analysis.
• Awning Airbnb Estimator : The Airbnb calculator available on Awning helps you forecast the daily rate, the occupancy rate, and the annual revenue you’ll be able to generate from any type of property in any US market. This removes the guesswork from Airbnb arbitrage.
• Awning Vacation Rental Furnishing Services : If you don’t have the time or the knowledge to furnish the property, Awning can help with this. Awning furnishing budget starts at about $15,000.
• Awning Vacation Rental Insurance : Awning can provide you with short-term rental insurance to cover both damage and liability.
• Smart Pricing : To optimize the results of your Airbnb arbitrage business, you should dynamically adjust the daily rates when renting out. The Airbnb platform provides an in-built tool called Smart Pricing which can do that for you. Nightly rates will be constantly adjusted to reflect supply and demand trends in the local vacation rental market.
• Airbnb Automation Tools : If you want to be an Airbnb host and manage the property yourself, get access to automation tools. They will help you optimize listing, marketing, pricing, revenue management, and tax collection.
• Awning Vacation Rental Property Management : If you live out of state or don’t have the time to manage a short-term rental, you can hire Awning to do all the work for you. As a full-service Airbnb management company, Awning charges an industry-low fee of 15% of revenue, while providing the best services in the US market.

Airbnb Arbitrage Tips

In order to start your short-term rental arbitrage business on the right foot and maximize its performance throughout, follow these tips:

• Make a budget and stick to it
• Conduct diligent rental market research and analysis
• Get to know all applicable laws and regulations and comply with them at all times
• Use different sources to search for rental properties
• Run all the numbers before signing any agreements
• Negotiate the monthly rental rate with the landlord
• Sign a written rental contract with the property owner
• Ask guests to sign a written agreement before their stay
• Get additional vacation rental insurance
• Furnish the property in a welcoming matter without going overboard
• Apply dynamic Airbnb pricing
• Continue optimizing the Airbnb listing for SEO
• Work actively on getting positive reviews from guests
• List on additional platforms like Vrbo and Booking.com
• Automate short-term rental property management with the best tools
• Look for ways to minimize Airbnb rental arbitrage business expenses
• Consider hiring a professional Airbnb manager

10 Best Airbnb Arbitrage Markets

To help you get started with your short-term rental arbitrage endeavor, we’ve put together a list of the best Airbnb markets for this strategy. The ADR, occupancy, and revenue data are provided by Awning.

Chattanooga, TN: Best Airbnb Arbitrage Market for Beginner Hosts

• Average Daily Rate : $122
• Occupancy Rate : 68%
• Annual Revenue : $21,000

Chattanooga, Tennessee is one of the best possible locations in the US to start a short-term rental business. The city benefits from its geographical location along the Tennessee River and by the Appalachian Mountains, which guarantees year-round demand for various types of Airbnb rentals. Rental rates and other operating expenses are affordable, while Airbnb nightly rates and occupancy are excellent. Chattanooga, Tennessee short-term rental laws are restrictive, but operating a short-term rental business is still possible and highly profitable.

Gatlinburg, TN: Best Airbnb Arbitrage Market Near the Smoky Mountains

• Average Daily Rate : $227
• Occupancy Rate : 73%
• Annual Revenue : $42,000

Gatlinburg, Tennessee is a top tourist destination because of its location within the Great Smoky Mountains National Park. This is by far the most popular national park in the US, bringing millions of visitors every year. Hiking, walking, biking, swimming, and skiing are just some of the outdoor activities that attract tourists. Importantly, the Gatlinburg Airbnb laws are very conducive.

Naples, FL: Best Airbnb Arbitrage Market on the Gulf of Mexico

• Average Daily Rate : $212
• Occupancy Rate : 67%
• Annual Revenue : $31,000

Naples, Florida is an excellent location for Airbnb arbitrage. Its strategic location on the Gulf of Mexico provides access to white sand beaches, dolphin-spotting, fishing opportunities, and various water sports. The outstanding golf courses and the ample shopping options also contribute to making Naples one of the hottest tourist destinations not only in the Sunshine State but also across the US. Naples has some of the most Airbnb friendly local regulations in the State of Florida.

Kissimmee, FL: Best Airbnb Arbitrage Market Near Walt Disney World

• Average Daily Rate : $170
• Occupancy Rate : 77%
• Annual Revenue : $32,000

Kissimmee, Florida is one of the best places to run a vacation rental business because of the year-round demand for hospitality and accommodation by those visiting Walt Disney World and Universal Studios. Florida short-term rental laws require a state-level permit, and Kissimmisee allows vacation rentals only in certain zoning districts. However, the above-average Airbnb daily rates and occupancy rate bring high profitability to Airbnb hosts.

Blue Ridge, GA: Best Airbnb Arbitrage Market for Nature Experiences

Blue Ridge, Georgia is a mountain town that offers beautiful scenery, outstanding nature, and multiple options for outdoor sports. The town has a vibrant arts and crafts scene which makes it even more attractive for short-term visitors. Blue Ridge, Georgia short-term rental laws are positive, with some zoning restrictions.

Atlanta, GA: Best Airbnb Market in a Historical City

• Average Daily Rate : $125
• Occupancy Rate : 55%
• Annual Revenue : $12,000

Atlanta, Georgia benefits from rich history with many remaining historic sites and monuments, attracting tourists from near and far. Among major US cities, Atlanta has some of the best Airbnb laws which allow long-term tenants to engage in short-term rental arbitrage. The Airbnb data is good.

Galveston, TX: Best Airbnb Arbitrage Market for Waterfront Destination Experiences

• Average Daily Rate : $180
• Occupancy Rate : 48%
• Annual Revenue : $24,000

As a coastal resort, Galveston, Texas is another popular tourist destination that makes for an excellent location to start an Airbnb arbitrage business. Demand for vacation rentals is never an issue, while the Galveston, Texas short-term rental laws are friendly for hosts. Trails, kayaking, fishing, bird-watching, seeing sharks, and amusement rides are just some attractions that bring visitors.

Asheville, NC: Best Airbnb Arbitrage Market in a Vibrant Art Community

• Average Daily Rate : $142
• Occupancy Rate : 69%
• Annual Revenue : $26,000

Asheville, North Carolina offers both outstanding nature and an excellent art and culture atmosphere. The city is known for its vibrant arts scene and historic architecture. It’s within the Blue Ridge Mountains, which makes it a top mountain city destination. Asheville, North Carolina short-term rental laws restrict this strategy to the resort zoning district, so you need to look for a property within this area to sublease on Airbnb.

Gulf Shores, AL: Best Airbnb Arbitrage Market for Beaches

• Average Daily Rate : $196
• Annual Revenue : $34,000

On the Gulf Coast, Gulf Shores, Alabama is one of the most popular beach destinations across the US. The trails, the pier, the golf course, and the Alabama Gulf Coast Zoo provide everything that year-round visitors need. Meanwhile, Gulf Shores, Alabama short-term rental laws are significantly less limiting that those in other top Airbnb markets.

Sedona, AZ: Best Airbnb Arbitrage Market Near the Grand Canyon

• Average Daily Rate : $228
• Occupancy Rate : 78%
• Annual Revenue : $44,000

Its strategic location close to the Grand Canyon has turned Sedona, Arizona into one of the most popular cities for travelers across the US market. Importantly, the Sedona, Arizona short-term rental laws are friendly for Airbnb hosts. The vacation rental data is excellent, reflecting strong occupancy, high ADR, and amazing income.

Airbnb arbitrage is an increasingly popular strategy which allows just about everyone to make money from short-term rentals. What is required is to find a market and a property for which vacation rental income exceeds long-term rentals rates and where Airbnb is legal. For optimal results, hosts are advised to use the best tools for rental property analysis and management.

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Become a better host and investor in just 5 minutes, quick links.

© 2022 Awning CRE, Inc. All rights reserved. Awning, Inc. is a licensed real estate broker in California (DRE# 02120175), Awning Brokerage Holdings is a licensed real estate broker in Florida collectively referred to herein as “Awning”.

A 27-year-old started 'Airbnb arbitrage' after getting laid off during the pandemic. He explains how he got his first rental with $6,400 upfront and scaled to 25 units in less than 2 years.

• After being laid off in March 2020 Nathan and Taniera Turner started looking into real estate.
• They decided to try 'rental arbitrage,' which is when you rent a property and sublet it on platforms like Airbnb.
• Today, they have 25 Airbnb units in three different states, plus an Airbnb cleaning business. 

When the pandemic hit in March 2020, Nathan Turner was among the millions of US workers immediately impacted.

He was working as a route delivery specialist for Aramark, servicing restaurants and hotels, and got laid off towards the end of March. His wife Taniera also lost her job as a banquet server at a Marriott hotel that same month. 

They weren't too worried about money, Turner, 27, told Insider. They both had side hustles at the time — Nathan was doing real-estate wholesaling , while Taniera was selling lip gloss — and filed for unemployment benefits. "But we were a little anxious and didn't know what to expect going forward," he said. 

While they lost their jobs, they gained back time to figure out their next steps. They didn't feel financial pressure to start working right away, thanks to the pandemic assistance, said Turner: "When the additional unemployment kicked in, that basically equaled out to what we were already making with our jobs previously, if not a little bit more. And we had all the time back, so we could put that same 50 hours that we were working into building businesses."

The couple decided to look into real-estate opportunities. 

Turner was already familiar with wholesaling, which he first learned about while listening to podcasts on his delivery routes. Wholesalers connect sellers and sale contracts to prospective buyers for a profit.

"You spend a lot of time out on your own," he said of his previous jobs at Aramark and also delivering for FedEx. "Instead of listening to the radio in between deliveries or going to the next location, I would listen to different podcasts. One talked about how you could make money selling houses with no money or no credit."

Turner got his foot in the door by partnering with an established, Houston-based wholesaler, who he reached out to after seeing one of his marketing campaigns on Facebook. The wholesaler was looking to expand in Louisville, where Turner lived at the time, and Turner offered to help him find potential buyers in the area.

On their first deal, they made $1,000 total and split it 50-50, said Turner. His half of the profit was almost equivalent to one week's paycheck, he added: "After taxes and everything, I might only bring home $600 a week. If I did overtime, I might bring home $700 to $800 a week, but that was after working 50 hours. Doing these deals, it didn't take nearly as much time or labor to produce more money."

Knowing that there was money to be made in real estate, Turner started exploring other potentially lucrative strategies. Airbnb first came on his radar when someone posted about needing a last-minute cleaner in one of the Facebook real-estate groups he was part of.

He and Taniera, who were still unemployed and had free time, decided to take the job.

"We cleaned three units the first day and made $70 per unit, so $210 for the day," said Turner. "And we were only there for three to four hours. We thought, 'That wasn't that hard. What if we started doing 10 units a day?'"

They continued working with the client, who owned six Airbnb units total, and started learning more about the hosting side of the business. 

"They were telling us about their journey and how they were able to quit their jobs from doing Airbnb," said Turner. "Hearing about the freedom and the lifestyle that you can live piqued our interest."

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At the time, however, purchasing a property and setting up an Airbnb felt unattainable, he said, as it would require a lot of upfront cash for a down payment, closing costs, and furniture to fill the space.

Moving to Houston and using rental arbitrage to set up an Airbnb rental with $6,400

The Turners continued picking up clients and cleaning Airbnb properties in Louisville. As their cleaning business expanded, they decided to relocate to a bigger city with more real-estate opportunities.

They moved to Houston in 2021 and landed a client who had 12 units, but didn't own them. The client was doing what's called "Airbnb rental arbitrage," which is when you rent a property and sublet it on platforms like Airbnb and VRBO. The goal is to make enough in short-term rental income to not only cover rent, but pocket extra cash each month.

This route seemed much more doable. Rather than putting tens of thousands of dollars down to buy a home, the Turners' upfront costs would include: first month's rent, a security deposit, and furniture.

The first step to doing rental arbitrage is finding an apartment or home to rent, and also a landlord willing to let you sublet the place.

"We were looking for ourselves at first and we couldn't find anything," said Turner, but, once again, the Facebook real estate community came in handy. "We were in an Airbnb group and a realtor in the group posted saying that she could help people find properties, so we reached out to her."

The realtor helped them secure their first unit: a two-bed apartment going for $1,200 per-month. 

Between first month's rent, a $1,200 security deposit, and furniture, they spent about $6,400 and three weeks putting together their first Airbnb.

It wasn't an instant money-maker, said Turner: "This one was a learning experience for us because we were trying to figure out pricing and how to get your listing out there. The first two months, we really didn't make anything at all." 

Part of the issue was their pricing strategy. They figured they could book the unit every weekend, so they calculated how much they would have to charge each weekend night in order to make up the $1,200 in rent that they owed. 

"We would just charge the same price throughout the entire week and the weekends, but we weren't really getting any bookings during the week because our prices weren't competitive," explained Turner. "It was a missed opportunity for us. That's when we realized we had to adjust our prices and drop them during the week."

They looked at comparable listings in their area and charged either the same amount or slightly lower than their competition. (Today, rather than changing prices manually, they use a pricing software called PriceLabs that will automatically change your prices for you based on demand and seasonality in your area.)

It took about six months to recoup the money they put into setting up the unit, but over the course of the final six months of the lease, they started profiting between $1,000 and $1,200 per month, said Turner. 

Scaling up to 25 units in Houston, Des Moines, and Louisville

While their first Airbnb eventually started profiting, the Turners decided not to renew the lease at the end of the 12 months. At that point, they'd decided to start looking for buildings where they could acquire multiple apartments. 

"We figured it would be best for operational purposes to try to only operate in places where we could have multiple units in one building versus being spaced out all over Houston and having cleaners run from side to side," said Turner. Plus, "if you only have one unit, you can't control what's going on with the other units — maybe they're not keeping their outside area as clean as you are — and that can affect the guest experience."

Turner added a triplex to his portfolio in May 2022 and a fourplex two months later. Currently, he has 25 total units in three different markets: 18 in Houston, six in Des Moines, which he considers his top-performing rentals, and one in Louisville. Insider verified his Airbnb ownership by reviewing lease agreements and screenshots from his Airbnb dashboard.

View this post on Instagram A post shared by Nathan Turner 😊 (@natebturner)

As for how he finds strong Airbnb markets, in addition to using short-term rental data analytics tools like AirDNA and RABBU , "I always look at the bigger companies and see how they're moving," he said. "They have more capital and they're not just going to be throwing money in any market." 

While he doesn't want to reveal the specific markets that are on his radar, he said they're in the Midwest and on the East Coast. Generally, he's looking at "mid-major markets," he added. "It's getting hard to compete in huge cities for two reasons: One, so many units are already online for those markets, and two, you're competing with the city, which could be building new hotels every day." 

Turner's goal is to expand to 100 units and hit $1 million in annual revenue.

His monthly revenue, including rental income and revenue from the cleaning business, fluctuates but, "it's always within the $50,000 to $60,000 range for the most part," he said. His best month so far was December, when he brought in about $80,000 between Airbnb rentals and cleaning. Insider confirmed these details by looking at his business bank account statements. 

If you're looking to get into real estate but don't have a ton of capital, rental arbitrage could be your way in, said Turner: "Realistically, you probably only need about $4,000 to $5,000 to get started, whereas with buying a house you're probably going to need at least $10,000 to $15,000." 

The most challenging part is finding the right property to rent — and getting the landlord on board with short-term rentals.

It'll take a lot of legwork in the beginning, said Turner: "You need to be sending out emails to buildings every single day and doing phone calls as much as possible. Just keep calling. If you hit the phones hard every day and are emailing out every single day, I don't see why you wouldn't get a yes in two weeks."

Axel Springer, Insider Inc.'s parent company, is an investor in Airbnb.

Watch: From the launch of Airbnb to the rise of travel influencers, here are the biggest ways we changed the way we travel this decade

• Main content

Airbnb Arbitrage Guide

Airbnb arbitrage works by renting an apartment or home at the market rate on a long-term basis and then marketing it to vacationers and temporary guests at a higher rate per night or month. Doing so allows you to cover the monthly rent and collect a profit without the responsibilities of owning the property.

hash-mark Table of Contents

Is Airbnb Rental Arbitrage Legal? How Much Money Can You Earn Doing Airbnb Arbitrage? How Do You Start in Airbnb Arbitrage? Airbnb Arbitrage Pros and Cons Airbnb Arbitrage Bottom Line

hash-mark Is Airbnb Rental Arbitrage Legal? 

Yes, Airbnb arbitrage is legal. However, you must abide by the local laws regarding short-term rentals and the conditions of the lease agreement. Many large cities with a high volume of tourists per year have regulations on short-term rentals to prevent property values from getting out of control. So, research the local laws when determining your Airbnb arbitrage strategy.

Also, not every landlord allows you to sublease the apartment or may have conditions that must be met before you can do so. So read the lease carefully first and let them know what you’re planning so they aren’t surprised by all the sporadic guests.

hash-mark How Much Money Can You Earn Doing Airbnb Arbitrage? 

Airbnb arbitrage can be extremely profitable if you do your research and find the right strategy. You can earn thousands of dollars in monthly profit depending on your market and how many expenses you have.

The average Airbnb listing rents for about $150 per night, which equals $4,500 per month. The average rent in America is around $1,800, which means you could make $2,700 in profit in a popular area just by listing the apartment as it is. 

Even if you budget $1,000 per month for cleaning, staging, and maintenance and account for vacancies, you will only need to rent the apartment for 24 days out of the month to turn a profit. Plus, that’s just a modest example, and there are markets where short-term rentals command even higher rates, especially in peak seasons. So, with a little research, you can easily make an extra $1,000 to $3,000 per month with Airbnb arbitrage after expenses.

If you think rental arbitrage might be the right side hustle for you, check out the best cities for Airbnb investing . 

hash-mark How Do You Start in Airbnb Arbitrage?

• Do Your Research
• Find and Lease an Apartment
• Stage the Apartment
• Take Photos
• List It on Airbnb and Other Short-Term Housing Apps
• Prepare For Your Bookings

1. Do Your Research

Before you get started, you should do some preliminary research to make sure you find the right property. Airbnb arbitrage tends to work best in major cities and areas with heavy tourist traffic, such as NYC, San Francisco, Miami, New Orleans, Honolulu, Orlando, etc. Ultimately if you don’t find enough tenants, you’ll have to cover the rent and expenses out of pocket, so be sure to do the math and find the perfect location. 

2. Find and Lease an Apartment

Once you’ve chosen your ideal destination, you’ll need to find a rental unit you can lease. When you’ve found the perfect unit, you will submit an application and sign a lease agreement with the landlord or management company. But pay close attention to what it says about subleasing and short-term rentals in the contract. 

3. Stage the Apartment

Short-term tenants expect the unit to be furnished, so you’ll need to stage the apartment once you sign the lease. You can either go out and purchase your own furniture or find a staging company that will rent you furniture on a monthly basis. 

4. Take Photos

Next, you’ll want to take some eye-catching photos to help market the property. You can take them with a cellphone or even hire a professional real estate photographer. Just make sure the lighting is decent and you get the best angles. Good pictures can make or break the success of an Airbnb listing, so do your best to get quality shots. 

5. List It on Airbnb and Other Short-Term Housing Apps

When everything is staged and photo ready, you can start marketing your listing on short-term rental apps. Airbnb is the obvious place to start, but you should also consider VRBO, Vacasa, and even Craigslist. The more sites you’re on, the larger the pool of potential renters you can access. Just make sure you have a reliable system for tracking bookings so you don’t accidentally rent it to two different groups at once. 

6. Prepare For Your Bookings

From there, all you have to do is wait until the bookings start rolling in and respond to requests and inquiries from tenants. You may also want to hire cleaners and a handyman to check in on the unit between guests. Plus, it’s also smart to develop systems to run your business, track expenses, and collect payments.

hash-mark Airbnb Arbitrage Pros and Cons

Airbnb arbitrage pros.

• Low Upfront Investment
• Minimal Risk
• Easy Accounting

1. Low Upfront Investment

Airbnb arbitrage requires a much lower upfront investment than buying a rental property. Typically, all you’ll need is the first month’s rent, a security deposit, and the cost of staging and marketing the property. Considering the income you can make, that’s much cheaper than the down payment and closing costs needed to buy a traditional rental.

2. Minimal Risk

Rental arbitrage is also less risky than other real estate investing methods because you don’t actually own the property. You are on the hook to pay the rent every month, but in many areas, you can cover that with just a few guests per month. So as long as you plan for vacancies and have a cash reserve to get you through slower seasons, the risk is very minimal.

3. Easy Accounting

Unless you develop a portfolio of Airbnb arbitrage properties all over the country, the accounting is relatively simple, especially compared to standard rental property. Your only expenses will be rent, furniture, and upkeep; the rest is pure profit, which simplifies things when it comes time to do your taxes.

Airbnb Arbitrage Cons

• Risk of Vacancies
• More Wear and Tear
• Dealing With the Landlord or HOA

1. Risk of Vacancies

One of the major disadvantages of short-term rentals is not having long-term commitments from a tenant. So, you will naturally have some vacancies as guests transition in and out. As long as you factor their periodic vacancies into your budget, you should be fine, although it may be difficult to predict in some areas.

2. More Wear and Tear

With new people constantly coming in and out, you will likely deal with more wear and tear, which means additional upkeep. The good thing is that with AirBnB, you can charge a cleaning fee to help offset some of the costs, but you may need to perform maintenance and upgrades routinely.

3. Dealing With the Landlord or HOA

Not all landlords or homeowners associations will be happy about the idea of you using the unit as an investment property rather than a residence. So, you may face pushback from management, especially if you have rowdy guests who are loud or disturbing neighbors. That’s why it’s often best to be upfront about your business and move on to another building if the owners aren’t thrilled about the idea. 

hash-mark Airbnb Arbitrage Bottom Line 

Airbnb Arbitrage is a relatively low-risk investment strategy that allows you to earn passive income without purchasing a property. However, it does take careful planning and consistency to run a successful rental arbitrage business. So, make sure to do the proper research and understand the risks and obligations before investing in Airbnb arbitrage.  

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The Complete Beginner’s Guide to Airbnb Arbitrage

If you want to get started with Airbnb but don’t own any property, you’re may be in luck. Airbnb rental arbitrage is an option for some that happens to be rapidly growing in popularity. It’s also a great business model for those who are starting off with less money in their budget. Not quite ready to make the huge commitment of property ownership? This may be another way you can experience The Airbnb Ride.

Below, find out exactly what Airbnb arbitrage is and learn about all of the pros and cons. You’ll also be able to read success stories, find out what kinds of effects COVID-19 has had on this type of business, and learn about property options so you know how to start an Airbnb arbitrage. Don’t forget to check out our general tips to keep in mind as you begin your Airbnb adventure!

What Is Airbnb Rental Arbitrage?

The simplest definition of Airbnb rental arbitrage is the practice of renting out properties on a long-term basis. These hosts do this for the sole purpose of subletting them for short-term stays on Airbnb.

Advantages of Airbnb Rental Arbitrage

Airbnb arbitrage is quickly gaining traction and becoming a very popular way to earn income! Some advantages are obvious, such as the possible profit you can earn. Additionally, the freedom is unmatched when subletting Airbnb properties. The fact that you don’t have to be a property owner is definitely a pro of this business model.

A person who sublets Airbnb properties in most cases can plan on earning about 1.5 to 3 times the price of the property’s rent. Profits can reach even higher levels depending on location! If you have multiple properties, this profit will only continue to rise. It is important to have good business sense and follow all of the necessary rules and regulations. This is vital in allowing an Airbnb arbitrage to be a successful business venture.

Increased Freedom

You have much more freedom and autonomy with Airbnb arbitrage than you would have as a property manager. As a Property Manager, you are answering to the property owners. This role may be salary based or a small percentage of the monthly rent. When you sublease Airbnb properties, you are your own boss. It is up to you to keep track of your guests as well as the property utilities. Additionally, because the nightly rate is often drastically higher than the monthly rental rate, 100% occupancy is not required to earn a profit.

Property Ownership Isn’t Necessary

When thinking about starting with Airbnb, many people assume that you must first be a property owner. This isn’t true! A person who sublets Airbnb can be anyone who rents a property. As long as it is legal and your landlord approves, you can then sublet it in order to earn extra cash.

This really opens up the market; many people who don’t have enough saved up to become homeowners do have sufficient funds to invest in a rental property which can then become a lucrative business.

Downfalls of Airbnb Rental Arbitrage

Although Airbnb rental arbitrage can be a great source of extra cash, it doesn’t come without a downside. Learn more about common downfalls below.

Possible Eviction

There’s always a risk of getting evicted from a property if you don’t speak with your landlord about your plans for Airbnb rental arbitrage. Some landlords don’t allow it and will be especially unhappy if they find out you’re subletting the property without letting them know about it beforehand. You could even be susceptible to various fines and legal action as a result!

Some Cities Don’t Allow It

Vacation rentals and Airbnb are prohibited in certain cities. It’s essential to look into the local laws and regulations before embarking on your Airbnb rental arbitrage business venture. (For more information, check out our article discussing the legal challenges of hosting an Airbnb.)

Even if Airbnb isn’t considered illegal in the city you’re wanting to sublet in, some areas have limitations as to how many nights you’re allowed to rent out your property. You’ll need to factor in whether or not you’ll get a good return on your investment if you’re not able to sublet your property year-round.

Initial Costs

Airbnb arbitrage can definitely be a great source of income. However, it’s important to take note of all the investments you’ll have to make upfront before you begin subletting a property. Aside from more obvious costs such as monthly rent, you’ll most likely also need to pay an application fee and deposit.

Insurance and legal fees can also add up, and they’re definitely necessary for your Airbnb to be successful. Finally, you’ll need to provide at least basic furnishings and appliances for your guests to use. All of these costs together mean that you’ll need to have a substantial amount of money to invest upfront before your business really gets going and begins to bring in profit.

Inconsistent Market Conditions

You won’t be able to rely on a consistent income through Airbnb rental arbitrage. You’ll likely have more traffic during certain seasons and times of the year, while some months may be much slower. Some of the ebbs and flows of the market are more predictable, while other unexpected events may take you by surprise and lower your profits.

For example, the COVID-19 pandemic essentially shut down travel for several months. COVID caused many people to have less money for travel even after restrictions were lifted. Additionally, some travelers are now more hesitant to stay in Airbnb properties,. Likewise, some hosts don’t feel safe renting to guests during these uncertain times.

Airbnb Rental Arbitrage Success Stories

There are tons of success stories out there from people who decided to try their hand at Airbnb arbitrage! Evan Kimbrell’s story is one of the best–he’s even launched a course called “Hacking Airbnb”! Kimbrell sublets his San Francisco apartment and brings in about $10,000 per month, which he now uses to travel the world. If he can do it, so can you!

Many seniors in the United States have chosen to sublet their spare rooms and are raking in lots of extra cash as a result! Sharing their homes in this way provides older Americans with enough money to cover medical expenses and avoid downsizing their homes after retirement. This shows that Airbnb arbitrage isn’t limited to any age group.

Property Options for Airbnb Rental Arbitrage

You have several options when deciding what type of property to use for Airbnb arbitrage. Of course, you can rent out a property that you already own, or even just a spare bedroom. You can rent a property from a friend or family member and then sublet it on Airbnb. Finally, you can find a totally new property to sublet.

It’s important to remember that the amount of income you’ll be able to make is largely dependent on the location of the property. Big cities with many tourist attractions are typically the most profitable. It also helps when your listing is near grocery stores and public transportation rather than those on the outskirts of town.

However, you should be able to make at least a little bit of extra cash regardless of location. Travelers are always looking for a place to spend the night, and if you can offer a lower price point than the hotels in the area, you’re likely to get some business!

General Tips and Reminders for Airbnb Rental Arbitrage

Keep these tips in mind throughout your Airbnb arbitrage journey, and you’re sure to find success!

Negotiate With Your Landlord

It’s extremely important to have a chat with your landlord upfront. Let them know that you’re planning to use your apartment or other property as an Airbnb. Some landlords won’t allow this at all, so it’s best to have this conversation before you sign the lease. To sweeten the deal, you could even offer to share a percentage of your profits with your landlord! Make sure to get any agreements in writing to avoid possible legal issues in the future.

Make Your Property Into A “Home Away From Home”

Travelers are losing interest in the classic, but impersonal hotel room. Now they gravitate toward Airbnb properties that are more like a home away from home! Aside from basic furnishings, there are some simple tricks that will greatly add to the quality of your listing. Taking time to decorate, offering basic groceries and other simple supplies are great ways to help aid in receiving awesome reviews!

You can provide toiletries such as this Hotel Amenities Bundle . These types of amenities give your guests all the basics they need to shower and get ready in the morning. These small and inexpensive additions to your property will add lots of value for your guests!

Main Takeaways

Subletting Airbnb properties, also known as Airbnb rental arbitrage, is a great option if you’re looking to make some extra cash! The upsides of choosing to sublease Airbnb properties are the profits, freedom, and the fact that you don’t have to be a property owner to start up this business venture.

When you’re deciding how to start a retail arbitrage, don’t forget that there are some drawbacks to subletting Airbnb properties. These include possible evictions, various laws and regulations, startup costs, and unpredictable market conditions. 

Finally, when you sublease Airbnb properties, don’t forget to have a discussion with your landlord about your plans! To make sure your guests are comfortable and happy, try to transform your property into a home away from home. As long as you follow our guide to Airbnb rental arbitrage, you’re sure to find success!

What Is Airbnb Rental Arbitrage (And Is It Worth It)

Jenni Sisson, Contributor

• Updated May 28, 2024

Whether you’re in a bustling city or the middle of nowhere, buying a property to run as an Airbnb business can be a great way to earn passive income.

Of course, buying a house takes a significant amount of capital.

A lesser-known (but still viable) strategy for making money on sites like Airbnb and VRBO is short-term rental arbitrage, which doesn’t require you to own real estate. 

In this guide, we’ll explain how the strategy works and how to find opportunities to start this type of real estate rental business.

Table of Contents

What Is Rental Arbitrage?

The concept of arbitrage is a continuation of the “buy low, sell high” rule that drives all businesses. 

Here’s an example: if you buy a single-serving bottle of water in bulk at the grocery store, it might cost $1. But if you buy that same bottle from a vending machine, it will probably cost at least $2. If you buy it at a stadium or an airport, the same bottle might cost $5. 

The product didn’t change, but its value is different depending on where and how it’s sold.

Rental arbitrage works the same way. An apartment might rent for $2,000 per month (about $67 per day) on a 12-month lease. But when rented on a per-night basis, it may command a significantly higher price. 

Some savvy people have figured out how to take advantage of this difference in pricing: they sign a lease for an apartment, house or condo, then sublet the space to others on a nightly basis on apps like Airbnb and VRBO. 

Then they pocket the difference, which is known in the industry as a premium. 

Is Rental Arbitrage Legal?

Rental arbitrage is legal, but it comes with two big asterisks. 

First of all, the city in which the property is located must allow short-term rentals. Many cities large and small (along with some HOAs) have banned or placed limitations on short-term rental properties for a number of reasons, so it’s imperative to do your homework before trying this out as a money-making strategy. Failing to do so could result in expensive fines or lawsuits. 

Unfortunately, there is no single website or app that will allow you to quickly look up whether your jurisdiction allows short-term rentals, so you’ll have to check your local regulations. These are likely contained in your city’s zoning code, planning code or city ordinances. Airbnb has a helpful guide on how to find your local regulations .

The second hurdle is the language contained in the lease of the property you want to sublet. Some landlords don’t want the additional risk of unvetted tenants coming in and out of their property, so the lease may explicitly prohibit subletting. In this case, renting out the place on a nightly basis would fall under any “no subletting” clause. 

Even if your lease is mum on the subject of subletting, don’t assume you’re good to go. Other provisions — such as an obligation to inform your landlord of overnight guests or using a property for business purposes — may also prohibit you from leveraging rental arbitrage.

Our view is that it’s best to be upfront with potential landlords about your intentions . Many are just fine with arbitrage arrangements, so long as they get paid as expected.

How to Find Properties for Airbnb Arbitrage

Finding properties that will work for a short-term rental arbitrage business can be challenging. Here are a few ideas for generating a pipeline of properties to sublet.

• Ask expat owners . Many people who go overseas for a temporary job, mission work or military service just want to ensure that their property is taken care of while they’re gone. You may be able to find expats willing to let you run an Airbnb out of their otherwise vacant house. Search in expat Facebook groups or forums like Expat Exchange .
• Find accidental landlords . Many people end up as landlords who didn’t plan to be. This situation can arise when someone can’t or doesn’t want to sell their house, but is required to move. Homeowners want to rent to tenants to cover the mortgage, but some of these folks may not know what they’re getting into. Accidental landlords who want their property to earn cash but don’t know the ins and outs of running a business may be the perfect opportunity for an arbitrage situation.
• Talk to real estate agents . These professionals have a good pulse on the real estate industry as well as the local market. Well-established agents will have a wide network of contacts and may know just the person to connect you with to start your business.
• Attend local real estate meetups . This is a great opportunity to get your name out there and meet others who may need your services, or who are a step or two ahead of you in the process. 
• Talk to burned-out Airbnb hosts . Running a short-term rental business can be challenging, especially if you have another job. Overwhelmed and/or unsuccessful Airbnb hosts may be happy to let you have the reins and take over.

How to Convince a Landlord to Let You Do Airbnb Arbitrage

If you’re planning to use an apartment, house or condo for rental arbitrage, the best approach is to be upfront with the landlord about your intentions. That way, everything is above-board and you don’t have to worry about being caught, evicted or fined.

If the property owner is reticent or unfamiliar with the short-term rental arbitrage model, here are a few tips for convincing them that allowing you to sublet is a great idea.

• Present yourself as a property manager . The owner likely wants a piece of the short-term rental pie, but doesn’t want the headache of furnishing, listing and maintaining an Airbnb rental. That’s where you come in. Frame the discussion in terms of you helping them earn more money from their property with little additional risk or hassle.
• Offer a premium rental price . Landlords operate rentals as investments to grow their portfolio. If you’re willing to offer a higher rental price in exchange for the additional risk that subletting represents, that may be enough for the landlord to take a chance.
• Showcase your insurance . One of a landlord’s chief concerns is protecting their asset from unruly tenants. If you can prove that you have adequate insurance, you can allay some of the owner’s concerns.
• Display your track record . If this isn’t your first Airbnb property, let the owner take a look at the other rentals you operate. Show them your listings as well as your reviews so they know you know what you’re doing.
• Propose a profit-sharing model . Again, a landlord rents a property to make money. Introduce them to the premiums gained through Airbnb arbitrage and offer to give them a percentage of the profit in addition to your monthly rent check.
• Highlight added scrutiny as a benefit . With an Airbnb unit, you’ll likely provide additional technology and care such as an exterior security camera, Ring doorbell, professional cleaning, and regular maintenance to keep up with your listings. This is a boon for property owners who want to see their units well cared for.
• Create solutions for their concerns . Are they worried about unauthorized parties? Use a noise monitor. Are they concerned about too many guests? Install a security camera. Use technology and systems to ensure your guests are well-behaved and that your landlord stays happy.

Rental Arbitrage Pros and Cons

An Airbnb arbitrage business is different from offering short-term rentals of a property you own. Here are some of the advantages and disadvantages. 

• Less upstart capital required . Saving up to buy a property (even just a down payment) to use as a short-term rental can take years. By subletting an apartment or condo, all you have to come up with is the initial deposit and furnishings.
• Limited long-term risk . If you own a property and the city (or even an HOA) bans short-term rentals, there’s very little you can do unless you have an alternate exit strategy. By using a rental, the maximum risk is carrying the property for the length of the lease. 
• Scalability . It would be difficult to expand your short-term rental empire quickly if you had to buy or own every property you rented. By using rental arbitrage, you can list more properties faster than you would be able to otherwise, since they’re cheaper to acquire.
• Personal perks . Since you’re the leaseholder, you can use the property for yourself or family members when it’s not rented out. This can be a great asset during holidays or for family gatherings.
• Harder to find . If they’re not familiar with or amenable to short-term rentals, landlords can be hesitant to agree to subletting. It can be difficult to find a property owner who will agree to let you use the place for an Airbnb.
• Paying for the lease . You’re on the hook for the full cost of the lease regardless of whether you’re able to book the space. This could result in you losing money on months where bookings are lean, or if your jurisdiction places limits on Airbnbs after you sign.
• Slimmer margins . Rent in desirable neighborhoods can be high, which can make it more difficult to turn a profit on an arbitraged rental. 
• Responsible for damages . While there’s a risk of damage to property in any rental property, tracking down the offending party can be difficult when they’re only staying for one night. If you’re running an arbitraged Airbnb, then your furnishings represent a larger part of your initial investment than if you purchased a property.

Airbnb Arbitrage Tools

To conduct a successful business, you’ll need a few tools in your arsenal. If you’re looking to do Airbnb arbitrage, here are a few helpful ones.

• AirDNA . This website gives detailed analytics for short-term rentals in a wide variety of markets. You’ll pay for the information, but for all the detail they give you on rental rates, occupancy and profitability, it’s worth the cost — especially if you’re first starting out.
• Noise monitoring technology . Want to prevent rowdy parties at your Airbnb? Install a noise monitor such as Noise Aware or Minut to keep tabs on unruly guests. It doesn’t listen to specific conversations, but it will alert you when the noise levels get high enough to disturb the neighbors. 
• Outdoor surveillance . It’s not legal to keep cameras inside your short-term rental, but front and back porch cameras can tell you a lot about who is coming into your unit, as well as what pets or additional guests they bring.
• Dynamic pricing tool . Several offerings, such as PriceLabs and DPGO , integrate with Airbnb and other listing platforms to help you charge the right price for your listing’s size and location, taking into account factors like the local market demand and time of year.

Airbnb Arbitrage FAQs

Short-term rental arbitrage can seem intimidating and complicated. We’ve compiled a list of frequently asked questions to help you better understand how it works.

There’s a premium for Airbnb arbitrage in most U.S. cities, but many — including Los Angeles, Las Vegas, Miami, New York City, San Francisco and Santa Monica (to name a few) — have made it extremely difficult to rent a place on Airbnb. Others merely require you to have a permit or to register with the city. A main reason cities ban short-term rentals is that they take away from the supply of long-term rentals in the area, making it difficult for residents to find a place to live. As such, the best cities for Airbnb arbitrage don’t have that concern, so look for municipalities with adequate housing supply and affordable rent.

There are a few Airbnb arbitrage calculators, including BnBCalc and Airbtics . However, both of these require you to subscribe to see results. If you want a free option, you can use any Airbnb calculator (this one from Learnbnb.com is a favorite) and adapt it for an arbitrage situation. Be sure to include furnishings in your initial cost outlay, as well as cleaning costs and hotel taxes in your monthly expenses. Instead of closing costs and a mortgage, enter your deposit and monthly rental calculations. 

Airbnb offers AirCover, which gives hosts $3 million in damage protection, though it doesn’t have a reputation for being a very reliable form of insurance . It’s a good idea to get additional renter’s insurance (since you’re technically the renter) or short-term rental insurance. Be sure to go over the policy with a fine-toothed comb to make sure it covers an arbitrage situation.

Airbnb Arbitrage: Does It Work and Is It a Good Business Model?

Using arbitrage to your advantage to run a short-term rental business can work. Even after paying for a long-term lease, furnishing the place, and accounting for other expenses, there is still room for profit in many markets. 

However, like any business model, Airbnb arbitrage comes with risk. If you have trouble booking your listing or your city suddenly prohibits short-term rentals (as many places are doing), you could be stuck in an expensive lease with no way to get out or profit from it.

Even though they might not have the high occupancy rates that major cities do, small to medium-sized towns may be easier places to run a short-term rental arbitrage business. These towns are less likely to have been inundated with Airbnb listings, and thereby less likely to have banned them. Rents are often cheaper in smaller cities, which may offer a better premium for Airbnb arbitrage.

Like any real estate transaction, you’ll need to do a lot of market analysis to determine if Airbnb rental arbitrage makes sense for your area and the specific property you’re looking for.

Note sure arbitrage is right for you? Learn about more ways to make money on Airbnb without owning property .

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Airbnb millionaire shares his rental arbitrage insights.

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Renting out a room or an apartment gives some extra financial security to most Airbnb hosts. This side hustle is precisely what initially drew entrepreneur Chi Ta to the platform. Today, Ta is one of the top earners on Airbnb, making millions of dollars in profit annually. Having automated his business, he has created The BNB University masterclass to show others how to achieve the same level of success.

Entrepreneur and Founder of The BNB University, Chi Ta.

Since 2008, Airbnb has grown to include several unique strategies for earning legally on the platform, aside from directly owning property and leasing in the short term. A relatively new strategy amongst entrepreneurs is the Airbnb rental arbitrage, which allows hosts to sublet rented spaces to Airbnb guests.

Ta started his Airbnb rental arbitrage business in a moment of desperation after losing his company. Just months before Ta had his own mortgage company called Senior Advantage Association but in 2017, the Department of Housing and Urban Development passed a new law changing the qualifications for reverse mortgages pulling the multi-million dollar business to its end. Broke and with fear of not being able to pay his rent next month, he listed his house on Airbnb. The rent on the apartment was $3900 per month, and if he would have been able to rent it at $5000, the monthly profit from Airbnb would cover the rent and leave him with a $1,100 balance, including minor maintenance fees. 

He quickly realized that the tactic had great earning potential, and the idea for an Airbnb arbitrage business was planted. Within nine months, Ta was earning six figures a month from 30 listings. Yet, unlike many other Airbnb hosts, he did not own any property. While his business is now a huge success, Ta says that his journey was not always straightforward.Getting started with re-renting on Airbnb requires a workable plan involving good credit on your part, connecting with a friendly landlord, furnishing the apartment, and listing it out on Airbnb with optimization for visibility. At the start, he pitched hundreds of landlords the idea of Airbnb and kept getting rejected. After refining his process, he realized most of the information he could find online comes from the viewpoint of people who only have one property. That’s when he started The BNB University and shared his knowledge with others on how to make Airbnb a viable business.

The Recipe To Success

Ta’s strategy starts with researching areas where people operate Airbnb and search for a property that can make profits of at least $2k per month after all expenses. He also shares how beginners can utilize software tools such as AirDNA to find the winning property.

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A major stonewall for most re-renting aspirants is figuring out the amount of money to safely invest when curating your search. “When I first started, it typically cost me between $20,000 to $25,000 to fix just one property which includes the first month's rent, security deposit, and incredibly sexy furniture. Don't go with all that Craigslist stuff like everybody is doing and have your listing looking like a garage sale. Go for tasteful furniture, pay attention to detail, and you’d have yourself an actual winning property.” Ta said.

He wants to share his experience so that when people take on the Airbnb journey, it will shorten their learning curve and help them avoid costly mistakes that he made. His course includes videos, templates, and tools that people can use to start their own Airbnb arbitrage business. His masterclasses cover a variety of areas including optimizing Airbnb listings to achieve higher rankings and improving the chances of getting five-star reviews. 

While Airbnb is constantly growing Ta found his knowledge continuously evolving through his students; “I get to go through the growing pains again with my students. I encounter different hurdles that I didn’t have in my market, and I get to solve those hurdles.” Ta explained how having the community to support you in the ever-growing process is one of the most critical factors.

What once started from a desperate move, became a profitable business on a large scale. Today Ta owns 30 properties internationally, generating at least $2.4 million annually and providing resources to entrepreneurs looking to tap into the market.

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Airbnb Arbitrage: A Complete Guide

Airbnb rental arbitrage can be extremely profitable. However, it can be a complicated process. This blog post will serve as your guide to deciding whether or not Airbnb rental arbitrage is right for you.

Host Tools provides an automated, unified calendar for short-term rental hosts, allowing you to seamlessly list on all major channels.  Start your free trial today!  

What is Rental Arbitrage?

“What is Airbnb arbitrage?” has over one million searches on Google – so you’re not alone in asking this question! In short, Airbnb rental arbitrage is when a host rents a property from a landlord (like renting a standard apartment) and then rents out that apartment as a short-term rental on Airbnb and other channels . 

What are the Benefits of Rental Arbitrage?

Hosting short-term rentals can be extremely  profitable ,  and Airbnb rental arbitrage is a great way to grow your business without the capital to invest in multiple properties.

You don’t need to own property:

One of the most appealing aspects of rental arbitrage is that it is possible for hosts who do not own property to make a hefty income. In the United States, it is becoming increasingly more difficult to own property. At the time of publishing, the average yearly income to own property begins at approximately $61,000. Currently, the average income in the United States is just under $50,000. Rental arbitrage gives an average person the ability to run a short-term rental business. Additionally – the extra income you make from rental arbitrage could help you save up to buy your own property. 

Let’s take a look at the formula for Airbnb rental arbitrage income:

Monthly rent - Average Monthly RevPAR (Revenue per available room) = Monthly Arbitrage Potential

Let’s say you have a one-bedroom property in Nashville, TN. The average market price is about $1,400/month. The average Airbnb rental price for an entire space in Nashville is $188/night (the price was about $209/night pre-pandemic). This means that you could cover your entire property rent in just 8 days of renting. After eight days, you are pocketing the profit for Airbnb upkeep, cleaning, and disposable income. If your Airbnb is rented out 80% of the time (average of 24 days/month), you will turn a profit of over $3,000.

The benefit of rental arbitrage over the property management model is that you only have to pay the landlord, and generally will keep 100% of the income. The property management model , where you manage properties for homeowners, would require shared profit and blackout dates if hosts decided to use the property for their personal enjoyment.  

What are the Downsides of Rental Arbitrage? 

As with anything, there are risks to choosing the rental arbitrage path. Those risks include:

Changing market conditions: 

The market conditions are always changing, and your property could be affected.   Before setting off on rental arbitrage it’s important to consider the stability of the housing market in your area. We’ll discuss the best and worst cities for Airbnb arbitrage in the next section of this post. 

Unexpected risks: natural disasters: 

Are you in a high-risk area for hurricanes? Earthquakes? Mudslides? While these aren’t fun things to consider when hosting, you need to consider the “what ifs''. Not only “what if my property is damaged?” but also “what if a natural disaster pauses tourism in my area?” Consider the risks of your area and what your backup income plan is.

Your name on the lease: 

Ultimately, you are responsible for the property. While Airbnb offers some protection for guest damages , it is your responsibility to fix any damage to the apartment and not your landlords. 

Unstable income:

Do you live in Chicago where tourists avoid the winter at all costs? Are summer festivals when your Milwaukee rental is booked back to back? When planning your likely income, keep in mind when and why your Airbnb is more or less likely to be booked. Some months may be fantastic and some may be crickets. A way to counteract the offseason is to provide discounts or special offers on weekly stays to entice guests to choose your short-term rental. 

What are the Best Cities for Airbnb Arbitrage?

Below are charts depicting the best and worst cities in the United States for Airbnb rental arbitrage based on how much profit you make and the law friendliness for Airbnb arbitrage.

How Do I Set Up Airbnb Arbitrage?

You have weighed the pros and cons and have decided Airbnb rental arbitrage is right for you. So where do you begin? Take a look at your local laws, talk to some landlords, and write up a rental arbitrage contract.

Airbnb arbitrage contract

Talking to your landlord:  First and foremost: tell your landlord. When hosts attempt to rent out their rental property as an Airbnb and their landlord is not aware it can end very badly. It can be nerve-racking to bring the conversation up to your landlord, but it is a step that should not be skipped.

If your landlord has any objections they are likely to be one (or all) of these three: local laws, unvetted guests, and insurance. 

Local laws: Before initiating any contract or conversation with your landlord, research what your city’s laws are in regards to rental arbitrage. This way you have all the answers going into the conversation with your landlord, and already know if your area is profitable for Airbnb rental arbitrage.

Unvetted guests: Your landlord likely has run a credit check on you, gotten references, or at least has an idea of what sort of tenant you are. The resistance to a rotating door of guests in their property is a natural hesitancy. A potential host can discuss Airbnb’s guest screening process (ID verification, guest reviews, etc.) with the concerned landlord. Additionally, you can consider collecting a security deposit from guests through Airbnb. Adding a line to your house rules is a great spot for this because guests must manually accept them before booking. 

If that doesn’t relieve your landlord’s hesitancy, you can suggest only allowing guests that fall under certain travel categories such as business travel. Be sure to provide guests with the Airbnb house rules and an Airbnb house manual upon booking so all parties are on the same page.

Insurance: If a guest damages an Airbnb and does not reimburse the host, AirCover guarantees that they will provide up to $3,000,000 in property damage protection. You can also offer to purchase short-term rental insurance , as the landlord’s basic homeowner insurance will not cover the property if rented as a business such as Airbnb.

Amending your lease:  After you and your landlord have come to an agreement on using the space as an Airbnb, it’s time to make it legal.

• You take the fall for any fines: Before setting off on this course you have already researched and ensured that Airbnb arbitrage is legal in your area. However, it will give your landlord peace of mind, and better your relationship, to add an amendment to your master lease that you, the host, will comply with all local laws and regulations.
• Liability insurance: As stated above, if your landlord doesn’t want to depend only on the Airbnb guarantee insurance, it is wise as the host to take out short-term rental insurance that will come out of your pocket. As mentioned above, requiring your own security deposit from guests upon booking can also serve this purpose.

Some landlords will understandably agree to the Airbnb arbitrage only if they are profiting from it. If that is the case, below are some examples of topics for an amendment to the lease you can choose to agree upon and include:  

• Profit-sharing: If your landlord is taking a cut of your profit, be sure to get that in writing. The more communication and clarity there is between you both, the better.
• Advanced notice of guests : To help ensure an open and honest relationship, landlords may request written notice of short-term rental guests to know when they should expect their share of the payment.
• Additional security deposit: Having new guests come in and out of the space will understandably cause more wear and tear on the unit than under normal circumstances. Some landlords may request a second security deposit for their protection. 

Set up your short term rental

You’ve talked to your landlord, signed a contract, and are ready to start your short-term rental. Before you start marketing your rental on Airbnb you need to make sure it's up and running smoothly.

• Fees : If you’re starting at a new property, expect to pay your security deposit upfront, first month’s rent, and any application or legal fees. 
• Appliances and furniture: You’ve rented the property – now you need to furnish it. Most rentals will have a refrigerator, oven, etc. Adding appliances like a coffee maker, fans, air-conditioner, microwave, etc. will make your property that much more enticing when you begin to list it. Remember, guests can filter by appliances during their search!

How to Scale Your Rental Arbitrage Business to Grow Your Business.

If you go this route, remember these important tips:

• List your property on Airbnb:  First things first: to start an Airbnb you’ll need to list it on the Airbnb website. New properties receive an extra promotional boost from the Airbnb algorithm. Be sure to use social media to help guests find your space by creating an Instagram for vacation rentals and/or promote the Airbnb listing on Facebook . When starting your first short-term rental, be sure to check out our Airbnb host checklist to ensure you have all of your bases covered.
• From the first contact with a guest, you can utilize Airbnb automated messages . You can automate your guest interface experience all the way down to check-in, changes in the reservation, booking requests, the vital Airbnb welcome letter , and more.
• Secondly, you will absolutely want to automate Airbnb cleaning . As your business grows, you are not going to have the time to personally clean the Airbnb after every guest – especially when you expand to multiple properties. You’ll hire Airbnb cleaners, automate their schedule, and purchase cleaning supplies in bulk. The more you automate, the less you have to be hands-on at your property, and the more time you can spend securing other units and increasing monthly income. 

If you choose to go down the path of Airbnb rental arbitrage, following this guide will ensure that you know how to become a superhost on Airbnb for both your guests – and your landlord! 

Airbnb rental arbitrage can appear complicated at first. Once you’ve studied the local laws, come to an agreement with your landlord, make amendments to your lease, set up the property, and automate your Airbnb you will be well on your way to creating the short-term rental business of your dreams!

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Airbnb Arbitrage – Beginner’s Guide For Rental Investors

January 25, 2024

Carmel Woodman

With over 8 years of expertise, Carmel brings a wealth of knowledge as the former Content Manager at a prominent online real estate platform. As a seasoned ghostwriter, she has crafted multiple in-depth Property Guides, exploring topics such as real estate acquisition and financing. Her portfolio boasts 200+ articles covering diverse real estate subjects, ranging from blockchain to market trends and investment strategies.

A brief outline

Purchasing a rental property to let out to tenants is not the only way to enter the rental real estate market. There is another solution which eliminates the need for owning property altogether. Sound too good to be true? We’ll outline the Aribnb arbitrage technique in our beginner’s guide below.

Airbnb has taken off in a big way over the last few years. By now, most people have used Airbnb or at least heard of it. The short-term rental platform is easy to use and offers renters a quick way to find the accommodation they’re looking for. As the platform continues to expand, it has also piqued the interest of real estate investors.

An interesting fact about Airbnb is that you don’t need to own a property before putting it on the platform to rent out. Those who are looking to invest in rental property can use Airbnb as a way to generate income can do so without purchasing a property first. This can be done using a process called Airbnb arbitrage. Here’s a beginner’s guide to this interesting technique.

What is Airbnb Arbitrage?

Also known as Airbnb Rental Arbitrage, this is a business model whereby people can sub-let properties that they are renting on short-term rental platforms such as Airbnb. Which means that people don’t need to own the property that they’re renting out.

Owning a home is becoming an impossible feat for many, as home prices have sky-rocketed over the last few years and general income isn’t matching this increase. So, the Airbnb arbitrage technique is a welcome reprieve for those looking to get into real estate but unable to purchase a property, or deal with the extra costs associated with home ownership.

Due to the simplicity of the Airbnb arbitrage method, and the fact that many people can use it without needing a large amount of capital, this technique has become popular, particularly among the Airbnb community. Here’s how it works…

A quick example

If you were renting a 2-bedroom apartment for $2,000 a month and you sub-let it on Airbnb as per the Airbnb arbitrage method. You could generate $150 per night in rent, which would mean that you could pay off your rent after 2 weeks of letting out the apartment. The rest of the month would then be profit.

If you rented the apartment out for 28 days of the month, you’d generate a total income of $4,200 for the month. If you used $2,000 to pay your rent, you’d be left with a $2,200 profit. Some of this could be used to maintain the property, and the rest could be saved or put towards something else.   

How do you start an Airbnb arbitrage business?

Any real estate investment will require some upfront work, and some costs will be involved too. Here are the first steps you’ll need to take, to get an Airbnb rental arbitrage business off the ground.

Step 1: Check the laws

Your first and most important step to running a successful Airbnb arbitrage business is to check the laws and regulations in the area where you’ll be operating. Some areas don’t allow for short-term or holiday rentals, in which case this would be illegal. Clearing up the legalities around the short-term rental method is vital to do at the outset.

Step 2: Clear it with your landlord

The next step is to come to an agreement with your landlord . You’ll need to outline what you plan to do, get their approval and amend or re-do your lease to reflect the new arrangement.

Step 3: Look into an LLC

If you plan on subletting more than one property, you may want to open a business entity. One of the best entities for this purpose is a Limited Liability Company (LLC). This will protect your personal assets and come with tax deductions.

Step 4: Research the real estate market

One of the key aspects to making an Airbnb arbitrage business successful is to do adequate research on the housing market in the area where you’ll be operating. Each real estate market differs, so it’s important to get to grips with the market in your area and figure out how to price your short-term rental and where these rentals are needed the most.

Step 5: Estimate your starting costs

While you may not need to purchase a house to get into real estate investing this way, there will still be some upfront costs to consider. These include, but are not limited to:

• Cleaning services
• Décor, furnishings and kitchenware
• Application fee for any permits or licenses you may need
• Utilities each month if the landlord isn’t paying these
• Repairs and maintenance to the property that fall on the tenant to do

Step 5: Repairs and upgrades

Lastly, you’ll need to make sure that you’ve done all the necessary repairs and upgrades or décor changes to the house, to make it short-term guest friendly. Whether this means painting the place, or changing the décor to a more neutral tone, this is a step that must be done with the specific type of guests in mind.

Step 6: Create the perfect listing

Now you’re ready to begin renting out the house, so you’ll want to find a short-term rental platform like Airbnb and list it on there at the right price. Airbnb listings are important as these can make or break your strategy. Make sure to use good photographs, list all the amenities and nearby attractions, as well as price the vacation rental right.

How to find Airbnb arbitrage properties

Method 1: Rental listing sites

One of the easiest ways to find a property to use for rental arbitrage is on a rental property listings website, such as Zillow . You’ll be able to find a property on these websites that has the features you require, thanks to the detailed property information available and the search filters. Once you’ve found a rental property, you can talk to the landlords about your plans and decide whether it’s a viable option before you sign the lease.

Method 2: Online search

You can search via Google or on social media for landlords who are specifically open to the idea of their tenant subletting the place as a short-term rental. This can take a little longer, however you’re then guaranteed to be talking to a landlord who is already on board with your plans from the outset.

Method 3: Network with real estate investors

Join your local real estate investors groups and meetings. Networking with real estate investors in your area allows you to connect with people who can help you find leads on a property to sublet.

Method 4: Ask real estate agents

Local real estate agents are typically a useful resource for real estate investors of all types. The key is to be honest about your plan from the start, so that they can recommend the right properties and landlords.

Pros and cons of Airbnb Rental Arbitrage

• Great technique for new real estate investors

Those who are looking to begin their career in real estate but cannot afford to purchase a property can look at Airbnb Rental Arbitrage as a solution. It’s easy to start, and doesn’t cost a lot upfront, which makes it an attractive option for those who are new to real estate.

• Low upfront costs

No property purchase is required which means that the upfront costs associated with this strategy are low. The typical upfront costs will include furniture items, décor, repairs, utilities and so on.

• Easily scalable

Successful real estate investors need to be able to scale their business at some point. Airbnb rental arbitrage allows people to scale easily, by adding multiple rental properties into their portfolio and renting these out on Airbnb or another short-term rental platform.

The risk factor with this technique is a lot lower as you don’t own the property yourself. When something big needs to be replaced or repaired, this will be the homeowners’ responsibility to fix. If the property doesn’t generate enough income, you can simply end the lease and walk away from the arrangement.

The Airbnb arbitrage technique requires less admin than a regular rental property because the property isn’t owned. This means that the owner will need to take care of a lot of the paperwork and all you’d need to focus on is paying the rent each month.

• Mandatory rent payments

You will be liable for the monthly rent payments, whether there are short-term guests in the property or not. This can be difficult in months where rental income is sparce, and it can be hard to plan for this as short-term renting is not very predictable. You’ll need to plan carefully and have funds on hand to pay the rent in months where there is less income generated.  

• Property damage is your responsibility

If any of the renters cause damage to the property, you may be liable for the repair costs because the lease is ultimately in your name. In some cases, the property’s insurance or the platform you are using may be able to assist with these costs, however this can still be expensive.

• Laws and regulations to abide by

You’ll need to familiarize yourself with the laws and regulations around short-term renting in your area. There can be local laws, HOA rules, neighbors to deal with and more. There are various parties to consider with this type of arrangement, so it can get tricky when you’re trying to keep everyone happy.

• Leasehold agreements may be required

The time and effort that go into creating leasehold agreements can be a drawback for some people. Legal services are typically required for these agreements, and they are necessary for Airbnb rental arbitrage to protect the landlord, tenant and short-term guests.

• Changing market conditions

As a real estate investor for short-term rentals, you’re at the mercy of the market. Conditions can change quickly, and with it the demand for short-term rentals can too. In which case, you may be affected and have to re-look your strategy.

Is the rental arbitrage model feasible, or is it just a fantasy?

The rental arbitrage investment strategy may sound too good to be true, but that’s not the case. The technique can work well in certain markets, however the right research should be done, along with thorough due diligence, to be successful. Local real estate markets differ greatly, so this strategy may not be successful in certain housing markets. Research is key to establishing whether a market has the right demand for this.

The legality of this method depends on the area. Each area has different regulations with regards to short-term rentals so it’s worthwhile checking what the local laws are before you take the next step. If your area allows you to participate in Airbnb rental arbitrage, then your next step is to clear it with your current landlord. This is an important step that should not be missed, or you could face eviction.

An Airbnb arbitrage property is one that is being rented by someone, who then sublets it on the Airbnb platform (or another vacation rental platform) as a short-term rental. The goal behind this is to make money from the short-term guests, to cover the rent and earn a profit.

Final thoughts

For those who are unable to purchase an investment property to fix and flip or rent out for the longer term, an Airbnb rental arbitrage business could be a good solution. However, the success of this strategy largely depends on the local real estate market. If the demand for short-term rental properties is high, then this bodes well for rental arbitrage, and if it doesn’t then you may struggle to make a profit from this.

It can be a great way to get into the real estate market, for those who wouldn’t have been able to afford it otherwise, and for investors who don’t have the time to self-manage a rental property , property managers can assist with the subletting.

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Last Updated on January 25, 2024

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How to Make Money With Airbnb Arbitrage

by Jasper Ribbers | Sep 20, 2019 | Blog | 0 comments

There are over a million searches on Google for the term “What is rental arbitrage”. 

With the coronavirus crisis hitting the short-term rental industry like a hurricane, people are quickly reworking their vacation rental business plans to be sure they're picking the right model.

You can take advantage of the short-term rental market without needing to own property. There are two ways to do this:

• Rental arbitrage
• Property management

Today, we’ll be talking about how to make money with Airbnb arbitrage.

In short, corporate rental arbitrage is the process of renting a residential property long-term and then re-renting it as a short-term or vacation rental on Airbnb or other short-term rental platforms.

Making money on short-term rentals isn’t exclusive to people who were born rich or who already have assets. That's why today I'm talking about one method to scale your Airbnb business without owning property.

This is one beautiful reason more and more people are able to list on Airbnb: rental arbitrage. And anybody can get in on it. 

Related Post:  iGMS Review: Manage Multiple Airbnb Accounts

What is rental arbitrage?

It’s simple math.

If you pay less in daily rent than what you’d make renting out your apartment on Airbnb (which is often the case), you have good business potential for rental arbitrage. For example: you currently pay $2,000 a month for your one-bedroom in San Diego. 

On Airbnb, prices for the same kind of apartment in the same area are around $170/day. You could pay your whole rent with just 11 days of doing this! If you move in with your girlfriend and rent out your apartment full-time, you could make a $3,000/month profit. 

This is rental arbitrage.

Benefits of Airbnb rental arbitrage

Fewer and fewer people are able to buy homes in today’s economy. Across the US, not only are the prices for purchasing a home increasing, but the median wages are not meeting the level necessary to be able to purchase homes.

The average salary needed to buy a home is $61,453.51 but the average US salary is $47,060. This excludes a lot of people not just from owning a home to live in, but also wannabe entrepreneurs from taking the traditional short-term rental route (who could eventually buy a home with their profits!). 

Graph from Airdna

Luckily, buying property isn’t the only way.

Now, even if you can’t afford to buy a home, you can rent a property from a landlord, list it on Airbnb and pocket the difference. 

Airbnb is reported to have over 150 million users and was last valued at $31 billion. That’s a lot of business potential.

It’s a win-win for everyone but hotel owners. People need somewhere to stay for a short period of time and hotels are too expensive. Plus, with traveling increasing for both business and leisure, people want somewhere to stay where they can feel at home.

Why not your rental apartment?

Profit potential

The profit potential for Airbnb arbitrage is high. 

If you do your research, pick the right properties, find motivated landlords and manage it well, you can expect to make about 1.5x — 3x the cost of your rental. So if you are renting a $2,000 apartment, making $5,000 (minus $1,000 in expenses), you can make $2,000/month just from one property.

At 10 properties, you could be making $20,000 a month, provided you find the right landlords in the right areas.

More autonomy

On top of the higher profit potential the benefit is that, unlike the property management business model , you won’t have to be dependent on your clients — the homeowners whose Airbnb businesses you’re managing. 

For instance, as a property manager, if you have 10 properties and suddenly 5 of your clients decide to go with someone else, you’ll be screwed. With that in mind, you have to keep your clients happy — one weekend they may suddenly decide they want to let their mom use the unit even though you’ve it rented out already. You can’t do anything about that.

With rental arbitrage , you’re completely independent. Just gotta pay rent to the landlord. And you take 100% of the cut.

Disadvantages of rental arbitrage

The business potential in Airbnb arbitrage is endless. But there are a few disadvantages to consider before you decide to take this route.

Legally operating your Airbnb arbitrage

The main issue is business acquisition: finding units where the landlord will allow you to rent it out on Airbnb and where you can do it legally. Maybe you have a place in LA that you can easily make $4,000 in profit from. 

Wondering how to continue your Airbnb arbitrage business through the crisis? We create a Coronavirus Survival Kit for Airbnb hosts

That doesn’t mean you’ll find a landlord that approves it or that you’ll be allowed to use the property that way.

Sure, you don’t have to buy a house, but there is still some investment involved.

Let’s say you find a perfect spot to run your Airbnb, costing you $3,000/month. Your landlord wants 2 months’ deposit and 2 months’ rent upfront. That’s a $12,000 investment.

On top of that investment, you may need to fix a few things up in the unit, buy some furniture, and throw on an extra layer of paint. You’re quickly looking at $10k-$15k of up-front investment per unit. 

If you want to do 10 units, it’s closer to $100k-150k investment. That makes it difficult to scale quickly.

Let’s say you have $15k saved, realistically you can get one or maybe two units going.

Now you need to wait until you’ve saved another $10,000 before you can start another unit. That’s another 6-12 months for the 3rd unit. If you want a 4th, add another 4-8 months’ wait.

This also not even calculating the cost of your property rental expenses .

It’ll be a while before you can hit $20,000 months.

The property management model has much less overhead. If you find 10 people who want to be hosts you can onboard those listings. I know some property managers who have onboarding processes that last 2 days (but property management has far smaller profit potential).

Rental arbitrage has more risk because you’re taking on the lease. That’s a contract in your name and it’s not a light one.

Imagine you take on a 3-year lease and one year later there are new regulations and Airbnb arbitrage isn’t legal anymore. And then you’re stuck with the property for another two years. 

That’s a big risk to consider.

Is Airbnb arbitrage legal?

Airbnb arbitrage is perfectly legal in many places. But not all. And sometimes only under specific circumstances.

You can check on the Airbnb website itself about the regulations, where you can also find contact information for the local authorities. You can also Google information about the regulations in the city of the property you’d like to rent.

There’s no shortcut or database of regulations. They’re all different; every jurisdiction has its own regulation. You have to do the work — either do the above or go to the city hall and ask directly what the regulations are.

Real estate arbitrage has been a long-term tactic used by many. The main point is to ask your landlord and make sure they’re on the same page as you. Some will be, some won’t. 

Ask before you rent and if they don’t like the idea, move on to the next property.

Rental arbitrage business plan

The first and hardest step is acquiring properties to rent out that:

• Are in a profitable location
• Have the landlord’s buy-in
• Are in a location where arbitrage is legal and regulations are in your favor

You can use tools like Mashvisor or Airdna to determine the best locations for properties and then you have to do the dirty work yourself to reach out to landlords and discuss what you plan to do with their rental.

*Read my detailed Mashvisor review

*Read my detailed Airdna review

Then you can start listing your property on Airbnb and other platforms, use software to automate the majority of the tasks , increase sales and optimize your Airbnb for better visibility .

Want to learn more? Check out my A-Z guide on growing your Airbnb business without owning any property .

Download a complete list of the best US cities for Airbnb arbitrage in 2020

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Airbtics Rental Arbitrage Calculator

• Post author By Robyn Peña
• Post date September 6, 2022

Last updated on June 22nd, 2023

Is it legal to Start an Airbnb Rental Arbitrage?

To cut the story short, starting a rental arbitrage business is certainly legal! As long as you adhere to your preferred area’s short-term rental laws and regulations and come to an agreement with the property owner, there should be no problems when it comes to starting a rental arbitrage. 

Can You Make Money with Rental Arbitrage?

If you are on a limited budget and currently cannot afford to purchase your own property, then rental arbitrage is the correct route for you! We’ve spoken to various Airbnb hosts doing rental arbitrage full-time and their mindset on profitability exceeds their expectations.

The short answer is: YES! Rental arbitrage is certainly profitable as long as you conduct market research, target the successful areas, and consider your overall startup cost. 

Using an accurate & free Airbnb calculator , you will be able to foresee potential monthly profit and consider the expenses associated with your property investment. By simply inputting your starting costs such as furnishing, deposit, legal documentation, and other expenses, you will instantly get a precise number to meet your expectations for long-term profitability.

How to Start A Rental Arbitrage Business?

To begin with, you have to find a profitable area to do Airbnb. This means that you have to carefully choose a location where you can receive a high number of bookings – profitability! Here is a step-by-step guide to start your rental arbitragd business:

1. Choose A Great Location

There are different ways for hosts to find a location. This includes connecting with local property managers in their area, participating in Airbnb host communities on social media platforms, asking questions in the real estate forum, and manually researching individual listings on Airbnb for various locations.

2. Find A Unique Gap in Your Market

Once you have decided what particular type of property and the number of bedrooms you’d like to invest in, you also have to research for the gap in the market where there’s a low supply and high demand!

3. Review Laws & Regulations

Make sure to apply for any required permits for rental arbitrage in your target location. For a more detailed location-specific list of legal and regulatory issues to consider before hosting on Airbnb, visit Airbnb’s official page .

4. Request Landlords to Allow Rental Arbitrage

It could be a real challenge to convince landlords to allow rental arbitrage. Property owners may not know much about the process of Airbnb rental arbitrage, which is why they need convincing! Preparing to speak with landlords and agreeing to cover minor maintenance issues is the best way to assure that they will agree to allow rental arbitrage.

5. Furnish Your Property

Finally, once you have your landlord’s approval to do rental arbitrage, the decorating begins here! Since this step is where most of your expenses will go, it’s also ideal to plan ahead of time in order to budget your overall costs.

Startup Costs & Profitability with Rental Arbitrage

To create expectations for your revenue in doing rental arbitrage, here is a basic calculation that you can compute for.

Based on Airbtics’ data, you can earn a monthly revenue of £2,128 for a 3-bedroom apartment in Leeds City Centre. The monthly profit can be calculated by subtracting the Airbnb monthly revenue, the rental price, and monthly expense (£2,128 – £1,230 – £425 = £472).

Source: Airbtics dashboard

By researching the average estimated startup cost (for furnishing) in your preferred area, you will also be able to compute the total startup cost.

For instance, if an average estimated startup cost is priced at £2,000, it is necessary to add the 2 months of average rent price (£2,460) to compute the total startup cost. 

Now that we have a total startup cost of £4,460, cash return time can be calculated by dividing this by the monthly profit (£472). Given the monthly revenue of £472, it will take approximately 9 months time to get back the startup cost! 

How much does it cost to start an Airbnb Arbitrage?

The costs may vary depending on your preferred area to start an Airbnb rental arbitrage business. For instance, the initial cost for Airbnb rental arbitrage in California ranges from $5,000 to $10,000. This cost includes the deposit, furnishing, amenities, legal paperwork, and LLC Incorporation.

Can you Make Money with Rental Arbitrage?

A simple way to calculate your Airbnb revenue is by multiplying the year-round occupancy rate and your average daily rate. If you charge $150/night and achieve a 70% occupancy rate, you will make around $150*0.70*365, which is $38,325 before expenses and taxes. 

Airbtics is a short-term rental data platform providing historical, current, and forecasted rental data. We believe that making data-based decisions should be easy and accessible for you. Whether you’re an Airbnb host, property manager, property investor, estate agent, or anything in between, access valuable data most relevant to you and your business. 

Learn how much profit you can make on your property NOW!

How to Convince Landlords to Allow Rental Arbitrage?

By following the best rental arbitrage email template , you can certainly boost your charm and convince them to allow rental arbitrage in their property. The majority of landlords are hesitant to allow renters because they worry about late payments & destruction of their property, so make sure to show them your reviews and gain their trust!

How to Find Properties for Rental Arbitrage?

You can find properties for rental arbitrage on property websites such as Apartments.com or Zillow , contact local realtors, and connect with real estate agents on social media! 

If you want to discover emerging & profitable areas to start your rental arbitrage business, using a short-term rental analytics tool like Airbtics will be beneficial for you. Here are the important key points to remember:

• Find a location that produces the highest profit & STR demand. 
• Look for a market that has at least above 50% occupancy rate annually. 
• Discover how many Airbnb listings your preferred market has, the international traveller ratio, historical trends, and so much more!

• Tags Airbnb Rental Arbitrage

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Brian Page is an entrepreneur, online educator, and passive income pioneer who is best known as the creator of the BNB Formula, the world’s #1 bestselling Airbnb™ coaching program with over 25,000 students in 47 countries.

How to Rent Out Airbnb Without Owning Property

• Everyone Needs This Airbnb Arbitrage Guide
• How to Quickly Raise Money for Your Airbnb Business

The allure of Airbnb arbitrage is undeniable. The potential for significant profits and passive income can be incredibly enticing, but it’s essential to recognize that this business model comes with a unique set of risks and challenges, including the risks associated with Airbnb arbitrage. If you’re considering diving into the world of Airbnb rental arbitrage, it’s crucial to be prepared and well-informed about the hurdles you may face.

Table of Contents

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In this comprehensive guide , we’ll help you navigate the complexities of this lucrative yet challenging endeavor. We’ll explore the differences between Airbnb arbitrage and traditional rentals, discuss the legal risks and regulatory challenges, examine the financial risks and market volatility, and delve into the importance of reputation management and guest experience. By understanding these risks associated with Airbnb arbitrage and challenges, you’ll be better equipped to mitigate them and maximize your success in the world of Airbnb arbitrage .

Key Takeaways

• Understand and manage the unique risks associated with Airbnb arbitrage to maximize success.
• Mitigate financial risks through budgeting, tracking, and automation while staying informed of external factors impacting business.
• Diversify portfolio by investing in different locations & leveraging technology & automation tools for optimal property management processes.

Understanding Airbnb Arbitrage

Airbnb rental arbitrage is a vacation rental business model, specifically an Airbnb rental arbitrage business model, where you:

• Rent properties
• Sublet them on Airbnb as vacation rentals
• Generate profits from the difference between the rent you pay and the income you earn from short-term stays, making sure that the Airbnb rental arbitrage legal aspects are taken into consideration.

This real estate model, focusing on short term rental property, has gained popularity in the vacation rental market due to the potential for higher rental income compared to traditional long-term rentals.

However, it’s worth noting that this approach carries unique risks and challenges absent in traditional rental property investments. Some of the risks associated with Airbnb rental arbitrage include:

• Legal and regulatory challenges
• Financial risks
• Dependence on external factors like economic downturns and crises
• Competition and market saturation

As a property manager , understanding these factors and proactively mitigating your exposure to risk can enhance your chances of success.

How Airbnb Arbitrage Differs from Traditional Rentals

One of the main differences between Airbnb arbitrage and traditional rentals lies in the way properties are rented. In traditional rentals, property owners or landlords typically rent out their properties for long-term stays, often for several months or even years. On the other hand, short term rental arbitrage, such as Airbnb arbitrage, focuses on short-term stays, catering to travelers and vacationers who need accommodations for a few days or weeks.

Another key difference is that Airbnb arbitrage relies heavily on platforms like Airbnb for bookings. These platforms have become increasingly popular due to their user-friendly interfaces, extensive reach, and the potential for hosts to tap into a large pool of potential guests. This reliance on platforms can be both an advantage and a challenge, as it requires hosts to stay up-to-date with platform policies and changes, as well as to maintain a strong online presence to attract bookings.

Legal Risks and Regulatory Challenges

Venturing into the world of Airbnb arbitrage necessitates understanding the potential legal risks and regulatory challenges. Compliance with local laws, Homeowners Association (HOA) regulations, and lease agreements are some of the legal risks associated with this business model.

You should acquaint yourself with the laws and regulations in your area, as well as any HOA rules applicable to the properties under your consideration. Additionally, when negotiating lease agreements, it’s important to obtain the landlord’s permission and be aware of any local laws and regulations that may impact your ability to rent the property as a short-term rental.

Staying Compliant with Local Laws

Each city or municipality may have its own set of local laws and regulations governing short-term rentals. Conducting thorough research and obtaining all necessary permissions are vital steps to ensure compliance and prevent potential legal issues in your Airbnb arbitrage business. Failure to comply with local regulations can result in significant financial penalties or even legal action.

To determine if short-term rentals are allowed in your jurisdiction, review your city’s zoning code, planning code, or city ordinances. Generally, short-term rentals are classified as tenancies of 30 days or fewer. They are typically for shorter periods of time compared to longer-term agreements. By staying compliant with local laws, you can reduce the risk of legal issues and ensure a smooth operation for your short term rental business, particularly when engaging in Airbnb arbitrage.

Navigating Lease Agreements and Landlord Permissions

One of the most significant challenges in Airbnb arbitrage is negotiating lease agreements with landlords and obtaining their permission to sublet the property as a short-term rental. Breaching lease agreements can lead to potential fines and legal action, so it’s crucial to be transparent about your objectives and create a mutually beneficial arrangement.

When discussing rental arbitrage with potential landlords, emphasize the benefits they’ll receive, such as timely monthly rent payments and relief from property management responsibilities like cleaning and advertising the listing on Airbnb. By navigating lease agreements and landlord permissions properly, you can avoid potential legal issues and ensure a strong foundation for your Airbnb arbitrage business.

Financial Risks and Market Volatility

Airbnb arbitrage can be a lucrative business, but it also comes with financial risks and market volatility. Unpredictable income streams and managing expenses and cash flow are some of the challenges you may face in this business model.

It’s important to develop a robust financial plan and budget for your Airbnb arbitrage business to minimize the impact of these risks. This includes:

• Setting realistic expectations for income and expenses
• Monitoring cash flow
• Making adjustments as needed to ensure profitability and sustainability in the long term.

Unpredictable Income Streams

One of the financial risks associated with Airbnb arbitrage is the potential for unpredictable income streams. Unlike traditional rentals, where income is typically more stable, Airbnb arbitrage is subject to fluctuations in demand due to factors like seasonality and market conditions.

To mitigate the impact of unpredictable income streams, it’s important to monitor market trends and adjust your pricing strategy accordingly. Offering special deals and promotions during low-demand periods can help increase occupancy rates and maintain a steady income stream.

Additionally, diversifying your property portfolio can help spread the risk and minimize the impact of market fluctuations on your overall rental income.

Managing Expenses and Cash Flow

Effective management of expenses and cash flow is a cornerstone of maintaining profitability in your Airbnb arbitrage business. Some of the most common expenses associated with this business model include:

• Rent or lease payments
• Cleaning fees
• Maintenance and repairs
• Furnishing and decorating
• Marketing and advertising costs
• Property management fees
• Taxes and fees

Creating a detailed budget, tracking expenses, and making necessary adjustments are fundamental steps to effectively manage expenses and cash flow. Utilizing automation tools and technology can also help streamline property management and reduce costs.

By keeping a close eye on expenses and cash flow, you can ensure the long-term success and profitability of your Airbnb arbitrage business.

Dependence on External Factors

Airbnb arbitrage is not immune to the influence of external factors, such as economic downturns, crises, and market competition. These factors can have a significant impact on your business, making it essential to stay informed and prepared for potential challenges.

Understanding the external factors influencing your Airbnb arbitrage business equips you to make informed decisions and take steps to mitigate risks, thereby maximizing success. This may include adjusting your pricing strategy, diversifying your property portfolio, or implementing new marketing tactics in response to changing market conditions.

Impact of Economic Downturns and Crises

Economic downturns and crises can have a detrimental effect on Airbnb arbitrage businesses, as they often lead to decreased demand for short-term rentals, lower rental rates, and increased competition. These factors can result in reduced profitability and increased financial instability for your business.

To minimize the impact of economic downturns and crises on your Airbnb arbitrage business, it’s important to:

• Monitor market trends
• Adjust your strategies accordingly
• Offer discounts or promotions during economic downturns
• Focus on attracting long-term renters
• Seek out alternative sources of income to supplement your rental income.

Competition and Market Saturation

Competition and market saturation can also pose challenges to Airbnb arbitrage businesses. As more hosts enter the market, it becomes increasingly important to:

• Differentiate your property
• Offer a unique and superior guest experience
• Stand out from the competition
• Attract bookings

To stay ahead of the competition and reduce the risks associated with market saturation, consider focusing on the following:

• Providing exceptional customer service
• Optimizing your property listings
• Utilizing technology and automation tools to streamline property management and improve the guest experience

By staying proactive and adapting to changing market conditions, you can increase your chances of success in the competitive world of Airbnb arbitrage.

Reputation Management and Guest Experience

A successful Airbnb arbitrage business relies heavily on maintaining a positive reputation and ensuring an exceptional guest experience. A good reputation not only helps to attract more guests but also fosters trust with potential customers, leading to repeat bookings and positive reviews.

To excel in reputation management and guest experience, communication is key. Be transparent about the rental process, promptly respond to inquiries, and provide a secure and comfortable environment for your guests. By prioritizing guest satisfaction, you can cultivate a positive reputation for your Airbnb arbitrage business and set yourself up for success.

Dealing with Negative Reviews and Complaints

If not handled appropriately, negative reviews and complaints can harm your business. Common triggers for negative reviews include:

• inadequate cleanliness
• inaccurate property descriptions
• communication issues
• safety concerns

Addressing these issues promptly and professionally is essential to maintain a positive reputation and attract more guests.

When dealing with negative reviews and complaints, it’s important to apologize for any inconvenience caused, offer a solution, and, if necessary, provide a refund or other compensation. By addressing negative feedback in a timely and respectful manner, you can demonstrate your commitment to guest satisfaction and maintain a positive reputation for your Airbnb arbitrage business.

Ensuring Guest Safety and Satisfaction

Emphasizing guest safety and satisfaction is a key driver of success for your Airbnb arbitrage business. This includes ensuring that your property meets safety standards, such as installing smoke detectors, carbon monoxide detectors, and fire extinguishers, and providing guests with emergency contact information and a first aid kit.

In addition to safety measures, focus on providing a comfortable and enjoyable experience for your guests. Offer amenities that enhance their stay, supply helpful information about the local area, and be responsive to any questions or concerns they may have.

By prioritizing guest safety and satisfaction, you can ensure repeat bookings and positive reviews, further solidifying the success of your Airbnb arbitrage business.

Mitigating Risks and Maximizing Success in Airbnb Arbitrage

Risk mitigation and success maximization in your Airbnb arbitrage business can be achieved by diversifying your property portfolio and leveraging technology and automation tools. Diversification can help spread risk and increase the chances of success, while technology and automation tools can streamline property management, optimize listings, and improve the guest experience.

By implementing these strategies, you can reduce your exposure to potential risks and increase the likelihood of success in your Airbnb arbitrage business. Here are some key steps to take:

• Stay informed about market trends.
• Monitor your expenses and cash flow.
• Continually adapt your strategies to stay ahead of the competition and navigate the ever-changing landscape of Airbnb arbitrage.

Diversifying Your Portfolio

Diversifying your property portfolio can help minimize the impact of market fluctuations and increase the chances of success in your Airbnb arbitrage business. By investing in properties across different locations and targeting various guest segments, you can spread your risk and create multiple revenue sources.

Listing your properties on multiple vacation rental platforms can also help increase your reach and occupancy rates. By achieving a broad distribution, you can maintain a steady income stream, and once you consistently reach a high booking rate, you can consider raising your nightly rates.

Utilizing Technology and Automation Tools

Technology and automation tools can play a significant role in streamlining property management, optimizing listings, and improving the guest experience in your Airbnb arbitrage business. Vacation rental software can automate guest communication, calendar synchronization, and cleaning coordination, helping you save time and effort.

In addition to automation tools, consider creating a Direct Booking Site (DBS) to manage your bookings and avoid paying commissions to listing sites. While it’s important to list your properties on major vacation rental platforms, a DBS can provide an additional avenue for attracting guests and generating revenue.

In conclusion, Airbnb arbitrage can be a highly profitable business venture, but it’s essential to be prepared and well-informed about the risks and challenges involved. By understanding the differences between Airbnb arbitrage and traditional rentals, navigating legal risks and regulatory challenges, managing financial risks and market volatility, prioritizing reputation management and guest experience, and implementing strategies to mitigate risks and maximize success, you can set yourself up for a thriving Airbnb arbitrage business.

Remember, the key to success in Airbnb arbitrage lies in staying proactive, adapting to changing market conditions, and continuously improving your strategies and guest experience. With the right approach, you can turn your Airbnb arbitrage business into a rewarding and profitable endeavor.

Frequently Asked Questions

Is airbnb arbitrage safe.

Airbnb arbitrage can be safe when you do your research and follow local regulations. The startup costs are minimal, with no long-term debt obligations, making it a viable investment strategy.

What are the downsides of rental arbitrage?

Rental arbitrage involves higher risk, as you don’t own the property and have limited control over it, potentially leading to financial losses. However, it can also be a great way to make money if done correctly. You need to be aware of the risks and do your research before investing in rental arbitrage.

Is Airbnb arbitrage still profitable?

Airbnb arbitrage can be highly profitable if done correctly. With an average nightly rent of $150 and expenses taken into account, one could generate thousands of dollars in monthly profit.

What are the main differences between Airbnb arbitrage and traditional rentals?

Airbnb arbitrage involves short-term stays with bookings through online platforms, while traditional rentals involve long-term agreements between landlords and tenants.

What are some legal risks and regulatory challenges faced by Airbnb arbitrage businesses?

Legal risks for Airbnb arbitrage businesses include compliance with local laws, HOA regulations, and lease agreements, while regulatory challenges involve securing landlord permissions and adhering to local rental regulations.

Related Posts

• Short Term to Mid Term Rental
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• Best Airbnb Book
• Guide to Setting up Your Airbnb Price
• The Ultimate Guide to Finding High-Demand Airbnb Properties
• Expanding Airbnb Arbitrage: A Comprehensive Guide to Making More Money
• The Best Tools for Airbnb Arbitrage
• Mistakes to Avoid in Airbnb Arbitrage: A Comprehensive 2024 Guide

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