The real estate scene has changed a lot over the past couple years and Airbnb has quickly become one of the go-to options for people interested in earning money with property rentals. But not everyone can afford property. So here is where Airbnb arbitrage comes in, a creative way to make money in real estate without owning any property. In this post, we’ll explore everything you need to know about Airbnb arbitrage, including what it is, how it works and next steps if you want to give it a go!
What is Airbnb Arbitrage?
Airbnb arbitrage is an investment strategy where you rent a property on a long-term lease, furnish it and sublease it on Airbnb or something similar to make a profit renting the space. In essence, you are profiting from the price discrepancy between long-term rental rates and short-term holiday rental fees.
The secret to Airbnb arbitrage is that the amount your property will earn as a short-term rental must exceed the cost of the long-term lease. If you do it properly, Airbnb arbitrage is a very lucrative business model that can enable you to cash out without owning property.
How Does Airbnb Arbitrage Work?
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Finding the Right Property
The first step in Airbnb arbitrage is identifying a property that works for the business model. Search for properties in neighborhoods where short-term rentals are in high demand. Homes close to tourist sites, business centers, or vacation spots typically thrive on Airbnb. And the rent needs to be low enough that you can rent it out on Airbnb and still make a profit.
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Securing the Lease
After you locate an appropriate property you will need to sign a lease with the landlord. But it’s important to negotiate the terms, and get permission to sublease the property on Airbnb. Not all landlords are ready to rent short-term, so be prepared to explain how you will treat the property and protect it from damage.
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Furnishing and Preparing the Property
Once you have the lease secured, you will then need to decorate the property and make it attractive to potential Airbnb guests. Decorating with modern, comfortable furnishings and including basics extras like a cable television and WiFi can boost the appeal of your listing tenfold. The better the property looks, the more likely you are to land high-paying guests.
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Listing the Property on Airbnb
Once the property is in working order, you can put it on Airbnb. Make a well-designed listing with good photos, a complete description and competitive pricing. It should emphasize the property’s unique attributes and special features that distinguish it from other rental properties in the vicinity.
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Managing Bookings and Guests
Running the place means managing bookings, communicating with guests, checking them in and out. You must make sure your guests have a great experience as great reviews are vital to the success of being on Airbnb. And if the management of the property is overwhelming, you can always hire a property manager to take care of the day-to-day.
Benefits of Airbnb Arbitrage
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No Need for Property Ownership
Perhaps 1 of the chief benefits of this delicate business of Airbnb arbitrage is, without a doubt, you don’t have to own the building. This allows you to get into the real estate game with relatively little up-front investment.
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High Profit Potential
Airbnb arbitrage, when done right, can be very lucrative. With your lease payment much less than what it costs to rent the property, at premium prices for short term rentals you can make a serious profit obtaining great and consistent cash flow.
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Flexibility
Airbnb arbitrage allows you to be location and property type flexible. Houses can be rented in other cities or burbs according to demand and profitability. What’s more, you can try different kinds of properties (apartments, a holiday home, etc.) to increase your income.
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Scalability
Once you’ve built up some experience and capital, you can scale your Airbnb arbitrage business by adding more properties to your portfolio. With good enough systems and processes, you can expand your business so much.
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Landlord Approval
Not all best lords are amenable to the idea of short-term rentals, and even when they are, there are often challenges in getting their approval to sublease the property on Airbnb. Be sure to have a written contract detailing your intended use of the property and how you’ll treat stays by your friends.
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Initial Investment
Since there is no need to buy the property outright, other than the cost for decor, furnishings, or any improvements you have to make on the property, there are limited fixed costs as well. Here, with a financial cushion, you have to make sure you can afford the investment in the first place, and that your rentals will bring in more money than they cost.
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Regulations and Laws
Airbnb and other short-term rental services fall under local laws that can change from city to city. Some places may also have strict rules around short-term rentals, such as zoning laws, licensing regulations or limitations on the number of days you can rent a place. Right before you starting your Airbnb arbitrage journey, you will need to search the rules and regulations for operating in your locality.
Top Airbnb Arbitrage Platforms
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Airbnb
The leading short-term rental platforms Airbnb is the number one choice for Airbnb arbitrage. Listing your property with Airbnb, the broadest pool of potential guests for any platform with a trusted track record.
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Vrbo
Another popular vacation rental website is Vrbo (Vacation Rentals by Owner). It can be a fantastic substitute for (or supplemental to) Airbnb, particularly, if you’re catering to families or big groups.
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Booking.com
While traditionally known for hotel bookings, Booking.com also allows short-term rental listings. It’s a great platform to expand your reach and attract international guests.
Conclusion: Is Airbnb Arbitrage Right for You?
Airbnb arbitrage offers the prospect of making money in real estate without the high cost of owning property. It can also be a very lucrative business model and a great way for you to make income on the side Hire A Building Company And Lease Out The Unfinished PropertyIf you have the capital to invest, toward the construction of your property, this is another big money making opportunity. With the right strategy and management, you too can set up a successful Airbnb arbitrage business and generate a constant flow of passive income.
