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.

Profits

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!