If you happen to have a spare room or property that you're not currently using, you can always
rent it out to guests by becoming an Airbnb host. This type of side hustle is exactly
what drew us to the platform in the first place. But that's not the only way to earn
a passive income with the service.
As Airbnb continues to expand what kinds of services and features that they offer, people
are starting to figure out how they can build a successful business of their own through
the platform.
The biggest misconception is that you have to own a property to start earning income
with Airbnb. While it's true that owning apartments, condos, and cabins certainly increases your
chances of making bank with Airbnb, another way to get around the risks of buying and
holding properties is through Airbnb rental arbitrage.
If you don't know what that is yet, don't fret. In this video, we'll break it down for
you and give you the rundown on how it works and what you can do right now to start making
money. But as with just about anything, there are a few risks to look out for as well. We'll
key you in on what they are and what you can do to protect yourself from potential dangers.
After covering the basics, we'll also take a minute to explore how you can maximize your
profits with Airbnb rental arbitrage. So let’s get started.
What Is Airbnb Rental Arbitrage?
Airbnb rental arbitrage involves renting properties, then subletting them out on the Airbnb platform.
As home prices continue to skyrocket, it's becoming increasingly difficult to own property.
But with this proven strategy, you can start earning income without having to take on all
of the stresses, risk factors, and challenges of owning property.
To really understand how this process works, consider this. If you were to rent a property
for, let's say, $1,500 a month, and you sublet that out on Airbnb at $150 per night, you
would be able to pay off your rent in as little as ten days.
That means after you've covered your overhead – which would be your monthly rent and maintenance
costs – then the remainder of the month's rental income is pure profit. Short-term arbitrage
allows you to grow your savings so that eventually, you could even buy your own property if you
wanted to.
Now, we're not trying to make it sound like rental arbitrage is a walk
in the park. There are many expenses to running short-term rentals that you might not have
thought about yet. Cleaning costs alone, especially if you hire a cleaning service to cover that
for you, can stack up quickly. Then you have to think about building maintenance, amenities,
utilities, taxes, and other fees.
Airbnb rental arbitrage is also not for every market, but we'll touch on that in a bit more
detail in just a moment. You also shouldn't think of it as purely passive income. While
much of the process can essentially be automated, you'll still have to put in a bit of work
to get started and diligently stay on top of things to maintain a high user rating on
the platform.
Is Airbnb Rental Arbitrage Even Legal?
The answer to that question is, generally speaking, yes. But to make sure that you are
doing everything legally, you'll have to look into the short-term rental regulations in
the area where you're thinking about doing business. A quick Google should be able to
answer this for you in your area. But be warned that the laws pertaining to short-term rentals
are rapidly changing in most major cities across the globe.
You'd be wise to first make sure that rental services like Airbnb are permitted in your
city and that there isn't a limitation on the number of nights you can sublet your property
out to guests annually. If vacation rentals are permitted in your region, you should also
look into whether your local government will require you to obtain a hospitality license
before renting out your space.
But really, before you do all of that, you should first make sure that your landlord
is okay with short-term and vacation rental arbitrage. Since you’ll be using their home,
you need to get them on-board with the idea. Convincing Your Landlord
Landlords will often have clauses written into their rental agreements forbidding subletting
or only allowing it on a limited case-by-case basis. If you don't heed this advice, you'd
be putting yourself in danger of getting evicted, which can be a costly and not to mention stressful
process – and beyond that, it could also negatively impact your credit score.
Furthemore, your landlord might raise some questions about things like noise complaints
and parties. A landlord is naturally going to be looking out for their best interests
first. They might also bring up the issue of insurance. Just who exactly is going to
cover any damages?
The best place to start is by explaining how your landlord will benefit from letting you
execute this business model. For example, you would now be vested in the upkeep and
cleanliness of the home because it would improve your business. It’s a win-win, because the
landlord knows you will go above and beyond to keep the house in good shape, and as a
result, you get permission to run the airbnb arbitrage model.
Once you know for certain that your landlord is okay with the strategy, the next thing
you want to do is ensure that you are protected and covered in the event that the property
sustains any damage, your guests get injured, or natural disaster strikes.
Fortunately, Airbnb offers Host Protection Insurance, or alternatively, you could look
into other insurance options and means of screening your guests. And whether your landlord
is concerned about safety, noise, damage or having trustworthy guests, there are tons
of tools that you can implement to strengthen your business and convince your landlord.
Autohost
With this tool, Airbnb will analyze guest's information once verified and flag problematic
guests. Your guests will also receive their check-in instructions automatically.
NoiseAware
Noise complaints are a big deal. Not only does a noisy guest run the risk of ticking
off others renting or living in a building, but law enforcement could potentially get
involved. With NoiseAware, hosts can use non-invasive decibel sensors that will make sure that your
guests don't get too loud. They also offer 24/7 call center support, where your guests
will receive a phone call from an authorized agent if things get a little too noisy.
InsuraGuest and Safely
These two companies use algorithms to calculate various risks and provide coverage beyond
what Airbnb offers. Yet again, you don't want to find yourself in a situation where something
goes wrong, and you're the one that has to cover the bill. You really want to be sure
that you have all of your bases covered before you start renting out someone else's property.
That should go without saying, but then again, it's an issue that a lot of people tend to
overlook.
Know Your Costs And Risks
If you've ever rented an apartment or house before, then you know that there are a ton
of hidden fees and costs other than just the monthly rate.
Just to keep things simple, here are the most common costs associated with renting a property
Application Fees Deposits
Utilities Insurance
Legal Fees Toiletries
Maintenance Furnishings
WI-FI Cleaning Services
Remember, your net profit all comes down to one simple equation: total income minus total
costs. A good rule of thumb is to overestimate your starting costs, as it's always best to
err on the side of caution when just getting started.
Don't just assume that your property is going to be rented out every day either. While you
might have the potential to earn thousands of dollars a month, if you lack bookings due
to seasonal cycles or something like travel restrictions, your earnings could drop pretty
quickly. It’s best to map out these potential risks and calculate what you’d need to stay
in the green when facing each issue. Tips To Maximize Profit
A little research can go a long way. Figuring out what the best cities to invest your time
and resources into is key to maximizing your profit. A property in a rural area, for example,
might not do quite as well as an urban rental unless it's positioned nearby some kind of
popular attraction or destination.
But on the other hand, rental properties in cities are going to be a lot more expensive
than those off the beaten path. You can always use services like Zillow and other real estate
analytic websites to help you gain a better idea of what your monthly rent might look
like.
Data aggregators such as KeyData Dashboard and Wheelhouse Pro can also be helpful for
tracking and forecasting short-term rental markets.
Another excellent tool to lean on is AirDNA, which is a leading provider of short-term
rental data that also offers a ton of useful tools to help you estimate the markets for
Airbnb arbitrage in your region. Optimizing Your Listing
You'll struggle to make any money through rental arbitrage if you don't work on improving
your Airbnb ranking. If you've ever rented a room for the evening through Airbnb, then
you've probably checked the host's star rating and reviews before booking. These days, that's
pretty much how anything works. That means you're going to have to go out of your way
a bit to increase traffic to your listing.
There's a few ways that you can go about this.
Ensure that every part of your listing is up to snuff. You'll want to have several aesthetically
pleasing photos of the rental property as well as a well-worded and enticing host profile
description. You might even want to consider hiring a professional photographer to catch
photos of the property in the best light. That might seem like an unnecessary expense,
but you'd be surprised how big of a difference it could make. If you need extra help optimizing
your listing, there are numerous guides on the web for mastering your listing and converting
viewers into guests. Automating Your AirBnB Business
At first, you'll have to diligently take care of your short-term rental operation on your
own, but in time, you can automate many aspects of the process.
Incorporating vacation rental software into your business can automate things like communicating
with your guests, synchronizing calendars, and coordinating cleanings.
A few other ways this kind of software can be useful is with automated check-ins and
check-outs, bookkeeping and even monitoring home appliances.
Conclusion
Earning a little extra money on the side or even a full-fledged income with Airbnb arbitrage
is getting increasingly popular as you don't have to own a property to become a host and
start renting.
By considering your overhead costs, conducting thorough market research, and obtaining all
the necessary permissions – be it from your landlord or local government – you will
be able to cover your rental costs and start earning profit as a full-time Airbnb rental
arbitrage host.
Then by automating your business, not only will you be saving yourself a lot of time
and energy, but you'll be able to start scaling the AirBnB arbitrage model and make some serious
passive income.
Drop us a comment below and let us know if you have any experience short-term renting
with Airbnb arbitrage or if you have tips or suggestions for a new renter just getting
started. And if you're looking for other ways to make a few bucks on the side, be sure to
check out this video right here about how we outsourced an entire YouTube channel to
make 6 figures every single month. Thanks for watching and we’ll see you next time!