In short, Airbnb Rental Arbitration means renting real estate to sublet it. It looks like a way to get easy money: renting an apartment for $1,500 a month and renting it out for $200 a day is profitable. But in this area, it is essential to consider critical legal aspects, additional costs, and much more. You will need to study a lot of information and weigh all the pros and cons.
So rent arbitration is a common business model with its own peculiarities. Let’s talk about it in more detail.
What Are the Benefits of Rental Arbitrage?
The arbitration model of short-term rental business management is complex, but Airbnb arbitrage has its advantages. Here are the main ones:
- Minimal investment. If you want to run a full-fledged vacation rental business, you would have to buy real estate and equip it for the needs of the rental business. Then this is not required.
- You will have fewer daily expenses. You must purchase consumables, pay for house cleaning after each guest, and make minor repairs. But the property owner pays for significant expenses (repair of the roof, maintenance of household appliances, and furniture).
- You can quickly scale your business. For example, it is possible to sublease several real estate objects using special software for management.
- Fewer worries about bureaucratic subtleties. The homeowner is responsible for paying the mortgage, maintenance, commissions, and taxes. You only need to pay a fixed monthly amount: no extra paperwork.
As you can see, there are plenty of advantages. But what about the difficulties and disadvantages? They also exist, as in any business. Let’s talk about it below.
What Are the Disadvantages of Rental Arbitrage?
While Airbnb subletting has many pros, it’s essential to be aware of some of the downsides to such a business.
Although sublease agreements provide many advantages, they also have several important disadvantages. It is important to note that every business model has its pros and cons, especially in the Airbnb industry.
Here are some disadvantages of rental arbitration:
- You will be required to pay rent regardless of whether you have found short-term clients this month. However, sometimes you pay not a fixed amount but a percentage of your profits.
- Property risks. If one of your guests damages furniture, appliances, or repairs, you will have to pay for damages. But such risks can be incurred by every Airbnb host.
- Legal nuances. You should notify the landlord that you will sublet the property and consider this when drawing up the contract. It may be difficult, but it will save you a lot of problems.
Also, in some regions, additional permits may be required: for example, the consent of neighbors or permission to conduct Airbnb business in a particular area.
Is Airbnb Rental Arbitrage Right For You?
If you are considering Airbnb arbitrage as a way to make money, then first of all, you should understand whether this type of business is right for you. Let’s look at how this strategy works compared to a classic rental business.
- If you own the property you rent out, it gives you more security and control. You don’t have to worry about being evicted for unpaid rent. You also decide what repairs to make, what furniture to buy, etc. There are other advantages:
- More bonuses from Airbnb platforms.
- You can pay off your mortgage faster with the profits from the rental business.
- Tax incentives for homeowners.
In addition, if renting Airbnb is just an additional income for you rather than the primary way of earning money, and you want to live here yourself in the future, then buying a rental property is the best option.
As for Arbitration, there are several business models here:
In this case, you give the landlord a portion of the income from short-term rentals. In this case, a fixed payment may or may not be present. In this case, your benefit lies in minimizing risks and investments, and the landlord receives additional income on top of what he would receive for a long-term lease. You carry out all management tasks for managing listings and preparing apartments for receiving guests.
You pay a commission to the landlord and jointly manage the Airbnb business. You become full partners and co-owners, and together you find the most successful solutions for your business.
In this case, you play the role of a manager who manages most of the routine online and offline tasks: answering messages, making reservations, purchasing supplies, communicating with third-party specialists, etc. And you get money for it (usually a percentage of income). There are even fewer risks here since you do not have to invest your own money in real estate or day-to-day expenses.
However, your income may be less than in the commission model.
Draw up your Airbnb arbitrage business strategy, discuss all the details with the property owner, and grow your business step by step.
Choosing Airbnb arbitrage as a source of income is a popular decision with advantages and disadvantages. Such a business does not require large investments and the purchase of real estate. Yes, there are specific difficulties and nuances in this area, but if you carefully study the legislation and the real estate market, you can succeed.
To make your business more optimized and successful, you can automate routine processes: special software allows you to automatically respond to typical guest messages, leave reviews, update prices, etc. It will save you time, improve your Airbnb Host Rank, and free up more development resources.
And then your business for renting short-term real estate will overgrow and bring a stable income.