Rental arbitrage has evolved into a VERY PROFITABLE industry for short-term rental (STR) investors.
It’s, without a doubt, well-liked by those looking for financial freedom through passive income.
The beauty of rental arbitrage is that investors can launch their businesses without owning any real estate. However, many potential owners of short-term rental properties are doubtful about the potential profitability of the Airbnb arbitrage business. But, just as in any other endeavor, business entails certain risks.
More significantly, first-time rental arbitrage hosts must understand the intricacies of rental arbitrage before concluding that it’s not lucrative.
So, is it really profitable to engage in short-term rentals arbitrage? What steps should you take to get started? Where do you even start looking for a rental property?
Rental Arbitrage is a course that teaches you about real estate investing.
If you’ve read my other articles on real estate investing, you’ll know there are 3 primary ways to invest:
Wholesaling, buy-and-hold, and flipping.
While each has pros and cons, there is a ton of potential for success in investing in real estate.
Real estate has created some of the largest fortunes in world history.
That being said, you should take some time to seriously think about something:
Is now the best time for YOU to get into real estate investing?
Because despite the potential upside, investing in properties or land takes a lot of capital, and is very labor intensive.
That means if you:
- Have less than 3 hours per day, OR
- Aren’t sitting on $20K+ in disposable income
This may not be the best time for you to start investing in physical real estate.
Don’t get me wrong, real estate investing can be an amazing way to protect your assets while generating cash – but there’s a time and a place for it.
But there’s good news!
All you need is a system to generate the cash (& free time) you need to be ready for real estate investing.
My preferred method of getting there is by becoming a Digital Landlord
It takes the benefits of real estate investing, but removes many of the barriers (& annoyances), like:
- Small cash flow on properties
- Having to take out debt
- Dealing with repairs and upkeep
- Dealing with tenants
The cool part is that the income is mostly recurring (AKA semi-passive).
You could make anywhere from $2,000-$10,000+ per month doing it.
You can build it as big (or small) as you feel like, without the annoyances I listed above.
If that sounds interesting, you might want to think about becoming a Digital Landlord.
Then, you can take the profits and start investing in physical real estate a year or two from now.
If you wanna see what Rental Arbitrage looks like on the inside, keep reading.
What To Expect From This Rental Arbitrage Review
This review will go over Rental Arbitrage to see if it really is the best short-term rental investing course out there.
You’ll learn whether short-term rental investing is the right online business for you.
And at the end, you’ll find answers to some of the most frequently asked questions regarding Rental Arbitrage and short-term rental investing in general.
But most importantly, you’ll see the exact system many others have used to build their own internet marketing business to over $40,000 a month in mostly passive income.
This system made them swear off short-term rental investing for good because it uses some of the same skills but in a much more powerful and profitable way!
What Is Rental Arbitrage?
The practice of renting out long-term residences and then re-renting them to others temporarily via short-term rental websites like Airbnb or HomeAway is known as rental arbitrage.
Contrary to popular belief, vacation rental platforms like HomeAway and Airbnb are legitimate businesses as long as you go by local regulatory requirements.
Essentially, rental arbitrage is a means for individuals to generate passive income via real estate and to run an STR business without actually owning property.
Doing Rental Arbitrage Business Vs. Doing Rental Property Ownership
Investors in STR properties can either start their own rental arbitrage firm or buy their own property.
Both approaches have advantages and risks, but those looking for good cash flow seem to like rental arbitrage more.
Here’s a deeper look at the distinctions between owning property and engaging in rental arbitrage for an STR business:
- It’s not necessary to possess property.
- It provides a consistent source of passive income.
- Allows for serial renting (renting multiple properties).
- There are no property taxes.
- There is no need to insure appliances (this is the landlord’s obligation).
- Allows for small incremental growth and monthly reinvestment of earnings.
- Allows for the possibility of terminating the lease early – lesser commitment involved.
- A 20% down payment is required on the property (non-FHA loan)
- You must pay property taxes, HOA fees, and utilities.
- It takes a year or more to recoup the first investment and purchase a second home.
- Requires a significant financial commitment to a mortgage (if the place is in an unfavorable location for Airbnb arbitrage, you’re left with the mortgage and either convert it to long-term rental property investment or sell the home).
- Appreciation of property value.
How Much Does It Cost To Start A Rental Arbitrage Business?
Minimum start-up costs for a short-term rental arbitrage business range from $5,000 to $10,000. Leasing costs, furnishings, decorations, bedding, kitchenware, entity incorporation, and listing images will all be included.
But one of the most appealing features of short-term rental arbitrage is that no actual property purchase is necessary.
This means you won’t need to save a large sum of money for a down payment and closing fees to start a rental arbitrage business.
It won’t be your responsibility to cover high building upkeep costs.
That being said, you do not need to be on a tight budget to do Airbnb arbitrage business. Even though it’s a lot cheaper than buying real estate, there are still some expenses at the beginning.
Airbnb Rental Arbitrage Business: How To Get Started Without Owning Property
While there are many phases to starting an Airbnb business, the following is a basic checklist of steps to help you:
Look For An Ideal Airbnb Arbitrage Location.
As a first-time Airbnb rental arbitrage business owner, the most practical and efficient option is to start looking for rental properties in your area.
If you live close to the property, you can use this option to fix guest or property issues faster.
However, it’s not advisable to restrict your business to the neighborhood where you presently reside since the possibilities are limitless for Airbnb income.
The STR market may be thriving in other cities distant from where you reside, so bear this in mind when selecting a place for the vacation rental business.
After exploring your present area, you may always extend your short-term rental business to other locations.
Keep In Mind The Main Objective Of the Rental Arbitrage Business!
Keep in mind that the main goal is to find a location where the profit margin and difference between the short-term rental price (bid) and the quantity of short-term rental income (ask) are the highest.
Let’s use a more real vacation rentals scenario to put this in perspective. If you live in London, UK, and want to start a rental arbitrage business, you should look for good places less than a three-hour drive from London.
The initial stage should be to locate areas with adequate short-term vacation rental demand and a large number of transactions. This step will guarantee that your business’s occupancy rates remain high. The Average Occupancy Rate is an essential statistic to examine since it’s a strong indication of overall supply and demand in the market. Use this information to calculate how many days your property may be booked out of the total number of days it’s available.
50+ Airbnb hosts have been interviewed to get a sense of how they selected a place for vacation rental, and it was discovered that they got their information from various sources.
Here Are Some Of The Many Techniques Used By Airbnb Arbitrage Hosts:
- Getting in touch with local property managers in their location
- Taking part in Airbnb host communities using social media
- Using the BiggerPockets real estate forum to ask questions.
- Manually scanning individual Airbnb listings for different areas
Whatever technique or a mix of strategies you select, remember that every business and host is unique. Despite their same location, one host may operate their business differently from another host in the same area, resulting in a higher profit.
It’s good to make a more systematic approach to starting your business by researching potential rental sites utilizing the software. To get more customized and accurate information, explore using the unique Tailored Area Explorer software to define your own region.
The benefit of this data is that the software tools adjust for regional price variations across various areas, so the data is more precise and genuinely represents the pricing patterns of the place.
Make better-educated choices by using accurate data customized to your particular business needs, eliminating the need to depend on the expertise of others.
The STR software solutions were designed so that you may utilize the expertise of others as a complement to your rental arbitrage business rather than as the main source.
Identify A Specialized Need In Your Market.
Every location offers opportunities. You only need to locate the unique market segment with low supply and high demand. Renting as opposed to buying a property gives you more options.
Here are a few things you should consider.
- Which niche do you wish to specialize in? (Handicap-accessible houses, business-traveler-friendly accommodations, anime-themed rooms, and so on.)
- What kind of property are you looking for? (For example, a studio, a 5-bedroom home, a 3-bedroom apartment, and so on.)
- How many bedrooms do you want to buy? What is the maximum number of persons you wish to accommodate?
- What sort of facilities do you want? (Hot tubs, pools, gyms, leisure rooms, and so forth.)
There are many things to consider before starting your rental arbitrage business. According to research, studio apartments have greater occupancy rates and higher average daily rates (ADR) compared to monthly, long-term rental costs. It’s also generally worthwhile to purchase a couple of additional mattresses to accommodate more guests.
But imagine for a second that you could run an even easier arbitrage business…
I’m talking about creating websites that you can RENT OUT to local small businesses who need extra leads.
Sound crazy and out there?
The truth is, this is how you REALLY earn passive income…and it’s so much less of a headache!
Ensure Compliance With Real Estate Legislation And Requirements.
STR business is subject to different laws and rules about Airbnb arbitrage, depending on where it’s located. Don’t forget to apply for any permits required for rental arbitrage in the location you’ve chosen.
For a more thorough list of legal and regulatory issues to take into account before hosting on Airbnb, visit the company website.
Establish Your Reputation To Solidify Your Position To Secure Property Owners.
Before you delve into creating your pitch to property owners, here are a few things to think about:
- Maintain a solid credit rating
- Save a sufficient amount of money (extra money to offer for rent)
- Have some references on hand.
- Agree to cover minor maintenance problems up to a certain amount.
- You must provide your own liability insurance (especially if taking direct bookings)
- All of these ideas will help you address some of the property owner’s worries or problems with your rental arbitrage agreement presentation/offer. Preparation is essential for the time you spend getting ready to pitch to property owners, so don’t miss this stage.
Provide Furnishings For The Property.
This is where most of your money should be spent since high-quality design and furnishings may appeal to a wide range of visitors.
Budget a few thousand dollars on the essentials, such as a couch, a high-quality mattress and bedframe, excellent pillows, cooking utensils, towels, and so on.
How To Make A Proposal To Property Owners
Property owners come in various types, including single-family, multi-family, and even entire apartment buildings.
Consider each property owner’s requirements thoroughly before making your proposal to them.
As a first-time STR company owner, try not to concentrate on YOUR needs.
The entire purpose of presenting to property owners is to concentrate on their current or future requirements and how your business can help them.
Who Enjoys Dealing With Tenants On A Daily Basis?
You may make the landlord’s life simpler if you propose to be the single point of contact and property manager for both the renters and the landlord.
Keep in mind that some homeowners may be sensitive to the fact that they obtained their property via years of hard work and saving money while bargaining for your Airbnb rental arbitrage business.
Their property is a large and valuable asset that may not be readily bargained for.
When addressing this subject, you must be sensitive and show respect for their property.
But hey, if you don’t like the idea of dealing with potentially harmful tenants either…you really should check out my #1 recommendation!
It takes away all those dreadful headaches!
When Marketing Your Rental Arbitrage Business To Homeowners, Consider The Following Important Compromises:
- Suggest that you repair anything that requires maintenance.
- Offer to do a background check on each renter.
- Negotiate a profit-sharing arrangement if possible.
- The monthly rent should be somewhat higher.
Is Rental Arbitrage Business Profitable?
Airbnb income is based on many factors, such as location, type of facilities, current market, past or projected trends, occupancy rates, and more.
First-time rental investors or Airbnb hosts may find it difficult to do independent research on these issues, especially when they have a big to-do list.
Can I Really Make Money With Rental Arbitrage?
Yes, you can!
There’s a lot that comes along with short-term rental investment that many people struggle with.
Now, don’t get the wrong idea…
It’s not impossible to make money with a short-term rental business, but if you’re gonna put in the amount of grueling work to do this business (which, trust me, isn’t easy), you might as well bring in some REAL money while you’re learning the ropes.
What Are The Best Cities For A Profitable Rental Arbitrage?
Rental arbitrage is a constantly changing business, especially as people’s travel plans and living situations change due to the ongoing pandemic.
Identifying only a few cities as the “best cities for rental arbitrage” is not a definitive answer to your search for the best location.
Some Airbnb hosts may have been successful with their properties in thriving tourist areas prior to the pandemic, but those cities may no longer be doing well.
When deciding on a rental location, location analysis should be one of your top priorities to increase profitability during such volatile times, especially as the pandemic continues to impact the rental market.
If your current rental arbitrage properties are not performing well, you can always terminate the leases and relocate your business to a different location.
This type of low commitment makes rental arbitrage appealing when deciding which cities are best for you.
What Are The Advantages Of Doing Market Research, And How Can You Utilize It?
Because data equals information, market research is very important for your rental arbitrage business and the ability to make a significant profit.
You may utilize data to diagnose issues, forecast future trends, make educated choices, and execute evidence-based strategies for your rental arbitrage business.
Understanding data is one of your most valuable tools for strategizing in your business, apart from having the drive to succeed in rental arbitrage.
Market Research Is Always Essential When Deciding How To Proceed With Your Business.
For example, if data indicates that, notwithstanding COVID-19’s economic effect, certain locations continue to receive a large number of reservations, it’s time to rethink your business strategy.
You can observe which cities are performing well or badly and pick where to relocate based on that. The allure of rental arbitrage is that you are not tied down to a mortgage but rather to a lease, which is a lot less commitment than a 15 or 30-year fixed mortgage loan.
The Debates And Criticisms Around Rental Arbitrage
People will naturally take advantage of arbitrage opportunities wherever there is a relatively low-risk profit, which is the definition of arbitrage.
If many people take advantage of arbitrage opportunities whenever there is one available, it will have some unintended consequences.
In the case of rental arbitrage, the result has been rising rents and a scarcity of affordable housing.
Following the bursting of the housing bubble in 2008, more people were forced into the rental market, exacerbating the situation. As fewer families owned their own homes, competition and monthly rent prices increased.
Rental arbitrage exacerbates the problem by shifting more units from the long-term lease market to the short-term rental market.
Rental arbitrage can be a very profitable side business. There will be some upfront costs, but it will be far less expensive than purchasing a property.
But before you start arbitrage with Airbnb, consider ethics.
While your decisions may be profitable, you may end up displacing or pushing up the prices for your neighbors, depending on the housing market in your neighborhood.
Is Airbnb Rental Arbitrage A Scam?
So, time for the $1,000,000 question – is Rental Arbitrage a scam?
No, not technically. You can 100% make money with this program, though it’s not nearly as simple as they make it seem.
As with most businesses, there is A LOT of work to be done upfront & no guarantee of you being successful.
Not to mention the profit margins are typically pretty small.
Don’t get me wrong, I’m a big proponent of front-loading work now, so that you can reap the rewards later.
But if I’m gonna do that, I want the rewards to be HIGH and virtually guaranteed.
I’d rather put in that same 3 months of work (in my spare time) & build a handful of Digital Rental Properties that each produce $500-$2,000 checks every single month afterward (AKA recurring income).
And the cool part is that you can do it in a lot less time than 3-months (I personally did it in my first 2 weeks of being a Digital Landlord).
Unlike physical real estate, you can do it from anywhere in the world, so it’s a genuine “laptop-lifestyle” business.
All you need is an internet connection.
Some of my friends are Digital Landlords that run their 6-figure businesses from:
- Camping trips at national parks
- Beachfront in Hawaii
- On the road in a camper van (with a pet pig!)
They focus on living an enjoyable life first, and focus on income second. All thanks to this program.
They can take weeks or months off, and money keeps rolling in.
Living happily is the top priority.
If the thought of living perpetually at your dream vacation spot interests you, being a Digital Landlord might be for you!
What Is My Top Recommendation For Making Money Online In 2022?
I’ve personally tried all of the major online business models:
- I’ve sold fidget spinners through Amazon FBA
- I’ve dropshipped a toilet bowl putting green on Shopify
- I’ve sold women’s health supplements via Clickbank affiliate marketing
And I made money with all of them, so trust me when I say: there is no “perfect” business model.
It’s worth noting that I FULLY endorse real estate investing as a way to grow wealth, and that’s why I invest my own money in commercial and residential real estate.
That being said, my #1 recommendation for making real money online as a beginner is, hands-down: being a Digital Landlord.
Whether you’re a complete newbie or you’ve been around the block before but have never had that “big win” to propel you forward, becoming a Digital Landlord is for you.
Time: If you’ve got a spare hour or two each day, you can do this. If you want to drop everything and go all-in, you can do this. More time obviously means faster results, but even putting in a few hours per day is enough to see real success.
And because of that flexibility, you don’t need to trade your time for money. Once the income starts, it’s recurring.
That means you can take a month off, travel the country, pursue a passion project, chill on the beach, or charter a boat across the world.
But you can only do that once you’ve created an income stream that doesn’t require YOU to be there all day, every day.
Real estate investing is a FULL-TIME JOB. If you stop finding deals, your money dries up.
Ownership & Control: Unless you’re buying your properties in cash, you don’t technically own the properties – the lender does.
If you miss a single payment, the property can be taken from you.
Why pour your soul into a business that could be taken away from you at the drop of a dime?
When you’re a Digital Landlord, you literally own all of the assets, which means you have ultimate control.
Ongoing costs: With real estate, profit margins are actually pretty slim. Real wealth is made in owning the assets, and owning A LOT of them.
Being a Digital Landlord, your profit margin is nearly 100%. Watch here to learn how.
Just a reminder: these Digital Rental Properties are worth (at a minimum) $500/mo in semi-passive income. And each time you create another one, your income increases, and the effort put into creating the next property decreases.
Best-case scenario, you have properties bringing in over $3,000+/mo on auto-pilot.
It’s Effectively Copy-Paste: Here’s my favorite part: once you have your first Digital Rental Property up, you can literally copy-paste another version of it and find another willing “renter” in a few days. DOUBLING your income doesn’t get much easier than that…
If you wanted to double your income with real estate investing, you would need twice as many properties, or double your profit margins on each property. And I can guarantee you, that’s a lot harder than a few clicks & a phone call.
Make Money Helping Real People: When you’re a Digital Landlord, you’re helping solve REAL problems that people are ASKING for help with:
Small local businesses around the world need one thing: customers. Without them, their business would fall apart. If you can provide those customers, they’re going to be really happy – and they’re going to pay you for it.
You’re helping a struggling mother or father put food on the table for their families, put their kids through college, or simply live life a little bit more comfortably.
Having this type of impact on the world is what will help you sleep soundly at night.
So, the rest is up to you. You could keep looking at other opportunities Rental Arbitrage, which might make you money.
You could keep researching and researching for the next few months (or few years), never making a concrete decision.
OR, you can look deep inside, think about those dreams, hopes, & desires, and make the decision to ACTUALLY make it happen, just like it has for thousands of other students before you.
Making a fortune while actually helping real people that need it.
If this sounds like you, click here to see how it all works.