Now, let’s talk about the details involved with each step and how you can actually begin making money with Airbnb arbitrage. You’ve seen a few examples and realize the profitable potential of subletting a rental property on Airbnb.
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That’s a 91% monthly return - not bad at all! How to Start Making Money with Airbnb Arbitrage So this investor nets $1,325 each month while only paying $695. Call his expenses $250 per month, which covers supplies, insurance, and Airbnb fees. He does the cleaning himself, and his supply cost is minimal. We rented it to him for $695 and he’s renting it an average of 21 days per month for $75 per night. So we sublet it to an investor who then turned it into a “The Office” themed rental. However, it made sense as an Airbnb rental. The home was three rooms in a row with no hall, no closets, and no storage. We couldn’t rent the home because it was a 700 sq ft standalone home.
In our case, we had a strange house that shouldn’t have even been a standard rental to begin with. We made an exception to our subletting rule and made him carry special insurance, among other things. When I was managing investment property, one of our tenants used the Airbnb arbitrage strategy. The landlord still gets paid on time according to the lease they have with the tenant, the property owner is protected from liability thanks to Airbnb’s host protection insurance, and the tenant makes a nice profit from the first month. This is a profit of $800/month for the tenant (who is now subletting the home to Airbnb guests). They get permission from the landlord and start collecting $2,000/month, renting it out on Airbnb. They owe the landlord $1,200 per month, but they realize they can make $500/week by subletting the house on Airbnb. Let’s say the tenant from this scenario had the idea to use the property for Airbnb arbitrage. Not bad, but not great, either.Īlesiakan/Shutterstock Example 2 (Airbnb Arbitrage)
In most cases, the investor’s cap rate is between 4% and 7%. They stand to make about $7,200 in rental income during the lease period, but their expenses aren’t counted in this amount. Not terrible, but compared to the significant investment they just made, it pales in comparison.ĭon’t forget – during the 6-month lease period, if anything goes wrong with the home – HVAC system, plumbing, even a fire – the responsibility falls squarely on the owner. It’s now 2 ½ months in, and the owner has made $1,200 in returns from their $180,000 rental property investment. They spend another two weeks interviewing renters, and when they’ve found the right person, they have them sign a 6-month lease. After the repairs are complete a month later, they start to look for a reliable tenant to move in. Example 1 (Traditional Investing)Ī rental property real estate investor spends $175,000 to buy a home (it takes about 30 days to close) and another $5,000 making needed repairs. Why does Airbnb arbitrage make sense (and money)? It’s simple: the returns are higher than the investment required. In your agreement, address the Airbnb host protection insurance (which includes protection against liability from third party claims, up to $1 million). Many landlord explicitly prohibit subletting, but some landlord will make exceptions on a case-by-case basis. There can be legal issues involved with subletting a property without permission from the landlord, so you have to make sure you have an agreement with your landlord in writing before you proceed. The result is rental income that (hopefully) tallies up to be much more than the cost to rent the place by the month.Īirbnb arbitrage is not for everyone, though. When we say “Airbnb arbitrage,” we are referring to the method of “re-renting” a property to Airbnb users for a profit.Įmpty apartments, houses, cabins, and condos are leased through a landlord, then sublet to Airbnb users on a night-by-night, weekly, or monthly basis. What Is Airbnb Arbitrage?Īrbitrage is selling something for a profit in a different market, whether it’s a shipment of fruit or a rental property. Read on to learn about Airbnb arbitrage, why it works, advantages over traditional property investing, and how you can use this method to make money in real estate without owning property.
If you can afford to lease or rent a place in a relatively high-trafficked area, you can turn your initial investment (the amount paid to rent it out for a month) into much more, without the expenses, repairs, and responsibilities that come with owning a rental property.
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