Do you want to enter the real estate sector without owning a property?
Airbnb rental arbitrage is one way to pursue your goal. The idea is simple: you lease a property for a longer period and then rent/sublet it to others for short-term stays.
Profit? The profit comes from the difference between what you pay in rent (along with your running expenses) and what you earn from guests.
However, to make it work, you need a clear plan. You must know you can do Airbnb arbitrage successfully. For your information, here is how you can do so:
1. Select the Right Location
The first thing you have to do is to decide where you should leave a property.
Not every city or neighborhood is good for Airbnb rental arbitrage.
Therefore, it is important to select a few locations that have a strong demand for short-term stays. A few factors that can ease this for you are the number of tourists that visit the palace, events, and business-related movements in the area.
So, start by researching the demand in different locations.
Remember, make a list of all the cities and locations. Don’t stick to the one location yet—simply note down multiple locations at this point.
2. Ensure Legal Compliance
Short-term rental is different from long-term rental in terms of legality.
Short-term rental (STR) laws vary from city to city, so you must follow local regulations.
For example, New York City laws don’t allow tenants or owners to rent out a property for less than 30 days. This applies to all permanent residential buildings.
So, once you have created a list of top locations to start Airbnb arbitrage, the next step is to research whether it is legally allowed.
Check the local law for both the short-term rental as well as subletting from the city and state websites. Also, see if you need any permits and licenses.
Cross all the locations where STR isn’t allowed legally.
3. Analyze the Competition
Are you the first one to start an Airbnb arbitrage venture? Of course not.
Many hosts are already following this rental model and earning profit from it.
All you have to do here is to know how your competitors operate.
AirDNA is one platform that helps you evaluate your competition on Airbnb and Vrbo. You can check their occupancy rates, pricing, and how much they earn.
Once you find the top ones, look at their listings and assess what they offer. What makes them stand out? Is it great photos, unique experiences, or extra services?
The motto is to identify gaps you can fill and choose a property accordingly.
Guest reviews are also important. Note what they complain about, such as poor communication, lack of cleanliness, or missing amenities.
You have to collect and use this information later to select an appropriate property and improve your offering to get more bookings.
4. Find a Profitable Property
Once you have decided the location, checked the local laws, and found what kind of listings your competitors have, it is time to find a property.
Consider the following factors to go through this part of the process:
- Neighborhood
- Amenities
- Earning potential
Remember, the right property can make or break your Airbnb business.
Start with the location/neighborhood first. It should be located in a tourist-friendly area, near some popular attraction, and/or close to public transportation. Locations close to airports, train stations, and event venues attract frequent travelers.
Next, look at the amenities of the different properties on your list. You have to go for the one with features and utilities that appeal to short-term renters.
PRO TIP! Use the data you gathered when researching your competitors in the previous phase.
In the end, make sure it has low rent but high earning potential. And the property owner allows you to sublet the property to short-term renters.
5. Optimize Your Airbnb Listing
So, you have leased the property and made the necessary renovations and decor?
Hurrah! You’re almost done.
The next phase is to create an Airbnb account (skip this step if you already have one), list the property on the platforms, and start welcoming the guests.
Here, focus on standing out through listing. After all, it is the first thing guests notice.
If you already have rental properties, you can even hire DOSbnb (a co hosting platform) or another team you already know to do everything for you. Not only listing and optimization, but everything that comes in this guide.
If you want to do it yourself, capture high-quality photos and use them in your listing.
Write a detailed but simple description that highlights what makes your place stand out. Mention key amenities like Wi-Fi, free parking, self-check-in, or a fully stocked kitchen.
Is your property close to tourist attractions, shopping areas, or public transport? Highlight it.
Then, set a competitive rental price and make your listing live on the platform.
6. Prioritize Guest Experience
Positive reviews are key to standing out and attracting more bookings.
And where do you think positive reviews come from? Providing a great guest experience.
After listing the property, manage bookings smartly and communicate with guests. Always be responsive to guest inquiries and provide clear instructions before check-in.
Don’t forget to make their experience special. For example, welcome them with a welcome basket with snacks and drinks. Give them a guidebook with local recommendations.
This makes their stay more enjoyable and encourages them to leave a good review.
If your guests have a problem during their stay, address it quickly. Respond to them quickly and team up with them to find a solution.
Good customer service can turn a potential complaint into a 5-star review.
7. Market Your Property Beyond Airbnb
Airbnb isn’t the only OTA platform from which you can get short-term rental bookings.
You can also list your properties on other platforms, such as Vrbo, Booking.com, Expedia, Agoda, TripAdvisor, and the list goes on. Make sure you use them as well.
And using OTA platforms isn’t the only way to market your listing.
Promote your property on Instagram, Facebook, TikTok, and other marketing websites to reach more people. Post high-quality photos, guest reviews, and updates about your rental.
You can even partner with local businesses and tourism boards to attract guests.
For example, you can offer discounts to guests who visit a nearby restaurant or book activities with local tour guides.
You can also build a direct booking website using platforms. This allows guests to book directly, saving you from paying Airbnb fees.
Simply put, find some other ways to market your property beyond just Airbnb.
Conclusion
Airbnb arbitrage can be a profitable real estate business model if done correctly.
While there are many considerations to do it profitably, the keys lie in selecting the right location, finding a property with high earning potential, and managing STR efficiently.
Follow all the steps we discussed above carefully to create a successful Airbnb rental venture. Also, to minimize risks and maximize profits.
Start small, learn from experience, and scale your business over time.