The Airbnb arbitrage pros and cons are:
Pros
A less expensive (and less risky) way of entering the real estate industry
Additional cash flow
Control of who uses your property
Flexible and easier to scale
Experts are available to help you
Cons
Growing competition
Limited property control
Considerable startup cost - and continuous expenses (even during low season)
The changing regulations
Inconsistent income
A Forbes feature describes Airbnb as “an economic revolution” that’s “quietly turning millions of people into part-time entrepreneurs.” The arbitrage business model can be an effective way to see if this business model type is right for you. Of course, this is if you are willing to spend the required amount to start and are ready to face tough market competition.
Alternatively, lead generation is when you rent out your own websites to small business owners. Compared with managing real estate properties, digital real estate requires lesser work and is not as expensive. Instead of competing with hundreds of Airbnb hosts in your area, you're only competing with 20 or 30 local businesses for search engine ranking on specific keywords.
Most local businesses need organic leads to increase their customer base today, so reaching the first page of search engine results can be a huge advantage for them. As you use proper lead generation and SEO tactics, you can boost a business’ online presence and bring them quality leads. As a result, you can earn passive income each month.
5 Powerful Airbnb Arbitrage Advantages
1. A less expensive (and less risky) way of entering the real estate industry
Airbnb arbitrage is perfect for those who want to get their feet wet in the world of real estate. You won't have to invest in buying a property to rent out just to begin listing with Airbnb. In fact, you can start an Airbnb with $5,000 as your initial investment.
2. Additional cash flow
With Airbnb arbitrage, you can have an additional cash flow to diversify your income stream. Whether you’re a full-time employee or someone who runs your own business, rental arbitrage can help you earn extra money on the side. Others who succeed in the industry even find it’s possible to quit their 9-to-5 jobs and focus on doing Airbnb instead.
You can make $2,000 to $3,000 through Airbnb arbitrage each month. Earnings can vary depending on several important factors, such as your property’s location, size, and the number of bookings you get monthly. Furthermore, you can also improve your earnings as you implement effective marketing strategies and get more properties to list with Airbnb.
3. Control of who uses your property
The Airbnb platform allows hosts to screen all potential guests. For example, you can go to their Airbnb profile where you can see if the guest has a Verified ID badge. You can also read past guest reviews written by other Airbnb hosts. You can even check out their social media profiles online. That way, you can have greater peace of mind as you accept their booking. You’ll stress less over the possibilities of property damage and other similar concerns.
4. Flexible and easier to scale
As an arbitrage host, you enjoy the flexibility of choosing the location of your Airbnb properties. Whether you want to operate several units in your city or expand into other locations, scaling your business is always possible as long as you can find willing property owners.
5. Experts are available to help you
If you’re in the process of growing your arbitrage business, know that you don’t have to do every task yourself. Maintaining several properties can be time-consuming and demanding, so consider hiring skilled people to help you out. For example, you can hire property managers, virtual assistants, and an Airbnb cleaning service. That way, you can lighten your workload and focus on other important responsibilities.
5 Distinct Airbnb Arbitrage Disadvantages
1. Growing competition
The Airbnb business continues to grow each year with over 4 million hosts and 7 million active listings in over 100,000 cities across the world. Competition can be fierce, especially when you’re in a popular area. As such, you’ll have to market your Airbnb listings aggressively to gain attention from (and get booked by) your target customers. Ideally, you should invest time and money in using social media platforms by posting frequently, joining groups, and running your own advertisements.
2. Limited property control
Want to make changes or upgrades in the property based on customer requests? You’ll have to seek approval from your landlord first. While some owners immediately agree to improving their properties, others may object to the idea. So it’s always best to consult with them in advance. Remember that you are a tenant, so any changes or upgrades can only be done with your landlord’s consent.
3. Considerable startup cost - and continuous expenses (even during low season)
As mentioned, you will need at least $5,000 to start an Airbnb arbitrage business - which is still a considerable amount. This average estimate includes the initial rent, basic furniture, appliances, utilities, subscriptions, kitchenware, bathroom items, and consumables. That said, you'll have to pay rent every month, whether you get bookings or not. This can be a challenge during slow seasons when fewer tourists visit your location because of weather conditions or other reasons. This can defeat the purpose of offering the place for short term rental when you’re spending more than what you earn.
4. The changing regulations
Cities implement different policies on the vacation rental model. In fact, there are some locations where the business model is entirely prohibited. Case in point, a Business Insider report tells 26 locations across the US and Canada are currently “looking to rein in Airbnbs and short term rentals.” As an Airbnb host, it’s always important to stay up-to-date with the latest news to know about the latest changes. Also, check out city government websites to find out about the required licenses and permits for maintaining Airbnb units in your area.
5. Inconsistent income
While the Airbnb rental arbitrage business can be potentially profitable, earnings usually vary from one month to another. Compared with long term rentals where you can expect a fixed monthly amount, Airbnb income can be pretty unpredictable. At times, this may mean paying rent out of your own pocket (rather than from your separate business funds), especially if you didn’t get enough bookings for the month. This is specifically true for Airbnb hosts who are still starting out and don’t have any positive reviews to display yet.
How does Airbnb arbitrage work?
Airbnb arbitrage works when a tenant rents a property from a landlord, and then offers it for short term rental on the Airbnb marketplace. Also known as vacation rental arbitrage, the Airbnb arbitrage model is a popular way to start an Airbnb business without actually buying and owning property.
Let’s say you, as a tenant, manage to find an apartment or house that costs $1,500 per month. By offering the place for, say, $200 a night and getting at least 20 bookings a month, you get a total of $4,000. This means you earn a profit of $2,500 from the original rental amount.
To increase revenue potential, some Airbnb hosts secure more bookings, charge higher, and/or offer several properties on the platform.
Is Airbnb arbitrage legit?
Yes, Airbnb arbitrage is a legit business model and is approved by the Airbnb company. However, it is important that arbitrage hosts meet two important requirements: their city’s local laws and permission from your landlord.
Complying with local laws is a must for all property listings, whether owned or rented. So before adding a property on Airbnb, do your homework and find out about the applicable policies in your area. As mentioned, some areas have strict regulations that limit - or entirely prohibit - the Airbnb rental market operations. In cities where the business model is allowed, learn about requirements (such as fees, licenses, and permits) so you can adhere to them. Doing so will help you avoid potential lawsuits or costly fines.
Of course, you also need to seek approval from the property owner before offering the space on Airbnb. The landlord needs to be aware of your business plans. You may even seek their assistance as you come up with house rules for the property.
What are some Airbnb arbitrage success stories?
Airbnb arbitrage success stories show us how people have earned a sizable salary from the business model. Some examples include Passive Airbnb course creator Sam Zuo, TikToker Sarah Glidewell, plus couple Nathan and Taniera Turner.
Sam Zuo
Sarah Glidewell
Sarah Glidewell, one half of the popular TikTok account The KarWellls, used to make $50,000 annually in her full-time job back. Eventually, she invested $20,000 to rent four properties to list on Airbnb. In less than three years, she managed to earn $100,000 through the platform. Today, their TikTok page has over 109,100 followers and 1.2 million likes.
Nathan and Taniera Turner
In March 2020, Nathan Turner and his wife Taniera were both laid off from work because of the pandemic. Thanks to a realtor, they later found a two-bed apartment worth $1,200 a month. According to Business Insider, the couple invested around $6,400 before listing their first rental property on Airbnb. Fast forward to the present, the Turners are now operating 25 Airbnb units across Houston, Des Moines, and Louisville. In addition, they also own an Airbnb cleaning service. Their goal is to reach 100 units and earn a revenue of $1 million per year.
Related Articles on Airbnb Arbitrage
Conclusion: Is lead generation an easier business model than Airbnb arbitrage?
Yes, lead generation is an easier business model than Airbnb arbitrage. While renting out properties on Airbnb can lead to significant income, working as a lead generation expert also has its rewards. It’s fairly less complicated and less risky to run than an Airbnb. Competition is also not as stiff, plus the required upfront expenses is significantly smaller compared with Airbnb startup cost.
As you build a business website from scratch, target the right keywords, and rank it on search engines, you’ll be able to expect consistent income from interested clients who need organic leads for their companies.
With lead generation, you are handling digital real estate and are dealing directly with your customers. There’s no need to deal with landlords or strict short term rental regulations. You get paid handsomely as long as you can deliver organic traffic to your target clients. Case in point, I make $52,000 a month by providing my lead gen services to small business owners.
