Airbnb arbitrage is profitable in 2024 if you receive upfront approval from the landlord to sublease their property, choose a location with consistent rental volume throughout the year and accurately estimate earnings versus expenses. Most leasing agreements don’t permit subleasing. As such, it’s essential to obtain express consent from a landlord before listing their property on Airbnb to avoid potential lawsuits. Lawsuits can quickly turn a profitable venture into an unprofitable one. Fortunately, there are a few effective strategies you can use to avoid this.
A Reddit user suggests adding an addendum with the landlord and property manager. It should ensure the property is legally listed on Airbnb. They claim their strategy has four units in a luxury apartment. They generate $12K to $16K per month in profits..
Another Airbnb arbitrage pro with 4 listings says their success is due to a personal relationship with their property owners. Instead of pitching strangers on Airbnb arbitrage, they leverage their connections. These include former landlords and friends with rental properties.
Airbnb has gotten so popular that there are even Airbnb exclusive buildings where you can rent a unit and furnish it for Airbnb arbitrage. A Reddit user claims to make $1K a month in profit by using one of these Airbnb-exclusive apartment buildings for their business. They list many pros to using one of these buildings. The building handles most maintenance and amenities. However, it charges high rent and takes 25% of the nightly rate.
Sean Rakidzich is an Airbnb arbitrage expert who has performed this strategy on 150 rental units over the last 7 years. Many who try Airbnb arbitrage accept higher rent from the landlord to get permission. Sean claims he convinces landlords to give him free rent, boosting his profits. He claims to have negotiated about 3 months of free rent on his Airbnb arbitrage properties in Austin and Houston. He says he does this by finding the right landlords and coordinating contracts that benefit both sides. These contracts include longer leases and property upgrades.
The property location heavily affects Airbnb arbitrage profit. A good landlord is also needed. Choose a market that can attract year-round bookings. This will ensure a good occupancy rate for the unit.
Of course, an Airbnb arbitrage project's profit depends on your earnings vs. expenses estimates before starting it. A Reddit user, aspiring to do Airbnb arbitrage, got a reply. Another user suggested they had under-calculated their expenses. They had allocated just 20% to cleaning, management, and maintenance. The aspiring Redditor didn't even include taxes in their profit calculation.
Local lead generation is a business model. It has lower costs than Airbnb arbitrage. It lets you collect $500 to $3,000 in monthly rents. Local lead generation means creating cheap websites. They attract customers for local service businesses. Then, you can sell these leads to local service businesses. They want marketing support. Rent the website to them for a monthly fee. This article examines Airbnb arbitrage's profit potential. It looks at seven factors that cut profits, the startup costs, and expected earnings.
1. Poor Market Research
Poor market research refers to the lack of proper analysis of the local market, which can significantly reduce profits in Airbnb arbitrage. Without knowing the area's demand, rental rates, or preferences, you might choose a poor location or set bad prices. Tools like AirDNA or Mashvisor can provide valuable data to help avoid this mistake. Also, not studying the competition or ignoring seasonal trends can hurt your profits. It's crucial to know similar properties' rates and occupancy. This helps set competitive prices. Failing to do so can lead to missed opportunities or overpriced listings.
Airbtics explains the importance of doing detailed research before investing in a property. It means finding good locations, knowing what guests want, and choosing the right property size and type. You must also predict next year's profits. Investors, without research, might pick areas that are too competitive or not profitable enough. Airbtics stresses the value of tools like AirDNA and Airbtics Analytics. They provide data on occupancy rates, past revenue, and seasonal trends. These tools help investors avoid choosing bad locations and give them a better chance of success. If you skip this research, you might overpay for rent. You could also choose properties that won't attract guests. This can lower your profits in Airbnb arbitrage.
2. Neglecting Property Preparation
Neglecting property preparation means failing to properly maintain and equip the property, which can significantly reduce profits in Airbnb arbitrage. If the property is not clean, lacks basic amenities, or feels unwelcoming, guests are less likely to book or leave good reviews. Negative reviews can lower your listing's visibility on platforms like Airbnb. Apps like Properly can help you manage cleaning and maintenance to keep the property in top shape.
A well-prepared property should offer clean linens, working appliances, and essentials like toiletries. Quality furniture and a welcoming atmosphere are also key. If these elements are overlooked, it can cause unhappy guests, cancellations, and a decrease in profits.
A Reddit post stresses the need to prepare properties for Airbnb arbitrage. It is key to keeping profits. It suggests not relying too much on IKEA furniture because it can make the place look cheap. Instead, for things like sofas and chairs, consider buying used mid-century modern pieces. These can be affordable and stylish, even if not the most comfortable.
For functional items like desks and nightstands, IKEA works well because they’re simple and practical. For beds, the post recommends using cheap, minimalist frames (like IKEA or Zinus). But, it says to invest in a mid-grade mattress for comfort. Ignoring this balance can lead to negative reviews and lower profits.
3. Pricing Errors
Pricing errors refer to setting rates too high or too low, which can hurt profits in Airbnb arbitrage. If prices are too high, potential guests may choose cheaper options, leading to fewer bookings. On the other hand, if prices are too low, you may fill the property but miss out on maximizing your earnings. Tools like PriceLabs and Wheelhouse can optimize pricing. They do this by analyzing market trends and local competition.
It's important to adjust prices based on seasonality, local events, and demand fluctuations. Failing to do so can leave your property overpriced during slow periods or underpriced during peak demand. Proper pricing strategy is crucial to maintaining consistent occupancy and maximizing revenue.
James Svetec explains that pricing errors are one of the main reasons profits can drop in Airbnb arbitrage. Proper pricing means adjusting your rates based on supply and demand. For example, if a booking date is far in the future, you can price higher. However, if it's closer and hasn’t been booked yet, lower the price. Instead of using a flat nightly rate, you should regularly adjust prices based on factors like seasonality and demand. James suggests using pricing tools like PriceLabs and Wheelhouse. They can help manage these changes for better results.
To avoid pricing mistakes, Svetec says to monitor your occupancy rates. If your property is always fully booked, your prices might be too low. If it's not getting enough bookings, the price may be too high. When launching a new listing, he recommends lowering the price to get more bookings and reviews. It will help your listing rank higher on Airbnb.
4. Lack of Marketing Strategies
Not marketing your Airbnb listing can reduce bookings and profits. Simply listing your property on Airbnb is not enough to attract guests. Without proper marketing, your listing may not reach potential customers. Using social media, Google Ads, and email marketing can boost visibility and attract more guests. Also, tools like Canva can help you create visuals. Mailchimp can assist with email campaigns. Good marketing builds a strong online presence. It attracts more guests and keeps your property booked. Without them, you risk losing out on potential bookings and profits.
Fernando David shares key marketing strategies for your Airbnb arbitrage business. He recommends building a powerful brand and creating a website to secure direct bookings, so you don't rely only on platforms like Airbnb. Use Facebook and Instagram to market your properties. Share helpful content and encourage guests to tag you in their posts. This will boost your visibility. David also suggests using YouTube for virtual tours and local attraction videos. He also suggests partnering with influencers. Offer a free stay for a review or a social media post. Fernando David says these strategies can help you. They will make you stand out, attract guests, and boost your Airbnb arbitrage bookings.
5. Ignoring Customer Satisfaction
Ignoring customer satisfaction refers to not prioritizing the guest experience, which can directly reduce profits in Airbnb arbitrage. If guests are unhappy with the property, service, or communication, they are likely to leave negative reviews. This can lower your overall rating and hurt future bookings. Tools like Guesty or Airbnb's own messaging feature can help manage communication and address guest concerns quickly.
Providing excellent customer service, responding to guest needs, and maintaining a clean, comfortable property are key to keeping guests satisfied. Happy guests are more likely to leave positive reviews, leading to higher visibility on Airbnb and more bookings. Neglecting customer satisfaction can result in fewer bookings, lower ratings, and ultimately, a decrease in profits.
In a YouTube video, Kristen and Michael share tips on how to keep guests happy and avoid losing profits in the Airbnb business. They explain that property preparation is really important for getting good reviews. Keeping the place clean and comfortable is key. They talk about working closely with their cleaners to make sure everything is spotless, and how deep cleaning regularly helps prevent guest complaints.
Kristen and Michael also mention that quick responses to guest issues, like problems during check-in, can make a big difference. Even small things like dust under the bed or uncomfortable furniture can lead to bad reviews. By making sure the property is well-prepared and creating a welcoming space, Kristen and Michael have been able to keep their guests happy, get repeat bookings, and increase profits. They point out that neglecting these details can lead to unhappy guests and lower profits over time.
6. Poor Cost Management
Poor cost management refers to not properly tracking and controlling expenses, which can significantly reduce profits in Airbnb arbitrage. If you don’t keep a close eye on your costs—such as cleaning fees, maintenance, utilities, and furnishing—you could easily spend more than you earn. Tools like QuickBooks or FreshBooks can help track expenses and manage your budget effectively.
It's important to regularly review your spending and find ways to cut unnecessary costs. For example, negotiating better rates with cleaning services or using energy-efficient appliances can lower expenses. Failing to manage costs properly will reduce your profit margins and make your Airbnb business less sustainable.
In a YouTube video by The Real Estate Robinsons, they explain how poor cost management can hurt profits in the Airbnb arbitrage business. One of the main issues is that rent increases are unpredictable when you're renting a property. Unlike owning a property with a fixed mortgage, rental costs can go up each year, which makes it harder to control expenses.
They also shared a story about a friend whose landlord raised the rent after seeing how much money he made through Airbnb arbitrage. This forced him to leave the property because the rent hike would have cut into his profits too much. The Robinsons emphasize that not managing these rising costs can severely impact the success of your Airbnb arbitrage business.
7. Finding Sublet-Friendly Landlords
Finding sublet-friendly landlords refers to the challenge of locating property owners who allow subletting, a key factor that can decrease profits in Airbnb arbitrage. Many landlords have strict policies against subletting, and failing to find those who are open to the idea can limit your options for properties to rent and list on Airbnb. Using platforms like Zillow, Craigslist, or Realtor.com to search for properties, and communicating openly with landlords about your business model, can help.
If you don't find landlords who agree to subletting, you could face legal issues or be forced to terminate your lease early, which would lead to financial losses. It’s essential to build trust with landlords by explaining how Airbnb arbitrage works and ensuring them that their property will be well-maintained. Without sublet-friendly landlords, it’s difficult to grow your Airbnb business and maintain consistent profits.
According to ItsReallyRhonda, finding landlords for your Airbnb business is easier if you avoid the traditional apartment complex route. Many apartment complexes don’t allow short-term rentals because of the constant traffic. Instead, Rhonda suggests targeting individual landlords, especially those who are tired of managing their properties. A great tool for this is PropStream, which helps you find non-owner-occupied homes and landlords who may be more open to renting their properties for Airbnb.
Rhonda also recommends using TruePeopleSearch.com to find the landlord's phone number and reach out directly. When talking to them, explain how you’ll take better care of their property than a regular tenant since Airbnb properties are cleaned after each stay. By using these methods, you can find landlords willing to lease their homes for Airbnb and grow your business.
What Are The Pros And Cons Of Airbnb Arbitrage?
Pros of Airbnb arbitrage
High-profit potential: Airbnb arbitrage can generate high income, as short-term rentals offer higher rates than long-term leases. For example, a property leased at $2,000 per month can earn $100 per night on Airbnb, then you can earn $3,000 per month or more.
Easy to scale: Airbnb arbitrage allows for quick scaling of the rental business. It is by leasing multiple properties and subletting to different short-term rental platforms.
Minimal Upfront Investment: Airbnb arbitrage typically involves lower costs since there's no need to purchase properties. Unlike traditional real estate investment, you need a huge capital to buy the property.
Minimal property ownership responsibilities: You can avoid the usual obligations, such as maintenance and repairs. With Airbnb arbitrage, landlords typically take care of these responsibilities.
Diversify income streams: By doing Airbnb arbitrage, you can generate additional sources of revenue. It helps you to reduce the risks of relying solely on one income stream.
Cons of Airbnb arbitrage
Legal and regulatory challenges: Airbnb arbitrage can be subject to location-specific legal and regulatory restrictions. Some cities impose limitations on short-term rentals. It requires permits, licenses, and taxes that can affect your profitability and operations.
Operational complexities: If you want to scale, managing multiple short-term rentals is time-consuming and demanding. You may need to do some guest communication, property maintenance, and coordinating booking.
Unpredictable market: The short-term rental market can change rapidly because of seasonality, local events, and economic conditions. Also, economic downturns, changing travel trends, and unforeseen events like pandemics can affect your cash flow.
Tough competition: Airbnb arbitrage increased its popularity because of low capital to start. The increased competition can affect occupancy rates and pricing strategies.
Limited control over the property: You need to follow the decisions and rules of the property owners. Landlords may impose restrictions, and lease agreements, and raise rents that can affect your income.
How Much Would It Cost To Start An Airbnb Arbitrage for Beginners?
$6,000 is the average cost to start an Airbnb arbitrage for beginners. According to SixFiguresUnder, PassiveAirbnb, and BiggerPockets, the minimum Airbnb startup cost is $3,900 and the maximum startup costs are $30,000.
These are the several expenses you need to consider in starting Airbnb arbitrage.
How Much Profit Can You Make In Airbnb Arbitrage?
You can make $100,000 per month in Airbnb arbitrage if you scale. With proper strategies, it's possible to reach a six-figure income within 12 months or fewer. Also, the minimum earnings in Airbnb arbitrage are between $1,000 - $2,500 per month. But, it can vary on several factors, like location, property type, market demand, and operational costs.
How to Calculate Profit In Airbnb Arbitrage?
You can calculate your profit in Airbnb arbitrage by using this formula:
Weighted average rate (A) =
(average weekday rental rate from Airbnb x5 + average weekend Airbnb rate x2) / 7
(B) = All monthly costs are / 30 for the daily cost of property expenses
A / B x10 = Percentage of days per month you will need to rent out your Airbnb property
For example:
$100 = average weekday rental rate
$150 = average weekend rental rate
$3000/month costs
($100 x 5 weekdays) + ($150 x 2 weekend days) = 800 / 7 days =
@ $115 = Weighted average rate
$3000 / 30 days = $100 / day expense
$115 / $100 = $15/day profit
To improve your success in Airbnb arbitrage, aim for a ratio of 2 or higher. You can achieve that by charging $200+ per night to generate $100 profit each day from short-term rentals.
What Are The Profitable Cities For Airbnb Arbitrage?
Nashville, TNCharleston, SCBoston, MASavannah, GA
San Diego, CA
1. Nashville, TN
Nashville, Tennessee, is an ideal choice for Airbnb arbitrage. It is a highly desired domestic destination with a 200% increase in travelers. According to AirDNA, it has an occupancy rate of 51.9%.
Previous Month Revenue: $5,012
Previous Month Occupancy Rate: 52%
Nightly Rate: $237
Total Listings: 5721 (76% are listed on Airbnb)
2. Charleston, SC
Charleston, South Carolina, is an excellent choice for Airbnb arbitrage. It ranks among the top 5 cities in the US for rental arbitrage, according to AirDNA. In 2021, Charleston boasts an effective rent of $1,326, a strong STR premium of 223.6%, and it takes only 5.5 nights to cover rent.
Previous Month Revenue: $7,013
Previous Month Occupancy Rate: 62%
Nightly Rate: $275
Total Listings: 1204 (100% are listed on Airbnb)
3. Boston, MA
Boston, Massachusetts is a great option for Airbnb arbitrage. In 2021, it is the 9th best real estate market in the US, according to the Urban Land Institute. With a population of nearly 695,000 residents, it offers a strong economy and a promising market for rental arbitrage.
Previous Month Revenue: $3,452
Previous Month Occupancy Rate: 52%
Nightly Rate: $162
Total Listings: 2087 (83% are listed on Airbnb)
4. Savannah, GA
Home values in Savannah have increased by 18.8% in the past year, showing a strong market. The West Savannah neighborhood offers affordable investment opportunities, with a median listing price of $75,000.
Previous Month Revenue: $6,137
Previous Month Occupancy Rate: 59%
Night Rate: $210
Total Listings: 2378 (68% are listed on Airbnb)
5. San Diego, CA
In 2022, San Diego, California ranks 7th in the largest markets with multifamily STR listings. It has effective rents of $2,622, monthly STR revenue of $5,331, and 10.2 nights to cover rent.
Previous Month Revenue: $5,001
Previous Month Occupancy Rate: 62%
Night Rate: $195
Total Listings: 9696 (74% are listed on Airbnb)
How To Increase Profitability With Airbnb Rental Arbitrage?
It is essential to conduct market research to identify profitable locations with high demand for short-term rentals. Analyze factors like tourism, business opportunities, and local events to determine your potential income.
PRO TIP:
Nashville, TN, Charleston, SC, Boston, MA, Savannah, GA, and San Diego, CA are the best cities for Airbnb arbitrage. These cities have a high demand for short-term rentals. It is because of their popularity among tourists and business travelers. In Nashville, TN, you can make $96/day profit and $77/day profit for Charleston, SC.
You must negotiate favorable lease terms with the property owner. Aim for a long-term lease at a discounted rate. Make sure that the lease agreement allows subletting and short-term rentals while complying with local laws and regulations
PRO TIP:
Try to negotiate a three-year lease for the apartment at $1,500 per month and secure a lower rate compared to the market average.
You can consider investing in quality furniture, comfortable beds, essential appliances, and attractive decorations to create a good ambiance for your guests.
PRO TIP:
Furnish the apartment with modern furniture, a fully equipped kitchen, and high-speed internet.
You may need to create an interesting listing on Airbnb. It should highlight the property's unique features, amenities, and location. You need to use high-quality images, engaging descriptions, and relevant keywords to improve your visibility.
PRO TIP:
Use professional photographs to showcase the interior of the property. Also, show its proximity to popular attractions. You can mention nearby amenities like restaurants, shopping centers, and public transportation.
You must set competitive prices based on location, property size, seasonality, and local market rates. Also, monitor and adjust the prices to maximize occupancy and income regularly.
PRO TIP:
You can set a daily rate for the apartment at $150. Analyze similar listings in the area, then adjust it slightly higher during peak seasons or special events.
Provide exceptional customer service and resolve guests' inquiries, concerns, and requests. You should offer a seamless check-in and check-out process, and make sure that the property is well-maintained and clean.
PRO TIP:
Respond to your guest messages within a few hours and provide clear and complete instructions for self-check-in. You can also partner with a cleaning service to maintain the cleanliness of the property.
You must use various marketing channels to promote the property. This includes social media, online travel agencies, and your personal networks. Ask for feedback from your guests to build trust and attract more bookings.
PRO TIP:
You can start creating social media pages for the property to engage with potential tenants. You can use that also to offer exclusive offers or discounts.
Always monitor your income and expenses. Track your rental payments, maintenance costs, furnishing and other expenses to keep your profitability performance accurate.
PRO TIP:
Use accounting software to monitor your finances such as QuickBooks Online, Xero, and Zoho Books.
Airbnb Arbitrage Profit vs Different Ways To Make Money With Airbnb Without Owning Property
Is Airbnb Arbitrage Worth It?
Yes, Airbnb Arbitrage is worth it because it allows you to rent properties on Airbnb and make a profit by subletting them at a higher price. This can be especially worth it in popular tourist destinations with high demand. For example, in cities like Miami and New York, some Airbnb owners report monthly revenues of $5,000 or more after expenses. Also, you need to find landlords that will offer generous lease agreements that will work for the long term. However, you need to consider the pros and cons of Airbnb arbitrage and be aware of local regulations and laws. Property management can be time-consuming, and market conditions can fluctuate, which can affect your Airbnb rental arbitrage business.
Blake Roach explains that despite news of an "Airbnb collapse" or "Airbnbust," the market is not crashing. He shares that his own Airbnb business is doing very well, expecting over $2 million in revenue this year. While travel has slowed a little, the demand for Airbnb properties is still strong, and he sees 2024 as another record year. Blake believes Airbnb arbitrage is still worth it, especially now that buying properties is harder due to high interest rates. This business model requires less upfront money, making it appealing. He advises looking at pre-pandemic data (2016-2019) for more accurate profit expectations. O
Conclusion: Why Local Lead Generation Is More Profitable Than Airbnb Arbitrage?
Local lead generation is more profitable than Airbnb arbitrage due to its low upfront costs and high-profit margins. You can start a lead generation website for as little as $500, and once it's ranked, it generates free leads for local businesses with minimal ongoing costs. Profit margins can reach up to 90%, and each lead gen website can earn between $500 to $3,000 per month. It makes it a highly lucrative and scalable business model.
In contrast, Airbnb arbitrage requires higher ongoing expenses such as rent, property maintenance, and cleaning fees, which can cut into profits. Additionally, income from Airbnb is more dependent on occupancy rates and market fluctuations. It makes it less predictable. Local lead generation offers more consistent, passive income with lower management demands and higher profitability over time.
Local lead generation through the rank and rent model is a better option compared to Airbnb arbitrage. Instead of renting physical properties, you rent websites that generate leads for local businesses, like digital real estate. The advantage is that you compete with only 20-30 companies or fewer, not millions of Airbnb hosts. This reduces competition. Local lead generation is a simpler and more profitable way to make money online.
