How to Start Rental Arbitrage on Airbnb (Comes with a Warning)

[Andrew Street]

Hello everyone,

Rental Arbitrage is deeply debated in this forum, so I figured I'd shed some light on what it is, how to do it (high level) and also some concerns and mindsets you should have should you decide to pursue this business. This post does not cover every aspect of rental arbitrage, however is a good start for those looking into the process.

Rental Arbitrage is leasing a property from a landlord and sub-leasing the property out to a third party. In more recent years, people have taken to Airbnb to rent out these properties in order to arbitrage the rent. Arbitrage is when you pay for a good/service and sell that good/service at a higher price point.

This process can be done in a variety of ways, but typically you want to scout out properties that you like that are open for rent and reach out to the landlords. Landlords will have concerns that you will need to address, so come with a plan to be proactive and address their concerns of payment, damage and maintenance.

If the property (based on your calculations) will cashflow and the landlord approves of you using the property, then you can start the next steps which are setting up the property for Airbnb. Please note that your calculations should not only include the cost of the lease, but the cost of furniture and all costs related to getting the Airbnb up and running.

Next, you will need to furnish the property and have photos taken by a professional. Furniture can be acquired in a variety of ways, but you will want to make sure it's durable, unique and fits the aesthetic of the place. Professional photos will take your listing to the next level, so do not try to take the photos yourself unless you have the talent required (i.e professional).

Once you have furnished the property, uploaded the photos and created the listing; you are good to go on making your listing live on the Airbnb platform and putting your arbitrage strategy to work.

*A couple items of warning over rental arbitrage. Please note that you are not an investor when you are arbitraging rent. You do not own anything, so you cannot expect to have equity pay down, appreciation or depreciation benefit. This is a deal that at best will cashflow, so it's important to understand the difference. This process may also affect your ability to have financing to invest in actual real estate as well if you do not have two years of solid tax returns proving the income is consistent. This approach is in not passive.