Airbnb arbitrage: Find out all you need to know about this new and lucrative Airbnb business.

Airbnb is a known platform that is a market leader in the short-term rental industry. When people thought hotels or resorts as the only options for a stay, Airbnb came into the picture and transformed the dynamics of the rental world. Ever since it was founded, Airbnb has shown positive growth and many people are getting in this field and trying out new ways to make money on the platform. One of the most recent endeavours is subletting your rental property on Airbnb.

Lately, entrepreneurs have shown keen interest in Airbnb arbitrage. If you have not come across this term before, then read on to answer every question you might have regarding Airbnb arbitrage. There are a lot of ways to make money through Airbnb. One of many amongst them is the Airbnb arbitrage. It helps in setting up your business without much investment and helps you obtain a good amount of profit. Even with Airbnb arbitrage, this platform provides you with an opportunity in which the revenue potential is much higher than the investment requirements. The rental income is surely going to be higher compared to the traditional long-term leasing option.

What is meant by Airbnb Arbitrage?

In Airbnb arbitrage, owners rent properties to entrepreneurs who then sublease them short-term through platforms like Airbnb. It is like a double rent system wherein the rent you charge is more than what you pay. Moreover, Airbnb arbitrage is feasible for smaller properties. A businessman can get a home on lease and host it on this platform.

What is the need for Airbnb arbitrage?

Airbnb is a great platform for everyone who requires a short term place to stay. Hotels situated in high traffic places charge a lot of money. They try to leverage their locational advantages to maximize their profits. This is where Airbnb arbitrage comes into the picture. One can rent both their leased and owned places in such demanding regions. But always remember to check the rates of nearby hotels as well. This is because the tourist will definitely choose a better and more affordable option. So, why are you waiting? Just try putting your place on Airbnb. Airbnb has changed the structure of the renting market and affordable places have a huge business share in this segment.

Is Airbnb arbitrage legal?

Yes, it is legal. However, it also depends on the area where you are situated. There is definitely a difference in the Airbnb regulations according to the location. Always remember to get the required permissions prior to renting your place. You ought to inform your landlord about the rental plan you are about to embark on. If you break the lease contract or any clause of it, then it might lead you into serious troubles. Strata management companies (in case of a stratified property) should be well aware of your plans and be informed about the details.

Can I offer higher charges as compared to the nearby hotels?

If you will ask for higher charges then the guests will consider the neighboring and affordable hotels. It is essential to set competitive charges in comparison to the neighboring businesses. Otherwise, there will be no appealing factor for potential guests to choose your property.

How vital is market research in Airbnb arbitrage?

Always Remember to do sufficient research work prior to establishing yourself as an Airbnb arbitrage host. Look for the places that have optimum requirements for your business plan. Try to find a place in a region which is profitable or it would be difficult to get customers on a regular basis. Failure to choose a property with good potential may cause you losses. Cities that are flooded with tourists should be on top of your list. Places near amenities are preferred for Airbnb arbitrage. The properties on the outskirts of the major cities are preferred by people due to less cost and affordability. But the potential profit you earn will also be significantly lower. This won’t help you reach your goal of income. Amenities like grocery stores, transportation, restaurants, and medical stores should not be difficult to reach, otherwise, people will not prefer to take up such places.

What are the risks related to the airbnb arbitrage business?

Every business comes with a few risk factors and Airbnb arbitrage is not any different. You have to understand that the short-term rental industry is relatively new and very dynamic. The property’s demand will keep on changing due to a number of factors. Booking demands might be high for a particular month and they may go to near zero in the next month.

You will incur losses in case of natural disasters or any other extraordinary circumstances. If there is no guest for your place for a few months, you would not earn anything. Certainly, nothing can be done about a natural disaster and if it hits your area, then you have to bear with the consequences. So, it is advisable to take into account the amount of loss that you’ll be able to cope with. You ought to consider the probable risks.

Airbnb arbitrage income is unstable and it is difficult to predict. This also depends upon your location and the influx of tourists is in your area. An important factor will be the demand for rental services in your area.

Seasonality is another uncertainty that cannot be controlled. So, various discounts and incentives should be provided to the guests. One can also keep the charges discounted for a particular day of the week.

Is property ownership necessary in Airbnb arbitrage?

It’s good if you own the place. However, if you don’t own the property yourself Airbnb will not discourage you from any of its policies. Unlike other passive income options, one doesn’t have to own the property when it comes to Airbnb arbitrage.

You could sublease your rental properties with the help of Airbnb arbitrage.

How much time do you need to invest?

When you begin, you have to devote at least a few hours every day for Airbnb arbitrage. Later you can increase or decrease your commitment time. If you are concerned that this will hamper your full-time job, then rest assured it will not. There are no obligations here and you can work according to your time schedule and at your own pace. You can also decide to venture into Airbnb arbitrage only on the weekends. The amount of time you give to it solely depends upon you. However, the only necessary thing for getting good results is consistency. You have to be consistent and respond in a positive way.

What is the initial investment to get started with Airbnb Arbitrage?

Setting up any business needs investment. If you own the apartment then you have to take care of the application charges, deposit, legal fees, insurance, furnishing, and appliances. However, these expenses may be different for different people because of the specific regulations at a particular place, and the rules and regulations set by Airbnb at that place. On the other hand, if your premises are on lease then you will have another expense which is the rent. Initially, you may not succeed to cover all the rent through the arbitrage. But it would not take too long before you start to recover all this money and start making a profit. It would work faster if you show consistency and take calculated decisions for your business.

How can I ease the task of managing multiple properties?

If you want to earn a substantial income through Airbnb arbitrage you may have to manage several properties and we all know that it is no easy task. Especially during peak tourist season or demand times, you may find this very hard. Your problem has a simple solution in the form of automation softwares to help the management. Nowadays, there are several Airbnb management software like Hosty, which are available to make the lives of property managers easier.

You can automate several important and repetitive processes like replying to guests, asking for their reviews, etc. You can even use automation to update the prices for each night by analyzing the competition. You can use smart tools like smart locks for guests to check-in without the physical presence of you or a property manager.

What is the scope for Airbnb arbitrage in my country?

To understand this you will need to visit the official website of Airbnb and check for existing listings in your area. Airbnb is already present in 191 countries and 81,000 cities across the globe. So, the probability is high that you already have a few Airbnb units nearby or at least in your city.

Although Airbnb has a set of rules and regulations for the hosts, you also need to check with the local legal structure as well. In this respect it should be understood that rental laws vary greatly across locations so it is recommended that you check with your municipality before starting up this venture.

Steps for better earning through Airbnb?

It is vital to estimate your expected returns before you jump into this venture. You’ll have a rough idea about the profits by knowing the average price of Airbnb rental in your local area. You should also be well informed about the weekend and weekdays charges levied by other hosts in your locality. Now, you need to collect information about the average rate. To have an idea of this value, you may check the rates of the neighboring units on all weekdays and weekends separately. You can get the average price by dividing the sum of the rates by the number of days for which you collected the data.

You should have an idea about the daily expenses that you invest in the maintenance of your property. Calculate your monthly spending and divide it by thirty to know the average per day spending. For preventing loss you should rent out your place for the major fragment of the month. In any case, the profit earned from renting should be more than the maintenance cost you are likely to incur. This can only be guaranteed by making sure that your property is rented for a sufficient number of days.

Are there any area-specific regulations?

No, there are no such regulations in Airbnb arbitrage. But at the same time, you should have the knowledge of local rules and regulations. You should know whether your nearby place has any restrictions for the STR (short term rental) business or not. For this, you may have to research thoroughly. But this research work is crucial as it will ensure that you have a profitable STR business.

Will I be making profit from day one?

While working with Airbnb arbitrage, one will not be gaining instantly, you are expected to be patient. You will not start making money on the first day. However, you will surely do once the initial ground for the business has been laid and the required arrangements are settled.

Is it possible to run Airbnb business business remotely?

Yes, you can manage Airbnb arbitrage business remotely. This is one of the best parts of the Airbnb arbitrage business. You can manage everything related to Airbnb arbitrage from anywhere. You’ll still have complete control over the commerce transaction and the property.

Permission required?

This is a very important point and checking regarding the permissions should not miss your attention due to any reason. First, the consent of your landlord for putting up the property on Airbnb arbitrage is essential. Otherwise, you might get evicted and may even have to face legal charges. You should also learn your local rules and regulations.

Your city might have some specific set of rules for such businesses. In certain cities around the world, vacation rental business is not legal. Some other cities have a restriction on the number of nights a property can be rented annually. Considering the legal aspect, you should give it a good thought on whether you’ll be able to make a profit while complying with the rules or not. This will also make sure that you stay out of legal trouble.

Conclusion

Airbnb arbitrage is proving to be fruitful to start a business on Airbnb without the need for heavy investments. However, be well informed about the risks and rules involved in this field before getting into it. Know that the revenue can be unstable and you must manage to balance your profits as a host with the rent of your property. You can always experiment it out on a small scale, with few rooms or cabins and proceed further according to the performance. It is advisable to test the waters!

To achieve the position of an established host and a successful businessman, you have to do the extensive groundwork and equip yourself well. Make full use of the technological tools like Hosty’s property management software to create extraordinary experiences for guests and high profits for you as well.