Landlording & Rental Properties

Rental Arbitrage: The Secret to Making a Fortune on Airbnb Without Owning Property

Expertise:
10 Articles Written

When most people think of real estate investing, they usually assume a few things. One, they think they need a lot of capital to get started, and two, they think they need to own a lot of property to make money. That’s not true, thanks to rental arbitrage.

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

Owning property isn’t a bad thing, but it isn’t necessary under the arbitrage model. Through this method, you can work with a landlord to rent out their property on Airbnb—and make a lot of money doing so. 

What Is Rental Arbitrage?

The word arbitrage is a financial term that basically means taking commodities from one marketplace and selling them for a profit in another.

In reference to Airbnb, it means an investor rents a property from a landlord, then lists it on Airbnb and collects the difference. For example, let’s say you rent a condo for $1,500 per month and list it on Airbnb for $4,500 per month. Before expenses, you collect $3,000 per month in profit. (Keep in mind that expenses can range from $250 to $1,000-plus per month, depending on your strategy.)

Most rental arbitrage investors aim to make around $1,000 net profit per property—although you can make much more.

Related: Vacation Rentals Are Popular But Are They Profitable? (Hint: Yes! Very.)

Is Rental Arbitrage Legal?

When I first came across this model, I had several questions. Namely: Is this legal? And how will the landlord respond when they find out?

Fortunately, yes! It’s completely legal. In fact, the rental arbitrage strategy has been used for a long time—it’s just not talked about often. Like many creative investment strategies, it stems from the realm of commercial real estate.

First, you must tell the landlord about your intentions for the property. Some will be open to it; others won’t. If you encounter one who isn’t, you move on. Honesty is key.

How to Make Money on Airbnb Without Owning Property

Learning how to work with landlords is essential to successful rental arbitrage. After all, we’re not trying to be sneaky! So how can you convince landlords to work with you? First: Remind them of the benefits for them.

When a landlord rents their property to someone doing rental arbitrage, they can rest assured knowing that they are getting a long-term, business-to-business tenant with a financial incentive to keep their property in tip-top shape year-round. During arbitrage, you rent the property at full market rate—or maybe even a little higher to sweeten the deal, as long as it works with your business plan. The property owner’s equity is increasing and they’re getting a little bit of cash flow every single month.

Some investors worry that Airbnb guests will destroy the house. Every now and then, someone may do something destructive—that’s just part of the rental business, and it’s usually a very small percentage of the guests. It’s a risk with traditional renters, too. Plus, with Airbnb, there are courses of action you can take to get reimbursed—not to mention a free $1 million liability policy for listed properties.

When someone using the arbitrage model rents a property from a landlord, it is in their best interest to keep the property pristine. For the landlord, this means the property will be in top selling condition all year.

How Airbnb Hosts Can Sweeten the Deal for Rental Owners

If that’s not enough to convince the landlord, try these tactics to make the deal more desirable.

1. Offer an additional layer of third-party insurance.

For security-conscious landlords who are security-conscious, this appeals to their need for more certainty. You can shop various companies for a third-party insurance policy that you can layer on top of the $1 million policy that you already have. This offers plenty of protection against just about any possible scenario. And remember: As long as the numbers make sense financially, this is a good strategy if it helps to get the deal done.

2. Offer profit-sharing

This is where you offer a percentage of the net profit of each deal that you’re doing with the landlord. This comes from a concept in private equity known as economic alignment. The basic premise is that when a party has a financial incentive in a business’s success, they’re more willing to help that business succeed.

You may need to give away a large portion of the profit of your first few deals in order to build up your portfolio and develop a track record. You might think that this isn’t fair, but this may be exactly what you need to do in order to convince the landlord. Once you have several deals under your belt, you have more bargaining leverage, and you can take a larger share of the profits.

3. Offer to rent multiple properties from them at once

Expand with them as they build out their portfolio. A lot of single-family-home investors are looking for equity build-up in each of their properties over long periods of time. If you can prove to them that your model works, then you can offer to expand alongside them to accomplish their goals. With this strategy, you and the landlord become joint venture partners, each helping the other accomplish their investment goals.

upgrade-vacation-rental

How to Get Started in Airbnb Arbitrage

You don’t need to be a homeowner or have a lot of capital to get started with Airbnb. In fact, the costs associated with listing your first property are pretty low—even more so because we’re using other people’s properties. 

1. Set up your business

If you plan on scaling your portfolio beyond three properties, begin by starting your business properly. Set up a solid foundation and infrastructure to conduct business in good standing and grow effectively.

Start with a legal entity. For most people, an LLC works best. It’s easy to set up and simple to manage and offers favorable tax options.

Related: Do Landlords Need an LLC for Rental Property?

Doing this now will help you find more deals later on when you start searching for properties. Plus, some property management companies won’t allow you to perform rental arbitrage without a corporate lease. 

Take inventory of your assets, resources, and network. What can you leverage for immediate success? No, you don’t need tens of thousands of dollars. But if you do have investment capital, I’d still encourage you to start small. It’s tempting to jump into the business head-first, but you must learn the systems first before you scale. Capital-wise, you only need between $1,000 to $2,000.

2. Build your team

Like any good business owner or real estate investor, you need a good team. It’s easy to handle everything yourself at first—but you’ll want additional support once you start to scale.

Your core business team should consist of your accountant and your attorney. These two team members will guide you around common newbie pitfalls. Here’s what to look for:

  • Attorney: You want someone who specializes in corporate law and/or real estate. Even better if they have personal experience with real estate investors and other rental property owners.
  • Accountant: They should understand tax strategy and have experience with real estate investors. 

Once you scale out to three or more properties, it’s time to start expanding your team, too. Here are some of the key members that you’re going to need:

  • Co-host: This person is a member of the Airbnb community who doesn’t control any property themselves but helps full-time hosts manage existing properties. Think of them like your personal property manager who oversees day-to-day operations. Airbnb allows you to give the co-host a percentage of the profit of each deal that they help you with.
  • Cleaning crew: In the beginning, you can clean your own properties. However, this is very time consuming. Your options are a professional company or an individual or small business. Generally, mom-and-pop cleaning crews are more adaptable and cheaper, while professional companies cost more but are more effective and have more accountability.

In addition to these key members, you’ll eventually need a real estate agent, bookkeeper, interior designer, photographer, and general contractor.

furnish-vacation-rentals

3. Do market research

Most people who get into Airbnb don’t conduct any market research beyond a Google search—if that. Just because you have a nice property and you think it’s in a popular part of town doesn’t mean it’s going to be successful.

You want to use hard facts to find properties in the most profitable parts of town. Which submarkets, zip codes, and streets will give you the biggest bang for your buck? The Airbnb website can tell you a lot about your market—if you know what to look for.

Related: Calculating Your Airbnb Return: How to Estimate Your Rent

  • Entire home properties. We’re not starting a room-sharing business. Whole-home properties make you more money.
  • Minimum nightly rate of at least $100. This rate tells you where the most in-demand properties are located. 

Next, examine the map for clusters of listings. Go through them one by one to identify patterns. What is in demand in this unique market? Look for: 

  • Number of bedrooms
  • Amenities, like washer/dryer or air conditioning
  • Proximity to downtown or other touristy spots
  • Decorating style.

Your job is to discover these market-specific details and then repeat them in your own business strategy.

What attractions are visitors talking about in your city? It could be beaches, parks, shopping, or bars. Look for this information in the descriptions of the top Airbnb listings, the reviews, and with Google searches on various travel sites. This will give you a better idea of where to look for properties.

Next, calculate the potential profitability of your listing and test for demand. Ideally, you want to be profitable at 50 percent monthly occupancy—that’s a good barometer of success.

For example, let’s say the going nightly rate in your target location is $200. Fifteen days booked—or approximately 50 percent occupancy—will make you $3,000 for the month. If your rent and expenses are $2,000, then you’ll net $1,000. That’s pretty good for 50 percent occupancy and doesn’t even account for additional costs that you will charge the guest, like a cleaning fee.

As you expand your Airbnb offerings, you might be interested in paid tools to test for occupancy and demand. Now, though, you can run these analyses for free on the Airbnb website. Look at several listings in your market and then look at their bookings one to two months into the future. This gives you a decent idea of how they are actually doing.

To do this, just click the “Check-in” button on the right side near the calendar. Then cycle through the months with the navigation arrow. The days that are booked will be filled in, and the open days will be bold text.

There’s obviously a lot more that goes into market research, but this is enough to get started.

4. Finding properties

Now that your real market data shows you exactly what areas are most profitable, what home types people like, and what attractions guests want to visit, it’s time to find your first property. 

There are many rental property search tools online, and you can use whichever one you feel comfortable with. I recommend Zillow. Search for your market, selecting the filters that apply to your metrics.

Once you narrow your search down to the exact submarket or zip code you are considering, it’s just a matter of analysis. You may have to sort through 50 to 100 rental properties before you find your needle in the haystack—but this effort will be rewarded in the end.

If you want to narrow the process even further and cut down on your upfront costs, you can search specifically for furnished properties.

Of course, you have to be upfront with the landlord. If they’re not on board with you listing their property on Airbnb, look for another option.

5. Listing your property

Listing your property is straightforward. Just follow the instructions on the Airbnb page by selecting “Become a Host.” You can create a dummy profile to get started, and then create your real listing later on.

After you are set up, you can create your schedule, set requirements for guests, and establish your daily rates. From there, everything is taken care of on the Airbnb website and app—which is what makes this model so easy to get into.

vacation_homeowner_marketing

6. Optimizing your listing

Now that you have your property set up on the Airbnb platform, you can begin optimizing your profile to attract more guests. Every profile has a rank, which is determined by an internal algorithm only known to Airbnb—just like Google search results. There are many known white-hat methods of increasing your rank and attracting more guests.

Great pictures are essential. We recommend hiring a professional photographer—it will cost a couple hundred bucks. If not, then at least learn a little about lighting and photo editing. Your pictures are one of the first things people notice. Often, tourists make immediate yes-no decisions based on the quality and appeal of the photos. If you want good examples of great photos and top-of-the-line listings, then click the “Airbnb Plus” homes to view your market’s top-rated properties.

You can glean more tips from those Airbnb Plus listings, too. Do they use certain keywords in their titles? What rooms do they showcase? Is there an interior design pattern that stands out?

Do your best to model your profile after the top performers. A lot of people who get into Airbnb just wing it and try to come up with everything by themselves. This is why most people get mediocre results.

Related: 5 Simple Steps to Build a Website for Your Vacation Home Rental Property

7. Automating your business

Successfully building an Airbnb portfolio that generates thousands of dollars per month is pretty awesome, but being stuck working 100 hours per week to maintain it certainly isn’t. We didn’t get into business and investing so we could work two or three times as much as everyone else. We invest because we want freedom, control, and options.

Establishing appropriate systems to run your Airbnb business with minimal effort and maximum income. 

Once you have your property set up, you’re responsible for basic property management tasks and cleaning. If your landlord has a property manager or you are using a condo in a complex, then your basic property management needs are taken care of. If not, then you will need to find a good property manager who can handle these things.

Your cleaning crew needs to understand exactly what to do each time they clean. They also need to know when to come. The best way to do this is to sync your Google calendar with your Airbnb schedule, and then share a “read-only” version with your cleaning crew so they can access the calendar, but they can’t change it. 

A co-host is your next most powerful automation technique. Find someone you can trust with experience in the hospitality and real estate industries. This person will be the face of your business on the properties that they represent and manage. They will be responsible for handling guest questions and providing additional services. Think of a co-host as an internal Airbnb property manager for you and your listings.

If you have numerous listings in multiple markets, then you will have more than one co-host who manages their own section of your portfolio. After a certain point, you can hire a CEO or asset manager, who will take on your job of overseeing and growing the company.

Next, automate the check-in process. Do you really want to personally drive to each listing and greet every single guest? No. Get around this burden by developing a self-check-in process for your guests.

You can put keys inside an old-school lock box, like the kind that real estate agents use, or you can use smart locks. The downside of the lock box is that people can lose the key or come back months later and rob you, assuming you don’t change the code. The upside: they’re cheaper.

Smart locks offer a lot of options and many more security features, like the ability to remotely access the property from your phone. A popular model is the August Smart Lock, which will run you a couple hundred dollars. 

You can also give temporary codes that expire after your guest leaves and allow you to see who is accessing the property and when. This gives you a lot more control and accountability.

You’ll also want to develop a comprehensive house manual and give guests access immediately upon booking. It should cover every possible question a guest could ask—everything from WiFi passwords, gate codes, and available amenities to local attractions, transportation options, emergency contacts, and co-host contact information.

This manual gives guests everything they need to be self-sufficient. Most people don’t want to be bothered when they are staying at your property, just as they wouldn’t in a hotel. Make it easy for them to get what they need without too much effort.

Starting a business with Airbnb is one of the best models for people without a lot of real estate experience or startup capital, because a lot of the mechanics are handled for you. However, it’s even better if you do have these things, because you will be able to launch and scale your business that much faster.

If you put your head down and diligently work on this, you will be making a six-figure income in 12 to 18 months—a level of success almost unheard of in most industries.

Any questions? Need further instructions?

Ask me in a comment below!

Jason has been in the real estate business since 2015 with a primary focus on commercial investments. Over the last 10 years he has also started and operated businesses in digital marketing and eCo...
Read more
    Steve T. Real Estate Investor from Colorado Springs, Colorado
    Replied over 1 year ago
    As you mentioned, discuss with the landlord up front. Every good lease I have ever seen has a SUBLETTING OR ASSIGNMENT clause. Disclosing to the landlord is great, but make sure the lease you sign does not have this clause… because the lease is what matters, not that the landlord verbally told you it was OK. I would never consider this unless I was getting a fair cut of the increased revenue… because who will get called for the repairs?… the landlord, and this will increase wear and tear on your property.
    Todd Goedeke from Sheboygan, Wisconsin
    Replied over 1 year ago
    If a STVR is occupied on average 200 nights per year how can there be more wear and tear than a LTR that is occupied 365 days per year? In addition, what incentive other than small deposit does a LTR have to maintain property? Compare that to a STVR which is insentivized to maintain property in great condition to generate great reviews and more bookings. Rather than renting out property to a party that will use rent arbitrage, why not sign Master lease or triple net lease where lease is responsible for taxes, maintenance( interior) and insurance? The Master lease may include a lease rate based on property value in 10-12% range. This is no different than the passive investor who leases out his big box building to any number of businesses( drug store, bank, post office, medical clinic, grocery store,etc) Lease escalators can be built into lease at every 5 years for example.
    Jason Allen
    Replied over 1 year ago
    Steve, Great point! You want everything on paper to protect yourself and the landlord. Every property owner is different. Some are just happy to have a long term professional tenant who will help pay down their equity. Others are more savvy and understand the potential so they want a percentage of the profit kind of like a royalty. Thanks!
    Todd Goedeke from Sheboygan, Wisconsin
    Replied over 1 year ago
    Jason, Do you have a case study based on your own experience to share? You make no mention of investors with retirement accounts ( Self directed IRAs , Roth IRAs and Solo 401ks ) looking to passively invest in RE. They are hands off landlords looking to lease potential STVR properties to 3rd parties.
    Emrose Bhalesha from Austin, TX
    Replied over 1 year ago
    Great article! Airbnb in my area is still in the grey zone and a simple change in the law can wipe out the entire business. Thanks for sharing.
    Jason Allen Investor from United States
    Replied over 1 year ago
    Thanks! Some markets are questionable like that so you have to pay attention. The cool thing about the arbitrage model is that you can adapt to things like this and not be caught owing several hundred thousand dollars on a home. Just cancel the lease and move on.
    Peter Talbot from San Diego, California
    Replied over 1 year ago
    Hi Jason – I really liked your piece and love that you used my city (San Diego) as the example 🙂 I tried this approach last year with my current landlord, but she insisted she get 50% of the proceeds for taking on the liability of the guests (and that it’s her house, I guess) This really isn’t worth it in my opinion, so we haven’t done any Airbnb, but I wanted to ask: 1) what have you seen as “reasonable cuts” for landlords in both real dollar amounts and/or percentages of revenue? 2) if the landlord wants a cut, would you recommend they take care of any repairs? I can see how if they do take a cut, I would be responsible for the repairs aka charge the Airbnb guests 3) how do you work liability into your leases? For example, if an Airbnb guest is injured on the property, who is liable, me or the landlord? Many thanks!
    Jason Allen Investor from United States
    Replied over 1 year ago
    Thanks Peter! I love the city of San Diego. I used to live in La Jolla and I try to get back there as much as possible. Some landlords just don’t get it or they are greedy like the one you were working with. What I advise people to do is sell them on the idea of building their portfolio with you as you build the business. This way it’s not just a one off deal but it’s a long term vision. Reasonable cuts of course vary because some properties can make $10,000 per month net profit. But I like 10%-35% depending on the variables at play. It all depends. If your guest breaks something then they should pay for it and you would want to take this through Airbnb. If the AC blows out that’s on the landlord. If a chair breaks then you might just want to handle it yourself. It also depends on what the landlord provided in the deal such as furniture and other fixtures. With Airbnb you get a free $1,000,000 liability insurance policy for this exact scenario. You can also get a third party insurance once you scale out past 3 properties. On top of that you should be using a legal entity such as an LLC if you’re doing this professionally. And the landlord will probably have some type of basic insurance for tenants as well. So you’re well covered before it would ever reach the owner. Truth be told some people are open to it and others aren’t. You’ve just got to find the one’s that are. As your business gets bigger it will be more profitable to use commercial lease agreements with property management companies and apartment complexes. This will give you some economy of scale and better terms. Thanks, Good luck!
    John Lamb Rental Property Investor from Phoenix, AZ
    Replied over 1 year ago
    I don’t see how the landlord is “greedy” in wanting to split the proceeds. As a landlord myself, if a “tenant” came to me asking to use my property as an Airbnb rental, I look at it as a partnership. I’m providing the property and the “tenant” is handling the rest. Sure, the “tenant” is doing the legwork , but there is way more liability on my end as the actual owner of the property, plus additional wear and tear with the turn around of guests.
    Jason Allen Investor from United States
    Replied over 1 year ago
    John, Well you’re right that they’re not greedy for wanting to split the percentage but wanting to take too much off the table is a bad business practice and you probably don’t want to work with them anyways. There’s an old saying in private equity and that is “Pigs get fat, and hogs get slaughtered”. Now it does of course all depend on the deal and the other variables at play. I am open to profit sharing from the very beginning as it makes for a better deal for everyone. This is known as economic alignment in PE and it works because everyone is motivated to perform.
    Peter Talbot from San Diego, California
    Replied over 1 year ago
    Thanks for the thoughtful response! Will have to give this another go ??
    Andy Cox from Telluride, CO
    Replied over 1 year ago
    Hi Jason, great article. Having been in the vacation rental space for the past six years, this is something I’m definitely interested in trying. My question is about the approach to the landlord. Do you put together a packet of information and cold-call them to get an e-mail address? I would imagine the way you make initial contact is an important factor as to whether they’re open to the idea.
    Jason Allen Investor from United States
    Replied over 1 year ago
    Andy, So I advise people to reach out to the landlord first on the phone. Then set up a showing and while you’re at the property pitch your deal. Don’t just go for the close right when you show up because you want to build some rapport and start dropping the benefits of your business into the conversation. Then explain what you do and how it works. You’re much more likely to sell them in person when they see that you’re professional and easy to get along with. Remember that you want to make it all about them. Their security of income, their safety and protection, their benefit in all aspects. Good luck!
    Kevin Nichols Investor from Rock Hill, South Carolina
    Replied over 1 year ago
    I rehabbed a home and finished it in late 2018. Instead of flipping or renting it, we did the airbnb/vrbo route. Furnished it, stocked it with cookware, TV, etc. We’re in a bedroom community of Charlotte, NC. I told myself we would do a 12 month test and see whether it was worth doing vs. renting. 6 months in…and we’re only about $100/month over what a rental would net. Utilities, internet access, sling TV and some minor cleaning supply costs are eating up net income. I would be weary of arbitrage simply because the model can be feast or famine. I know of a lady who had 2 airbnb houses near me. She had rehabbed a little bungalow and made it aesthetically awesome for photos on Airbnb. But, the house was in a rough area of a really cute town. Out of town airbnb’ers made mention of that and she also had some cleanliness issues that were brought up in reviews. That killed her bookings. I watched them go down as more and more comments rolled in. She eventually sold the house earlier this year. Sure…you could do that if you own the property, but what happens if you signed a 12 month lease for a condo and the bottom drops out and you don’t get as many bookings. Another issue I see is what I like to call the “Uber effect,” where as more and more providers flood the network, you have to reduce your per night booking $. (Same issue with Uber drivers…the more out there, the less everybody makes.) I know folks are doing this in larger metro areas…but even in mid-size cities, I would be weary…not even mentioning the possibility of government regulation, renter insurance issues (policies not covering STR), etc.
    Jason Allen Investor from United States
    Replied over 1 year ago
    This is a common problem that a lot of people new to Airbnb run into. The core of this issue really comes down to the individual failing to do effective market research. Just because a home looks nice or you “think” it would do well on airbnb doesn’t mean anything when you compare it to the market data. Good luck next time!
    Maureen Salahshoor
    Replied over 1 year ago
    Hi Jason, I enjoyed your article. It contains very good information for folks considering STR Arbitrage. Two areas that I believe should also be highlighted are insurance and lodging tax obligations. Both could be complicated by arbitrage scenarios.
    Jason Allen Investor from United States
    Replied over 1 year ago
    The great thing is that Airbnb gives its hosts free $1,000,000 liability insurance. If you want to stack a third party policy on top that’s possible too. Tax is a part of being in business and being a human being for that matter. There are legal ways to defer or neutralize tax liabilities within the law and sometimes you just have to pay it. I’d rather have to pay 35% of $500,000 than 5% of $50,000 because you still walk away with more Thanks!
    John J Stadum
    Replied over 1 year ago
    This is a fascinating read! I really like the idea, as my wife and I are trying to break into the real estate game. The only problem we have, is: we live in rural Kansas – not too many tourists around here. The biggest closest city is Kansas City, which may be an option. How doable is this for out-of-state properties?
    Jason Allen Investor from United States
    Replied over 1 year ago
    Thanks John! This is 100% doable for out of state investing. (I may write a piece on this just for people like you) As long as you do some solid market research and follow the steps you can do this anywhere you want. It’s a completely location independent business. Good luck!
    Kimball Bailey
    Replied over 1 year ago
    Jason, I haven’t heard you discuss furnishings except to look for already furnished properties. Even if one can be found with a landlord that is willing to let it be Airbnb’d, it may not be top quality furnishings. You also listed an interior designer without fleshing out that role. How do you approach making the property very nice without breaking the bank?
    Jason Allen Investor from United States
    Replied over 1 year ago
    Great question, So it all depends on how much capital you have and where you’re at in the process and what type of property you’re trying to furnish. If you’re just getting started I advise people to try to get furniture for cheap (*not cheap furniture*) or free if possible. You can get huge discounts on amazing furniture on craigslist or other online portals but it will take a little work. This may not be worth your time once you’ve got some decent cashflow coming in. Using HGTV, Instagram, Pinterest, etc. you can get interior design examples like the professionals. Another option is renting your furniture or you can work out deals to purchase discounted furniture from furniture rental companies that are offloading their old inventory. Good luck!
    Carolyn Lorence Real Estate Agent from Round Rock, TX
    Replied over 1 year ago
    Great read, Jason! I’m beginning to love this strategy, as we’ve always wanted to be in the hospitality sector of real estate. Can you share what has been your experience with approaching apartment complex property managers? Are you finding most are familiar with this and open to this arrangement?
    Jason Allen Investor from United States
    Replied over 1 year ago
    Hey! So apartment complex owners and property managers are usually better to work with if they’re on board because they will let you sometimes rent multiple units which give you some economy of scale and dominance over that geographical area. However they usually require that you have an existing business and sign a corporate lease (business to business) Good luck!
    Carolyn Lorence Real Estate Agent from Round Rock, TX
    Replied over 1 year ago
    Thanks so much, Jason. I see that’s what Lyric / AirBNB are doing. Nice strategy!
    Carolyn Lorence Real Estate Agent from Round Rock, TX
    Replied over 1 year ago
    Thanks so much, Jason. I see that’s what Lyric / AirBNB are doing. Nice strategy!
    Ryan Mayes Rental Property Investor from Albion, NY
    Replied over 1 year ago
    I dont get why any landlord would do this. This is crazy…..why would they take all the risk when alls youd have to do is break the lease and forfeit security deposit and stick him with the worn down house thats been used and abused. All the while they make 10%. Or on the flip side if they do allow it, once your year lease is up then why would they bother to renew it with you? I bet instead the would just not renew the lease and thank the person for doing all the hard work and establishing it as an Airbnb so then the owner has repeat clients and makes all the profits going forward. Either way I’d like to hear 1 real example where this played out well for both parties. Anything can look and sound good on paper
    Jason Allen Investor from United States
    Replied over 1 year ago
    Great point Ryan, Some landlords will and others won’t. So just don’t bother with the one’s that don’t see the value. First thing you have to understand is that everyone is different and we all have different values in life. I used to think it was stupid that people would give their hard earned money to an investor in a syndication for example. However now that I have more money than time I gladly invest my money as a limited partner in certain deals. They way I frame it is that the landlord is not a sucker in the deal. Rather they are your strategic partner. You help them grow their portfolio by being a loyal and high quality tenant. Where did you get the idea that these properties are used and abused??? The arbitrage investor has an absolute financial incentive to keep their rented property in TOP shape year round. That means everything is clean, orderly and works the way it’s supposed to. Also when you work out deals with your property owner you are not looking to screw them over in the deal. Remember they are your strategic partner. Canceling a lease is the very last thing you want to do but you should create a contingency clause if that ends up being the proper course of action. But usually a property owner is going to require a couple months rent to break it early which gives them plenty of time to find another renter if that happens. There are countless examples that I have personally and from others. However I get the feeling that your mind is already made up on the effectiveness of this strategy. Years ago a mentor of mine said that the only competition we had in life was ourselves. What he meant was that you could tell the world your secret formula for success and most people would just write it off or never execute it. The more success I have in life and the more I try to help others the more I realize how true those words were. Good luck.
    Comfort Somuah
    Replied about 1 year ago
    Wonderful article. Thank you for the introduction to this way of business. Do you have recommendation of any sites both free and paid that would help with the market research? It appears airbnb does not have the search functionality anymore. It requires a date range.
    Jason Allen Investor from United States
    Replied about 1 year ago
    Check out: - Airdna - RentalEntrepreneur - VRBO - HomeAway - FlipKey - Trip Advisor - Google Maps (reviews and data) - Also the housing sites like (zillow, realtor, trulia, etc.) - If you have MLS access use that - Smart asset - bank rate
    Jason Allen Investor from United States
    Replied about 1 year ago
    Use Airbnb and Airdna for most of it. I'm also writing an airbnb 2020 market analysis which you can PM me about if you want it.
    Juana Silverio
    Replied about 1 year ago
    I’d love a copy even ready! Thanks in advance.,
    Michael Aslanian
    Replied about 1 year ago
    Hey Jason, do you see personal credit scores coming into play when working with landlords on this method? Also if I get 10 properties, that's checking my credit score 10 times, is there anyway around that?
    Jason Allen Investor from United States
    Replied about 1 year ago
    Hey Michael, Go get your credit score printed off by one (or multiple) of the accredited institutions and bring that with you. You will want to build a package showing deals you've done, your portfolio, credit history, business success, education, etc. Great question.
    Valerie Schuett
    Replied about 1 year ago
    Very informational! Question: What is the need for the lawyer when just beginning this business model? You mentioned them as ppl needed on the team first, but didn’t say what the lawyer would help with specifically.
    O Duru
    Replied about 1 year ago
    Hi Jason, You got me tingling with excitement! This is my way to financial freedom. One question I had is could you elaborate on when you said: "...it will be more profitable to use commercial lease agreements with property management companies and apartment complexes". Thanks in advanced!
    Jason Allen Investor from United States
    Replied about 1 year ago
    Yes because many of them will not let you sublease or rent2rent without one. Also because you can take advantage of what's called economy of scale. This is because having 2 or 3 units in one apartment complex is easier and cheaper to operate than 3 houses spread all over town.
    Harold Smither
    Replied 12 months ago
    Jason I have a quick question around apartments and economy of scale in smaller markets. Specifically in Oregon with a college town and ~165,000 people. Do you believe that arbitrage and multi units in the same complex would be successful in smaller cities. I need to do my market research but I curious as to your thoughts on smaller cities and this model. We are the track capital of the world and have a major D1 school. Additionally our tourism appears to be vibrant. I am just starting research on this model so forgive for my lack of knowledge.
    Jason Allen Investor from United States
    Replied 12 months ago
    Yea, college towns and tourist towns have proven to be successful with short term rentals. People are looking for an easier, cheaper alternative to using a hotel room when they visit. Both houses and apartments repurposed as short term rentals will do fine. You may also want to look into student housing. You can rent a 4 bedroom house and then put two beds in each room and charge $750/bed. That would produce a Gross Scheduled Income of $6,000 per month minus expenses. Students like this because it's cheaper than renting an apartment for $1,200+. Good luck!
    Sebastian De Smedt
    Replied 11 months ago
    Hi Jason, very interesting read. Just like anyone else out there I did not think this would be legal or I instantly thought of the liability issues that would arise. The Q&A already helped out a lot and answered most of my questions. I was wondering whether you could help me with this; if you would be able to get a deal with a complex manager/property manager to rent multiple units in their building, wouldn't it be hard to attract customers? What I mean is, if there are more units in the building and you only have a couple on AirBnB, those other units will go for a lower price as no one else is trying to make extra money off them. Therefore I was wondering if people would show interest in your AirBnB listing when they find out the cheaper rental price for other units in the same building. Maybe when demand is far higher than what is offered, or do you think this is not true? I am really trying to make some extra income, as I am 24 years old and just graduated my masters in January. My full time job is too demanding for what I am getting paid, so this would be amazing if it would work out. I am close to Los Angeles, so I'm sure there are lots of opportunities out here to make this happen. Thanks for the read and looking forward to your answer!
    Jason Allen Investor from United States
    Replied 11 months ago
    Well there are different floor plans in each apartment complex so this will play a roll in determining price. Also the way that each host runs their listing will also make a big difference. Also whoever knows how to list their property and market it better will also come out on top. Congrats on the Masters! Honestly Sebastian if you're set on living in LA the better option would be to do exactly what this articles advises but rent out each room as a private room on "Airbnb/Sublets" (for 30+ day stays). You'll make far less per room than the normal Airbnb option but you'll have way more occupancy per month. Plus it's easier to manage. Good luck!
    Sebastian De Smedt
    Replied 11 months ago
    Thanks for the tips Jason! I will start looking into this and maybe collab with a friend to start some kind of business. Thanks!
    John Glazier Investor from Phoenix, AZ
    Replied 11 months ago
    I’d love to get your Airbnb Market Analysis Report for 2020 when it comes out. Thanks!
    Kunal Bijlani
    Replied 9 months ago
    Hello, I am a 24 year old, starting out on building passive income and have been looking into arbitrage recently, and have found Austin, TX to be a potential market for me. however, given the licensing rules and regulations, I'm not sure if arbitrage is legal there for Airbnb. Can anybody provide better knowledge about the same please? Thanks in advance!
    Menachem Bresler from Houston, TX
    Replied 9 months ago
    Would love to figure out what is legal in Houston? Does anyone know if subletting is legal in Houston?
    Cody L. Rental Property Investor from San Diego, Ca
    Replied 9 months ago
    Yes it’s legal. It’s not up to the goverenment if you sublet. This is Texas. Not California. Subletting should ONLY be decided by two people: property owner and tenant, and whatever they decide is spelled out in the lease. LOTS of people in Houston lease units then put them on Airbnb
    Joey Buchan
    Replied 6 months ago
    Would another option (with much less risk) be to just search for rentals & ask the people up front if they'd be interested in converting their property to an Airbnb and offering to manage it for them for a split of the proceeds? I think most landlords would be very leery of subletting but more open to going this route (where they would likely make more $). With everything going on right now (with Covid-19), I can imagine alot of Airbnbs are sitting empty because practically nobody is traveling. You wouldn't make as much per unit but you'd have almost none of the risk.
    Amanda Upchurch
    Replied 28 days ago
    Hi Jason, i have an accountant and attorney, can you become my real estate agent?