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Airbnb has quickly become an incredibly lucrative investment. With the right location, renting a property or room on Airbnb can often pay for the entirety of the property and then some. If you want to earn money on Airbnb, you don’t actually have to own land or a house. It is possible for you to use a rental property to generate that sweet passive income if you know what you are doing.
Through a process known as rental arbitrage, a renter leases property and then lists it on Airbnb. By hosting short-term rentals, they can then cover the price of the lease, and ideally, then pocket the difference. For example, perhaps you rent a property for $2,000/month. You then rent it out on Airbnb as a vacation rental for $4,000 a month. You pay your rent, any other expenses (often somewhere between $250 and $1,000 monthly), and you get to pocket the remaining profit, making Airbnb arbitrage a lucrative source of income.
Making Money on Airbnb without Owning Property
If you are ready to start an Airbnb business, the first thing to know is that you have to be up-front about the process. When trying to find properties, being forthcoming with the property owner is one of the most effective strategies. Many residential rental leases prohibit short-term rentals, which may make this stage tricky.
Convincing a property owner to allow rental arbitrage can be done by reminding them of the benefits they’ll receive. Sure, you will be pocketing the profit, but that doesn’t mean the property owner doesn’t have their own benefits. Some of the perks landlords enjoy in the rental arbitrage process include:
- Consistently paid rent long term because you, the renter, do not want to lose access to your own passive income source. They get to profit and build equity.
- Assurance that even if Airbnb guests do something destructive, there is free liability coverage for listed properties so they have recourse to repair or replace the property if something happens.
- The property will be well-maintained by you to keep it in tip-top shape for short-term renters to boost your rating.
If the Airbnb experience makes a potential landlord nervous, there are other ways to sweeten the deal to get permission for listing their property. Offering more in rent, adding additional third-party insurance, profit-sharing, or renting multiple properties from them at the same time can be ways to foster a business relationship that can become extremely lucrative for both parties.
Getting Started in Airbnb Arbitrage
Deciding to become an Airbnb host for extra income is surprisingly simple once you have a good business plan.
Business Setup and Team Building
You can likely handle up to three properties on your own without much support. However, the most successful Airbnb hosts have a business plan and separate LLC to protect them and their assets.
A team should include several key positions to cover any situations that arise. Having an attorney, an accountant, a cleaning crew, and potentially a co-host can streamline operations. A co-host doesn’t control the property but acts as a sort of Airbnb property manager, overseeing the daily operations for a percentage of the profit.
Market Research and Finding Properties
Market research is important. Is the property you are renting in a desirable area? Spend time looking at areas and zip codes where short-term rentals go for at least $100/night. Properties you choose should have in-demand market features, such as certain minimum numbers of rooms, amenities, and proximity to tourist locations.
Properties can often be found on Zillow and similar websites. As you find rental properties that fit your criteria, don’t forget to be upfront with the property owner about your intention. If they are uninterested in your proposition, move on.
Finally, once you have drawn up the contracts for renting and your lease has begun, you can list the property. This is simple. Simply follow the instructions on the Airbnb “Become a Host” page. Set your schedule, rules, and rates and you are ready to begin. Then, optimize your listing with keywords and attractive pictures, ideally taken by a professional. To see better examples of this, check out the Airbnb Plus listings in your area.
By following these steps, you can get started quickly. And, over time, it is possible to streamline and automate the process by setting up a well-organized team. The check-in process can be automated with a self-check-in process. Because of the simplicity of Airbnb rentals with arbitrage, this offers a cheaper and more beginner-friendly entry into real estate that still has the potential to pay off.