Did you know that at least 60% of travelers prefer to stay at an Airbnb-type property over a hotel when vacationing? That is a lot of people! Have you ever thought about joining the thousands of Bnb hosts across the world? While it may seem out of reach for many people who don’t own property, it’s actually easier than you think to start a Bnb business. How, you ask? Through rental arbitrage. Here’s all the information you need about what is rental arbitrage and how to be successful at it.
What is Rental Arbitrage?
Simply put, rental arbitrage is the business of subletting a rental property to short-term customers. This may sound like a far-fetched idea, but trust me, it works. And it’s a great way to create a passive income stream.
How do you make money with Rental Arbitrage?
There are many factors that go into how to make money with vacation rentals. The basics of it go like this:
- First, you sign a long term rental agreement for a vacation rental property
- Then, you furnish the property and prepare it for listing on Bnb website platforms
- You charge a nightly or weekly fee for travelers to stay in your property on a short-term basis.
- You collect the rental income from the travelers each week and month
- From the profits you earn through rental arbitrage, you pay your monthly rent to your landlord, any additional costs (utilities, maintenance, taxes, etc.)
- You pocket the difference between your monthly expenses and your monthly rental arbitrage earnings.
How to Be Successful with Rental Arbitration
Now that you have a basic understanding of how rental arbitration works, there are a few things that you need to know to help you be successful at it. Let’s go over each step separately.
1. Research Profitable Bnb Markets in your Desired Area
You need to do some research before you jump into rental arbitrage. To begin, you need to look at the laws and regulations where you are hoping to sublet your rental property. Make sure it’s legal to do what you want to do! Otherwise, you’re setting yourself up for lawsuits and a lot of lost money.
Also, I recommend that you look at your return on investment potential for the properties you are interested in. How much do you have to pay out each month versus how much you can potentially earn each month? Does it make sense to get a rental property in an area that only has visitors a few months a year? Or would it make more sense to find a property that you can rent out regularly throughout the year? These are things you need to consider before you sign any lease agreements.
2. Find Properties with Income and Profit Potential
Once you have your homework done and you know where you want to begin your rental arbitrage business, it’s time to start looking for potential properties. Remember, not every landlord will allow you to sublet their property. You will most likely need to talk to a few landlords before you find one that is agreeable to your terms and business ideas.
Another important factor to consider is the startup costs you will need to be mindful of. If there’s one thing I can’t emphasize enough it’s to overestimate your startup costs. You never know how much things will really cost when it comes to prepping a rental property for short-term renters. Specifically, be mindful of:
- Rental Application Fees
- Security Deposit paid to the landlord
- Insurance Policies required by your area/landlord
- Assorted Legal fees
- Monthly Utility & WiFi expenses
- Property Updates and Maintenance
- Tasteful and sturdy Furnishings and Decor
- Cleaning Service Fees
- Any Entertainment subscriptions you will be providing
When you have these costs figured out, you can approach the landlords of the properties you are interested in with the answers to the questions they will inevitably ask you. Being prepared with the answers they are looking for will help you look more professional in the landlord’s eyes. In turn, this will help you achieve your goal of acquiring their property for your Bnb rental arbitrage business.
3. Listing Your Rental Arbitration Property Online
Two weeks before you take ownership of your property, you will want to list it on the appropriate online platforms so you can start making money as soon as you get the keys. After all, an empty Bnb property isn’t generating you any income! It’s time to get your new property booked with travelers. My goal is always to be moved in and making money within 3 days of getting the keys to the property.
The most popular Bnb platform is Airbnb. Did you know that more than 90% of online hospitality reservations take place on platforms like Airbnb, HomeAway, and others? This new method of vacationing is truly changing the way people around the world travel! While it may be tempting to only host your property through one platform, there are positives to hosting it on multiple platforms. Doing this will allow you to expand your potential customer base and open you up for regular bookings throughout the year.
When listing your property online, be sure to have good photos of your property along with a clear explanation of the amenities, attractions, and any other information that your potential customers will want to know.
4. Automate Your Business
Another key component of a successful rental arbitrage property business is automation. If you want to make a profit, you’ll need to automate at least part of your Bnb business. Not only does this help you to look more professional to your customers and to your landlord, but it also frees you up to take care of other tasks. For my business, I recommend automating things like the check-in/out process, your bookkeeping, your welcome process (think- iPad or smart tablet for the welcome book with instructions loaded), and a smart thermostat.
Don’t forget one of the most important parts of automating your Bnb business- hiring a good cleaning company! You don’t need to clean your properties on your own. You are building a dream life, so let someone else literally do the dirty work! Be sure to get a quality cleaning team because they will make or break your reviews.
5. Grow Your Rental Arbitrage Business
Now that you have your property, you’ve listed it online, and have automated your processes for booking travelers, it’s time to grow your business. When I talk about what is rental arbitrage and how to be successful at it, I have to bring up your next steps. While you can make a profit with one property, you’ll need more than one to truly turn a consistent profit that you can support yourself with.
As you look to expand your business, be sure to think about your pricing strategy so you can maximize the bookings you receive on your properties. Also, I recommend cultivating relationships with the landlords you are trying to work with. Many times I’ve been contacted by landlords who are interested in me acquiring their properties for Bnb’s because they trust me and my work. This becomes a win-win for both parties!
What is Rental Arbitrage and How to be Successful at it
I’ve shared a few of my top tips all about what is rental arbitrage and how to be successful at it. Now it’s your turn. It’s time to put these tips into action and start your rental arbitration business! Still have questions? I’ve got you covered. Get my FREE book to learn even more of the secrets behind my Bnb business here! And if you want to keep up with me on Instagram, you can find me here.
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