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How to Earn Money with Airbnb Arbitrage

How to Earn Money with Airbnb Arbitrage
Jennifer Leach Aug 21, 2019
Want to Earn Some Extra Money?

airbnb arbitrageAre you looking to make some extra money?

You want to start a side hustle that you don’t mind investing in but you’re looking to:

  • Make passive income
  • Get into an opportunity that can be scaled in the future
  • Break into a long-term side hustle that’s fun and rewarding

You’ve heard the hype surrounding AirBNB passive income and you want to get in on it but, you don’t own your home?

Can you actually participate as an AirbNB host without owning the home?


And, AirBNB supports it!

We’ve got you covered! In this post, we’ll show you how to earn money with AirBNB Arbitrage including:

  • Talking about what AirBNB is
  • Talking about the host experience
  • AirBNB from the host’s perspective and the guest’s perspective
  • The definition of arbitrage
  • Discussing AirBNB rental arbitrage in detail
  • Pros and Cons of AirBNB rental arbitrage
  • Legal and Regulatory
  • Where to Start
  • Key Rules of Rental Arbitrage
  • Startup Costs
  • Other considerations
  • Becoming a Host

Let’s get started.

What’s AirBNB?

AirBNB is a company that brings together homeowners and guests to arrange the short-term rental of a property.

It’s a great alternative to staying a hotel or crashing with family/friends, and perfect for:

  • Frequent travelers
  • Family travel
  • Vacation goers
  • People who enjoy an occasional staycation away from home

It’s available around the world and makes a lot of sense for many people.

For my small family of 3 (two adults and one child), when we travel, it’s tough to find a hotel to meet our needs.

We’d like a space that has a bed for all of us, one for me and my husband to share and then one for our first grader.

And, we also want separate spaces.

Sure, you can rent a hotel room with two double or queen beds but for a family, a room can feel really compact and tight. We appreciate the opportunity to roam around and enjoy some space.

In the past, we would book a hotel suite which came with beds and a sleeper sofa. The room came with two TV’s, kitchenette, desk, and bathroom. It was larger than a standard hotel room and my son would usually fall asleep on the sleeper sofa watching cartoons.

This worked for us but we still wanted more.

We found out that for the cost of renting a suite, we could get in on an entire home, which meant double (or more) the space, including a full kitchen, multiple bathrooms, multiple rooms and beds, and so much more.

This is the ideal travel quarters for us as a small family so I can’t imagine how larger families do it.

If you need to rent a room, rent an entire property, houseboat, space, restaurant, or more, Airbnb is the solution for you!

AirBNB for The Host

The host is the person in charge of the property.

They will signup to AirBNB as a host going through a simple 3-step process to get their property listed:

  • List their space for free
  • Decide on type of hosting
  • Welcome their first guest

List The Space for Free

Share any space without sign-up charges, from a shared living room to a second home and everything in-between.

Decide on How You Want to Host

Choose your own schedule, prices, and guest requirements for guests, with support from AirBNB along the way.

Welcome Your First Guest

Once your listing is live, qualified guests can reach out. You can message them with any questions before their stay.

Hosts have total control over their space in the process. They can rent when they want, setting rules about availability like minimum/maximum nights a guest can stay, how far in the future a guest can book, and advance notice before booking.

Hosts have the freedom to set prices they are confident about, building in extras like:

  • Cleaning fees
  • Weekly discounts
  • Special pricing for special times of the year
  • And, more!

Hosts can sync their AirBNB calendar with other calendars to avoid getting overbooked, establish rules for their space, and more.

AirBNB for The Guest

As the guest, you’ll visit the AirBNB site and search for properties using their user-friendly search tool, filling out information like:

  • Your destination
  • Rental dates
  • Special requirements (like number of beds, number of rooms, type of space you want to rent, and more)

You’ll be presented with the search results where you can sift and sort through the results to find your perfect AirBNB space.

You’ll secure the space online and on arrival day, head to your AirBNB property to begin your stay.

It’s super easy and very convenient for guests.

What is Arbitrage?

According to Investopedia, arbitrage is the simultaneous purchase and sale of an asset to profit from an imbalance in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms.

An example of arbitrage would be retail flipping. Retail flipping has been a growing industry among small business owners in recent years, especially those selling on Amazon and other online marketplaces.

The store owner buys a lighting fixture on sale at Home Depot for $50 and resells on Amazon for $149, keeping the different, $99 as profit.

This is an example of arbitrage.

The same can be done with:

  • Real estate
  • Automobiles
  • Domains
  • Websites
  • Personal goods

Now that you have a better understanding of arbitrage, lets talk about AirBNB rental arbitrage!

What is AirBNB Rental Arbitrage?

With AirBNB rental arbitrage, you can become a profitable host without owning property. You are renting your space and then subletting it to AirBNB guests.

This is a new, growing passive income stream that more and more renters are taking advantage of to make more money, and essentially pay their rent!

Imagine if you personally rented your house for $1,200/month but then, you hosted it for $350/night on weekends only. This means 8 weekends out of the month, you could earn $350/night, or a total of $2,800!

That’s enough to pay your rent, and still have $1,600 in extra income leftover!

Many AirBNB hosts that rent will actually put their primary place up for guests full-time, renting a room on the side, for their living, earning even more money! This is the perfect side hustle for those looking for extra money including college students, professionals, retirees, and more.

You can see why rental arbitrage is becoming so popular.

It’s extremely lucrative, easy, and a great way to earn passive income.

Is Airbnb Rental Arbitrage Legal?

According to AirBNB, real estate arbitrage is legal and completely acceptable. Before renting out on the Airbnb, you do need to inform the landlord and if they agree, you should get your agreement in writing and include in the agreement, Airbnb’s host protection insurance, in case anything should go wrong.

AirBNB even has a resource on their website, giving you tips and best practices for talking to your landord. Here’s their advice:

  • Know the rules and regulations
  • Make a great first impression
  • Let them know AirBNB supports you
  • Create rules that work for everyone
  • Get the support of neighbors
  • Keep everyone in the loop
  • Talk about the Friendly Buildings Program
  • Ask questions
  • Be confident

Know Rules and Regulations

Be knowledgeable about what contracts and regulations affect you, including HOA, city, state, and local including rules related to subletting. Have a full understanding of these rules and make sure you are in compliance before starting to host your first guest.

You can check out this resource on AirBNB to learn more about legal and regulatory issues.

Great First Impression

Let your landlord know about you.

Tell them about yourself, talk about how you care for the home, and why you want to host for AirBNB.

Some ideas:

  • Send a thoughtful handwritten message or a personal email
  • Give a tour of the space or share photos

Share that AirBNB Supports You

Talk about the $1,000,000 Host Guarantee and $1,000,000 Host Guarantee Policy as well as periodic background checks on guests.

Create Rules That Benefit Everyone

Collaborate with your landlord to set clear guidelines that benefit everyone, including when and how you will host guests, showing the landlord that you’re responsible and putting their fears at ease.

  • Discuss and agree on how often you’ll be hosting guests
  • Set a max limit for the number of guests allowed to stay at one time
  • Create house rules
  • Share your home and building rules with each guest
  • Show your landlord your listing page
  • Give your guests emergency phone numbers and a map of emergency exits and evacuation routes

Get Neighbor Support

Reach out to your neighbors to make sure they are comfortable with you hosting your space on AirBNB.

Keep Everyone in the Loop

Go the extra mile and alert your landlord anytime you have new guests, that way they are aware and feel more comfortable, knowing when they can expect guests.

The Friendly Buildings Program

These are the guidelines of the Friendly Buildings Program:

When you enroll your building in the Airbnb Friendly Buildings Program, you’ll allow home sharing within your desired constraints. In an addendum to your standard lease or building rules, you and participating hosts can agree on the percentage of the hosts’ profit you’ll receive and other conditions. You can also create safety and neighborly rules that participating residents must follow in order to home share. Airbnb’s platform then requires each host and guest to accept those rules.

You can read more about the AirBNB Friendly Buildings Program.

Ask Questions and Be Confident

Be open with your landlord. If they do happen to decline your request, get feedback and ask why. Address their concerns and try to overcome objections by talking about the Friendly Buildings Program.

Why Do AirBNB Rental Arbitrage?

We have shared some of the perks above. Lets look at the full list of pros and cons:

Advantages of Being an AirBNB host

  • Easy
  • Lucrative
  • Flexibility
  • Meet new people
  • Control over the process
  • Participate in the growing short-term rental market
  • Passive income opportunity
  • Unlimited income potential

Disadvantages of Being an AirBNB host

  • Your rental lease may prohibit subletting
  • AirBNB insurance does not cover all types of guest damage so if a problem were to occur, you’d have to foot the bill
  • Financial risk, if your space goes unrented
  • Unstable income (periods of a lot of bookings, following by dry spells)
  • Time requirement (cleaning the space, talking to guests over messages, etc.)

As with many things, there are risks and rewards. To offset the low barrier to entry and unlimited passive income potential, you have drawbacks like if your landlord does not allow subletting and not willing to be flexible with it, along with the possibility of severe guest damage to the property that insurance won’t cover, among other benefits and drawbacks.

You should weigh the pros and cons and determine if AirBNB rental arbitrage is the right choice for you.

Consider this though.

AirBNB hosting is becoming more and more popular everyday, with whole communities being dedicated to this topic, even AirBNB rental arbitrage. This is great because you’ll have a community of support and hosts that have probably already experienced any issues you come across, to help and provide guidance.

Check out these AirBNB communities:

Determining Where to Start

If you decide to press forward and pursue this lucrative, rewarding passive income side hustle, with AirBNB rental arbitrage, there are two ways to go:

  • Rent out your own primary residence
  • Invest in another rental residence to rent out

Renting Out Your Primary Residence

With renting out the place you stay, you’ll want to consider if, you are allowed to sublet, if not, can you work out an arrangement with the owner, like a profit sharing deal, or similar? You should consider the price you can rent the space for.

Think about where you’ll be staying when your home is rented out.

Some people stay in their room, renting out the rest of the home, or only rent out one or two rooms, or stay elsewhere when they book a guest. Put some thought into this because you could secure your first guest sooner than you think and you want to have a plan in place.

Investing in a Secondary Residence

Investing in a secondary residence means you’ll be renting out a home or apartment for the sole purpose of renting to AirBNB guests. To embark on this, here’s what you should consider:

  • The profitability of a secondary unit
  • Investment required
  • Application requirements and background check
  • Time investment

Once you secure your secondary space, you’ll want to furnish it and decorate it.

You can get an idea of possible costs from this article on furnishing AirBNB rentals.

What to Consider When Selecting a Profitable Secondary Residence

You want to make the right choice when picking your unit or home for guests. Here are some things to look at:

  • Average daily rates for properties in the area
  • Your daily and monthly expenses
  • Home decor and furnishings expense (since some units and homes come furnished)

Take your time reviewing all the numbers. You want to make sure your property is competitively priced (consider the weekend pricing too) and you invest the right amount in monthly rent and furnishing costs.

Next, you want to talk to the landlord.

Be upfront in discussing your intention to sublet the unit for rental purposes. If not, it can be very costly and shut your entire business down in the future, if you aren’t forthcoming now.

Once the landlord agrees, make sure to get the agreement in writing and then you’ll be good to go!

Key Rules to AirBNB Rental Arbitrage

These key rules were too good not to share, from Bigger Pockets. Take a look:

1) You should be making money/profit

Keep this in mind, in the forefront at all times. The goal is to make profit. That’s your purpose.

According to Bigger Pockets, the typical target for most rental arbitrage investors is $1,000 net operating income (NOI=revenue minus expenses).

NOI=Net Operating Income


Do your research to make sure you can make a profit. It’s not as easy as you might think. You have to:

  • Research and find a property
  • Lease a property
  • Furnish the property
  • Manage it

If you don’t find a calculated scenario that comes out less than $1000/month NOI, you might actually LOSE money.

2)  You need to make sure everything is LEGITIMATE and TRANSPARENT

Be upfront here. You need to be completely transparent and that means communicate with the landlord that your sole purpose is to sublet (or sublease) the home. The owner must know from the start and then you should capture that agreement in writing.

If the owner does not agree, then, move on.

3) You should have the support of City, County, Local, HOA regulations

You need to be fully aware of all the restrictions. The HOA (homeowners association) can be the most tricky because HOAS can be restrictive, especially condos and new construction communities.

4)  Cost of furnishing needs to be factored into your calculations

Look at the cost of furnishing your property. This includes the cost of furniture plus labor.

For example, if you buy a $500 couch, you should also consider the taxes, delivery fees, and assembly fees, if any. Typical costs can vary widely depending on where you get your furniture, labor cost, etc.

There are opportunities to save money here:

  • Pick up furniture yourself (instead of paid delivery)
  • Enlist family/friends to help with delivery
  • Assemble furniture and appliances yourself
  • Buy locally instead of online

According to this source, a typical 2-bedroom home can be furnished at a cost of $3,000 to $8,000.

When its tie to furnish, remember that the home is completely empty (unless you invest in a furnished unit) and you will have to furnish the entire place as if it were your own home, with home goods like:

  • Curtains
  • Kitchenware
  • Bedding
  • Shower curtains, towels, and toiletries
  • Furniture
  • Plus, more

5) Don’t Forget Extra Expenses

There are usually extras and don’t forget them. Extra expenses include – Utilities, Garbage, Internet, and Streaming TV (Netflix, SlingTV, Hulu), like these 16 money-saving cable alternatives. It’s recommended not to invest in cable.

Who Can Host?

Almost anyone can become an AirBNB host and there are a wide variety of postings available for you to list:

  • Apartments
  • Entire houses
  • Rooms in bed and breakfasts
  • Rooms in inns
  • Tree houses in the woods
  • Boats on the water
  • Enchanted castles

You can read more about the types of properties available to list here.

You’ll find spaces available to rent all over the world, with restrictions in these places, due to international regulations: Crimea, Iran, Syria, and North Korea.

Determine Your Startup Costs

This side hustle may require a small upfront investment. If you compare your space to a hotel or hotel room, think about the condition of your property, age of appliances, your bed, etc. You don’t want to over-invest, as you aren’t the owner so buying a new stove may not be a smart move, but it also might. Look at the pros and cons.

Overall, the expenses you incur include things like:

  • Furnishing costs including taxes and delivery/assembly fees(like buying home decor and other little items to make the space more attractive)
  • Application fees
  • Background check and credit report fees
  • First and last month’s rent

This is considering renting your own space or investing in a secondary residence, for rental purposes.

Investing is not a bad thing. If you’ll be pursuing AirBNB hosting long-term, hopefully you should recoup your costs during the time you are a host.

For example, if you invest $2,500 and your space earns you $1,000/month, then after 2.5 months, you would have recouped your entire investment.

Or, if you invest $8,000 and your space earns $2,500/month, then after 3.5 months, you would have recouped your investment.

Not bad, right?

Other Considerations of Becoming an AirBNB Host

You want to strongly consider the laws in your city.

Some cities have laws that place restrictions on accepting guests for short periods of time. This was shared above. You want to make sure you are getting support from local, country, city, and HOA. This means they don’t restrict short-term rentals and if there are specific rules, you should be in compliance.

If short-term renting is allowed, make sure you get the appropriate permit and/or license, which is a requirement in some areas.

Become an AirBNB Host

So, what do you think?

AirBNB hosting is a great way to supplement your income and essentially pay for your own rent. Their are tons of hosts that do this full-time as their primary income source. It’s a great opportunity to try but make sure you review it all thoroughly to ensure you are making a smart investment.

Are you an AirBNB host? Share your thoughts on your experience, down below. We’d love to hear from you!

Jennifer Leach

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