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Rental Arbitrage

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By: Scam Risk - Expert Reviewer

Rental Arbitrage 2021: Is It Still Worth It Considering The Moratoriums?

Rental Arbitrage Overview

For short-term rental (STR) investors, rental arbitrage has become a HIGHLY LUCRATIVE sector.

It is undeniably popular among individuals seeking financial freedom via passive income.

The allure of rental arbitrage is that investors do not need to own property to get started in the business. Many prospective short-term rental property owners, however, are skeptical about the real profitability of the Airbnb arbitrage business. But there are always risks in business, as there are in any other.

More significantly, first-time rental arbitrage hosts must understand the intricacies of rental arbitrage before concluding that it is not lucrative.

So, is it really profitable to engage in short-term rentals arbitrage? What steps should you take to get started? Where do you even start looking for a rental property?

Table of Contents

What To Expect From This Rental Arbitrage Review

This review will go over Rental Arbitrage to see if it really is the best short-term rental investing course out there.

You’ll learn whether short-term rental investing is the right online business for you.

And at the end, you’ll find answers to some of the most frequently asked questions regarding Rental Arbitrage and short-term rental investing in general.

But most importantly, you’ll see the exact system many others have used to build their own internet marketing business to over $40,000 a month in mostly passive income. 

This system made them swear off short-term rental investing for good, because it uses some of the same skills but in a much more powerful and profitable way!

What Is Rental Arbitrage?

Rental arbitrage is the practice of renting out long-term homes and then re-renting them to others on a short-term basis through short-term rental platforms like Airbnb or HomeAway.

Contrary to common perception, HomeAway and Airbnb arbitrages are legal businesses and vacation rental platforms as long as you follow laws and liability rules in your location.

Essentially, rental arbitrage is a means for individuals to start generating passive earnings via real estate without really owning property and to run an STR business without actually owning property.

Doing Rental Arbitrage Business vs. Doing Rental Property Ownership

STR property investors have the option of purchasing their own property or starting rental arbitrage for their business. 

Both strategies have advantages and disadvantages, but rental arbitrage seems to be more popular among those seeking positive cash flow.

Here’s a deeper look at the distinctions between owning property and engaging in rental arbitrage for an STR business:

Rental Arbitrage

  • It is not necessary to possess property.
  • It provides a consistent source of passive income.
  • Allows for serial renting (renting multiple properties).
  • There are no property taxes.
  • There is no need to insure appliances (this is the landlord’s obligation).
  • Allows for small incremental growth and monthly reinvestment of earnings.
  • Allows for the possibility of terminating the lease early – lesser commitment involved.

Property Ownership

  • A 20% down payment is required on the property (non-FHA loan)
  • Property taxes, HOA fees, and utilities must be paid.
  • It takes a year or more to recoup the first investment and purchase a second home.
  • Requires a significant financial commitment to a mortgage (if the place is in an unfavorable location for Airbnb arbitrage, you’re left with the mortgage and either convert it to a long-term rental property or sell the home).
  • Appreciation of property value.

How Much Does It Cost To Start A Rental Arbitrage Business?

You’ll be looking at $5,000 to $10,000 start-up costs at a minimum to start a short-term rental arbitrage business. The following items will be included: leasing expenses, furnishings, décor, bedding, and kitchenware, as well as entity incorporation and listing photos.

Nonetheless, one of the most alluring aspects of short-term rental arbitrage is that no buying of property is required.

This means you won’t need to save a large sum of money for a down payment and closing fees to start a rental arbitrage business.

It won’t be your responsibility to cover significant building upkeep costs.

That being said, you do not need to be on a tight budget to do Airbnb arbitrage business. Even though it’s a lot cheaper than buying real estate, there are still some expenses at the beginning.

Airbnb Rental Arbitrage Business: How To Get Started Without Owning Property

While there are many phases to starting an Airbnb business, the following is a basic checklist of steps to help you:

Look for an ideal Airbnb arbitrage location.

As a first-time Airbnb rental arbitrage business owner, the most practical and feasible choice is to begin looking for rental properties in your neighborhood. 

This option enables you to address guest or property problems in real-time and more efficiently if you live near the property.

However, it is not advisable to restrict your business to the neighborhood in which you presently reside since the possibilities are limitless for Airbnb income. 

The STR market may be thriving in other cities distant from where you reside, so bear this in mind when selecting a place for the vacation rental business. 

After exploring your present area, you may always extend your short-term rentals business to other locations.

Keep In Mind The Main Objective Of Rental Arbitrage Business!

Remember that the main objective is to identify a location that generates the most profit and the greatest gap between the short-term rental price (bid) and the amount of short-term rental income (ask).

Let’s put this into context with a more realistic scenario for vacation rental. If you want to establish a rental arbitrage business and reside in London, UK, you should search for lucrative areas that are within a 3-hour drive of London.

The initial stage should be to locate areas with adequate short-term vacation rental demand and a large number of transactions. This step will guarantee that your business’s occupancy rates remain high. The Average Occupancy Rate is an essential statistic to examine during this stage since it is a strong indication of overall supply and demand in the market. Use this information to calculate how many days your property may be booked out of the total number of days it is available.

50+ Airbnb hosts have been interviewed to get a sense of how they selected a place for vacation rental, and it was discovered that they got their information from a variety of sources.

Here are some of the many techniques used by Airbnb arbitrage hosts:

  • Getting in touch with local property managers in their location
  • Taking part in Airbnb host communities using social media 
  • Using the BiggerPockets real estate forum to ask questions.
  • Manually scanning individual Airbnb listings for different areas

Whatever technique or a mix of strategies you select, bear in mind that every business and host is unique. Despite their same location, one host may operate their business differently from another host in the same area, resulting in a higher profit.

It is good for you to do a more systematic approach to starting your business by researching potential rental sites utilizing the software. To get more customized and accurate information, explore using the unique Tailored Area Explorer software to define your own region. 

The benefit of this data is that the software tools adjust for regional price variations across various areas, so the data is more precise and genuinely represents the pricing patterns of the place.

Make better-educated choices by using accurate data that is customized to your particular business needs, eliminating the need to depend on the expertise of others. 

The  STR software solutions were designed in such a way that you may utilize the expertise of others as a complement to your rental arbitrage business rather than as the main source.

Identify a specialized need in your market.

There are possibilities in every location. You just need to identify the one-of-a-kind niche in the market where there is little supply and strong demand. You have more choices since you are renting rather than purchasing a property.

Here are a few things you should consider.

  • Which niche do you wish to specialize in? (Handicap-accessible houses, business-traveler-friendly accommodations, anime-themed rooms, and so on.)
  • What kind of property are you looking for? (For example, a studio, a 5-bedroom home, a 3-bedroom apartment, and so on.)
  • How many bedrooms do you want to buy? What is the maximum number of persons you wish to accommodate?
  • What sort of facilities do you want? (Hot tubs, pools, gyms, leisure rooms, and so forth.)

There are many things to consider before starting your rental arbitrage business.  According to research, studio apartments have greater occupancy rates and higher average daily rates (ADR) as compared to monthly, long-term rental costs. It is also generally worthwhile to purchase a couple of additional mattresses in order to accommodate more guests.

But imagine for a second that you could run an even easier arbitrage business…

I’m talking about creating websites that you can RENT OUT to local small businesses who need extra leads.

Sound crazy and out there?

The truth is this how you REALLY earn passive income…and it’s so much less of a head ache!

Ensure compliance with real estate legislation and requirements.

The STR business is subject to a variety of laws and regulations regarding Airbnb arbitrage, depending on the location. Make sure to apply for any rental arbitrage licenses that are needed in your desired area.

Visit Airbnb’s official website for a more comprehensive list of legal and regulatory concerns to consider before hosting on Airbnb.

Establish your reputation to solidify your position to secure property owners.

Before you delve into creating your pitch to property owners, here are a few things to think about:

  • Maintain a solid credit rating
  • Save a sufficient amount of money (extra money to offer for rent)
  • Have some references on hand.
  • Agree to cover minor maintenance problems up to a certain amount.
  • You must provide your own liability insurance (especially if taking direct bookings)
  • All of these ideas will help you address some of the property owner’s worries or problems with your rental arbitrage presentation/offer. Preparation is essential for the time you spend getting ready to pitch to property owners, so don’t miss this stage.

Provide furnishings for the property.

This is where the majority of your money should be spent since high-quality design and furnishings may appeal to a wide range of visitors.

Budget a few thousand dollars on the essentials, such as a couch, a high-quality mattress and bedframe, excellent pillows, cooking utensils, towels, and so on. 

How To Make A Proposal To Property Owners

There are various types of property owners, ranging from single-family to multi-family and even entire apartment buildings.

The key to pitching to various property owners is to carefully consider each property owner’s requirements.

As a first-time STR company owner, try not to concentrate on YOUR needs.

The entire purpose of presenting to property owners is to concentrate on what their current or future requirements are and how your business can help them.

Who enjoys dealing with tenants on a daily basis?

Not many.

You may make the landlord’s life simpler if you propose to be the single point of contact and property manager for both the renters and the landlord.

Keep in mind that some homeowners may be sensitive to the fact that their property was obtained via years of hard work and saving money while bargaining for your Airbnb rental arbitrage business.

Their property is a large and valuable asset that may not be readily bargained for.

When addressing this subject, you must be sensitive and show respect for their property.

But hey, if you don’t like the idea of dealing with potentially harmful tenants either…you really should check out my #1 recommendation!

It takes away all those scary headaches!

When marketing your rental arbitrage business to homeowners, consider the following important compromises:

  • Suggest that you repair anything that requires maintenance.
  • Offer to do a background check on each renter.
  • Negotiate a profit-sharing arrangement if possible.
  • The monthly rent should be somewhat higher.

Is Rental Arbitrage Business Profitable?

Airbnb income is determined by a variety of factors, including location, type of facilities, the existing market, past or projected trends, occupancy rates, and others.

As a first-time rental investor or Airbnb host, it would be understandably difficult to conduct independent research on all of these factors, especially when you have a long list of tasks to accomplish.

Can I Really Make Money With Rental Arbitrage?

Yes, You can!

But…

There’s a lot that comes along with short-term rental investment that many people struggle with. 

Now, don’t get the wrong idea…  

It’s not impossible to make money with short term rental investment, but if you’re gonna put in the amount of grueling work to do this business (which, trust us, isn’t easy), you might as well bring in some REAL money while you’re learning the ropes.   

The program that helped skyrocket many online businesses to over $40,000+ per month is so simple that making money really does become second nature. 

Is Airbnb Rental Arbitrage Legal? Or Is It A Scam?

It is entirely possible to build a profitable, successful short-term rental business… But there are better ways to build a business other than through short-term rental business.  

Our #1 pick proves this.

Because, unlike rental arbitrage, it actually provides real proof of real success from real people as recently as a few days ago.

What Are The Best Cities For A Profitable Rental Arbitrage?

Rental arbitrage is a business that is constantly changing, especially as people’s travel plans and living situations change as a result of the ongoing pandemic. 

Identifying only a few cities as the “best cities for rental arbitrage” is not a definitive answer to your search for the best location.

Some Airbnb hosts may have been successful with their properties in thriving tourist areas prior to the pandemic, but those cities may no longer be doing well.

When deciding on a rental location, location analysis should be one of your top priorities in order to increase profitability during such volatile times, especially as the pandemic continues to impact the rental market.

If your current rental arbitrage properties are not performing well, you can always terminate the leases and relocate your business to a different location. 

This type of low commitment is what makes rental arbitrage appealing when deciding which cities are best for you.

What Are The Advantages Of Doing Market Research, And How Can You Utilize It?

Because data = information, market research is very important for your rental arbitrage business and the ability to make a significant profit.

You may utilize data to diagnose issues, forecast future trends, make educated choices, and execute evidence-based strategies for your rental arbitrage business.

Understanding data is one of your most valuable tools for strategizing in your business, apart from having the drive to succeed in rental arbitrage.

Market research is always essential when deciding how to proceed with your business.

For example, if data indicates that, notwithstanding COVID-19’s economic effect, certain locations continue to receive a large number of reservations, it’s time to rethink your business strategy.

You can observe which cities are performing well or badly and pick where to relocate based on that. The allure of rental arbitrage is that you are not tied down to a mortgage, but rather to a lease, which is a lot less commitment than a 15 or 30-year fixed mortgage loan.

The Debates and Criticisms Around Rental Arbitrage

People will naturally take advantage of arbitrage opportunities wherever there is a relatively low-risk profit to be made, which is the definition of arbitrage.

If a large number of people take advantage of arbitrage opportunities whenever there is one available, it will have some unintended consequences.

In the case of rental arbitrage, the result has been rising rents and a scarcity of affordable housing.

Following the bursting of the housing bubble in 2008, more people were forced into the rental market, exacerbating the situation. As fewer families owned their own homes, competition and prices of monthly rent increased.

Rental arbitrage exacerbates the problem by shifting more units from the long-term lease market to the short-term rental market.

Conclusion

Rental arbitrage can be a very profitable side business. There will be some upfront costs, but it will be far less expensive than purchasing a property.

But before you start arbitrage with Airbnb, consider ethics.

While your decisions may be profitable, you may end up displacing or pushing up the prices for your neighbors, depending on the housing market in your neighborhood.

What Is Our Top Recommendation For Making Money Online In 2021?

Where these AirBnB Rental Arbitrage investments fall short is in scalability. 

Because in order to make a good amount of money with real estate, you have to own several different houses.

And who has that kind of capital to start?

But what if you went local?

With Local Lead Generation, you will be getting service requests from multiple sites at every minute of the day from people who are willing to pay a lot of money for what you can provide them.

I was watching a YouTube video once where the host made a comment that it isn’t about making a lot of money from one website… it’s about making a little bit of money from lots of different websites.

So, think of it this way….

What if you could have streams of investment income where you operated 10 rental units that you could charge anywhere from $750-1,000 per month?

That’s $7,500-10,000 per month in passive income!

What If You Invested Into 100 Rental Units?

But instead of spending $Millions to build houses or apartment complexes… you spend a couple hundred dollars to build websites.

You then get those websites ranked in the search engines for specific home-based services that customers are searching for.

Next, you offer your lead generation system to local business owners who

are looking for customers and are willing to pay you for their information.

And Then…

BAM!

You’ve just created a Digital Real Estate Investment Empire that is potentially earning you 4-5 figures in PASSIVE INCOME on a monthly basis without spending a single dime on ads.

With conventional digital real estate, you have to compete with thousands, if not millions of others who are selling the SAME product to the SAME customers.

Once the training program is completed you will also have access to a Facebook group much better than the Rental Arbitrage group in our opinion. This group is much more active.

Unlike Rental Arbitrage, where you’re profiting maybe $250 per property, you could be getting 5-10X THAT.

With Local Lead Generation, the competition is virtually nothing and your profit margins are 85-90%.

Now, I could go on and on, but I’m sure you have tons of questions about how to create Digital Real

Estate assets and start building YOUR digital empire!

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