The Rise of the Airbnb Rental Arbitrage Model – Why Does it Work?

The Rise of the Airbnb Rental Arbitrage Model – Why Does it Work?

If you’re a fan of travelling, you’ve probably heard of Airbnb. It’s a popular online platform where you can book rooms or even whole houses to stay in while you’re on vacation.

But aside from using the app to make your “staycations” even better, did you know that you can also use it to earn extra income?

According to Airbnb, their hosts make an average of $13,800 a month which is a pretty decent amount for a side hustle.

Of course, it still depends on the kind of property you own, where it’s located, and the kind of amenities you can provide.

But what if you don’t own any property at all? As in zero, nada, zilch. Is there really no way for you to tap into the business then? Well, fortunately, there is.

And today, you’re going to find out how people can launch an Airbnb business and earn 5 figures a month without owning or buying properties.

 

 

The Power of the Airbnb Rental Arbitrage Model

Setting up an Airbnb business is much easier when you have vacant real estate or enough capital to buy one. However, most people don’t and this is why it can be a challenge to start.

The good news here is that the old adage still holds true – when there’s a will, there’s a way.

And for people who want to launch Airbnb businesses without buying or owning properties, there are actually two ways to do so:

 

Subleasing

Subleasing is a form of rental arbitrage where you look for a property to rent.

Once you do, you have to get in contact with its landlord or owner and ask them if you can use the property as a short-term rental on Airbnb. 

When you get a yes from the landlord, you can now sign a legal agreement that you now have permission to use the property as a short-term rental, and then furnish it so you can launch it on Airbnb.

 

Co-Hosting

Co-hosting is another strategy that lets you earn through Airbnb by offering your services.

Some owners may not have enough knowledge in setting up their place, or they may need an extra hand in managing their Airbnb – this is where you come in.

The best thing about this method is that it will allow you to earn without actually having to put out money as capital.

 

Does the Airbnb Rental Arbitrage Model Really Work?

Now that you know what strategies to use to start your Airbnb from scratch, you might be getting more confident about launching one.

And that’s great because this business is a great passive income source.

However, you might also be wondering – is it really that profitable? What about competition?

Well, aside from other listings in the same area, the biggest direct competitor of Airbnbs are hotels.

And this is true in any locality because guests are always looking for better options.

This might cause you to wonder if your future Airbnb will even get the chance to see profits if hotels are around.

Short answer, YES. In fact, here are 3 reasons why people would prefer Airbnbs over hotels.

 

1. Airbnbs are Cheaper

Staying at a hotel can cost more money than renting an Airbnb, especially if your guests are travelling with a group of people.

Let’s say they’re travelling with their family of 10. When they book a hotel, they’ll be staying in separate rooms and incur additional costs per room.

They’ll also get less time to interact with their family.

However, with Airbnb, they can rent a whole house with 5 bedrooms and stay together.

They can even cook, make breakfast, and have a much better experience at a fraction of the cost. 

 

2. Airbnbs Have More Amenities

While some hotels have pools, guests may not like sharing their space with others for health and safety reasons.

So, some people book Airbnbs with pools that they can enjoy for themselves. 

Other visitors may even prefer your place better if you have a foosball table, a game room, arcades, and other amenities they can enjoy with their families.

Remember, people are not just thinking about places to stay, they’re also looking for memorable experiences to try.

 

3. Airbnbs Offer More Privacy

Imagine your family travelling together, having a great time, laughing, making new memories, and just enjoying each other’s company in a new place.

Only you wake up the next morning finding out that you’re sharing it with somebody else. It would bum you out, right?

Well, a lot of people feel the same. And that’s why some people would prefer to have personalized experiences in Airbnbs over hotels.

We’ve mentioned earlier that the average income of an Airbnb host crosses 5-figures a month.

How this can come true for other people is dependent on the kind of property and experience they can provide. 

But with all the reasons stated above, it’s safe to say that your future Airbnb business, if you choose to have one, WOULD NOT be inferior to big hotels.

This is why Airbnbs just work.

 

Your Airbnb Business Checklist

So let’s go back to starting your business without owning or buying properties.

You now have two techniques in your arsenal right?

Well, let me show you four of the most important things to keep in mind when using the Subleasing and Cohosting strategies for your Airbnb business.

 

1. Contracts and Agreements

Both the subleasing and cohosting strategies need you to put things in black and white.

Contracts and agreements are the most fundamental part of these techniques and not having them may cause legal battles in the future.

For Subleasing, your agreement needs to show that your landlord is aware that you’re using their property as a short-term rental and that they gave you permission to do so.

They also need to agree to change their locks for the period of the lease.

For Cohosting, you need to have a contract that clearly shows the most important elements of your deal.

This includes your compensation, the duration, and the exact roles you’re playing in the business.

 

2. The Right Property

Finding the right properties to launch is challenging because not all spaces are created equal. But here are some tips:

For Subleasing, you need to look for properties that are in cities that:

Allow short-term rentals
Have heating and cooling systems already installed
Have parking spaces good for two vehicles
Are well within your budget.

If you have real estate agents in your contacts or you’re a real estate agent yourself, you can offer your services as a Cohost too.

 

3. Learn How to Talk to Landlords

Learning how to talk to landlords is an essential skill especially if you want to sublease properties.

If you want to be a cohost, on the other hand, you can also use this skill to help newbie entrepreneurs find properties they can sublease and earn money in return.

 

4. Listing Management

Managing and scheduling maintenance and cleaning can be a handful.

But these are essential parts of having an Airbnb business and without these, your business won’t grow and thrive.

So if you’re worried that you can’t do them on your own, don’t fret. You can always delegate these steps and automate your systems and processes too.

All of these so you can give stellar customer service to your guests.

These are just some of the most important things to add to your checklist when starting an Airbnb business.

If you want to learn more, feel free to download and check out our free training guide here.

 

Related reading:

How to Start an Airbnb Business Without Owning a House

 

 

The Rise of the Airbnb Rental Arbitrage Model – Why Does it Work?

 

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