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to day. This show is

2:05

sponsored by Air Bnb. Did you know that a

2:08

long time ago before I ever started my real

2:10

estate business, I turned one of my first primary

2:12

residences and to an Air Bnb next the extra

2:14

income that I needed from Air Bnb. That gave

2:16

me the confidence to go out and work for

2:19

myself and eventually quit my nine to five job.

2:21

and now I have dozens of Air B and

2:23

B is all over the country. I've even partnered

2:25

up with the All David Greene on a recent

2:27

property in Scottsdale to take our portfolio to the

2:30

next level. and of course we hosted on Air

2:32

Bnb. We'll need to be a full time real

2:34

estate investor to. Start on here. Be and be.

2:36

As a matter fact, I was of managing Ten

2:38

property while working my nine to five job so

2:40

I know anybody can do it. Think about it

2:42

this way, you're looking for extra income and going

2:44

on a vacation. wouldn't it be great to read

2:46

out you space and let your property pay for

2:49

itself while you're gone? I did this one time.

2:51

it's my wife in my roommate is we were

2:53

how sacking on the idea of renting out our

2:55

home in a pay for all of our expenses

2:57

on a trip to Mexico City. So go and

2:59

give it a try. It might just change your

3:01

life just like a did mine and a really

3:03

do mean that your home might be worth. More

3:05

than you think. Find out

3:07

how much as Air bnb.com/host.

3:12

Air Bnb Arbitrage How to

3:14

make money? Without. Owning

3:17

property, By. Samantha Hall

3:19

relax. Subleasing.

3:22

Was frowned upon for a long time.

3:25

But. In today's era of air,

3:27

Bnb popularity is making a solid

3:29

come back and can be a

3:31

great real estate investment strategy. Air.

3:34

Bnb arbitrage allows you to read properties

3:36

to tenants that you rent from a

3:38

landlord. You act as the middleman between

3:40

the owner and tenants and can take

3:42

a piece of the pie without the

3:44

need to own physical real estate yourself.

3:47

So. Is. This strategy

3:50

right for you. We. Got

3:52

an indepth guide for you right now.

3:55

To. Find out. First.

3:57

up what is air bnb arbitrage anyway

3:59

or it's So Airbnb arbitrage

4:01

is a unique real estate

4:03

business model that allows long-term

4:05

renters to sublease properties on

4:07

Airbnb for short-term rentals. Since

4:10

long-term rental prices are typically lower than

4:12

what you could charge for short-term rent,

4:15

you may potentially make a profit. Quick

4:17

example, let's say you pay $1,500 a month in

4:19

rent but can charge $200 a day to rent

4:23

the property. You would cover your

4:25

own rental expense in eight days. Any

4:28

days you rent the property beyond those eight

4:30

days could become profit after any

4:32

cost to incur. Bam! Here

4:35

are the pros of Airbnb arbitrage. You

4:38

don't need a whole lot of capital. Unlike

4:40

purchasing a property, you don't need a

4:42

lot of upfront capital to rent a

4:45

property long-term. At the most, you'll need

4:47

that security deposit and monthly rent. Fewer

4:50

expenses. As a tenant, you're not responsible

4:52

for the major repair expenses or property

4:54

taxes. Your responsibility is the

4:56

rent and smaller expenses

4:59

like cleaning, furniture, decor, basic

5:02

maintenance, and booking fees. Easier

5:05

to leave, too. If you

5:07

don't own the property, you could exit the lease

5:09

when allowed in the agreement if it doesn't pan

5:11

out to be as profitable as you hoped it

5:13

would. You don't have to worry about

5:15

selling the property. Easier

5:17

to scale. If you want to rent

5:19

out multiple properties, it's a whole

5:21

lot easier to scale your business when

5:23

you don't need a significant upfront investment

5:25

to qualify for mortgage financing. You

5:27

can just rent multiple properties a whole

5:30

lot more easily and then sublease them

5:32

to reach your financial business

5:34

goals. Pretty cool. And

5:36

let's take a look at the cons. For every pro's list,

5:38

there's a cons list, am I right? Local

5:41

laws may be complicated on this one. Every

5:44

state and city has different laws

5:46

regarding short-term rentals and, of course,

5:48

rental arbitrage in general. You

5:50

gotta know your local requirements and

5:53

you might need some legal support, too. You

5:56

are responsible for the property. You

5:59

Signed a lease. With your landlord. which means you're

6:01

responsible for any damage from ten. And so when

6:03

you suddenly said. You're. Responsible for

6:05

rent payments to even if you

6:08

can't sublease the property or have

6:10

nonpaying tenants. You. Still going pay the

6:12

rent. Or your risk defaulting on your

6:14

lease. Air. Bnb

6:16

arbitrage vs. Ownership Let's go ahead

6:18

and dive in and understand the

6:20

differences. Comparing. The

6:22

difference between Air B and B

6:25

arbitrage and ownership is really important

6:27

in some situations, especially in cities

6:29

or states. For the laws regarding

6:31

rental arbitrage are strict. Ownership might

6:33

be the only way to go.

6:36

Required. Investment: The main difference between

6:39

Air Bnb arbitrage and ownership is of

6:41

course. The. Required investment.

6:44

When. You own the property, You gotta come up

6:46

with the down payment, pay all the taxes and

6:48

insurance, and keep up with your mortgage payment to.

6:50

You. Are responsible for the required

6:53

security, deposit and rent payments. When you

6:55

rent, the landlord is responsible for covering

6:57

the taxes insurance up minus any damage

6:59

your tenants costs. Which. You are

7:02

responsible for. And. Then

7:04

there's the risk. The risk for

7:06

Air Bnb arbitrage is somewhat less

7:08

than that of ownership, but they

7:10

both have some risk. If. The

7:12

market conditions change and demand for rent

7:14

decreases. You. Must still need

7:17

the terms of your rental or mortgage

7:19

agreement. If you're unable to collect rent.

7:21

You. Might say financial difficulties covering

7:24

the payments. And. Then

7:26

there's finding tenants. There's really a

7:28

major difference between. Air Bnb

7:30

arbitrage and owning an investment property

7:32

to rented tenants. With.

7:35

Rental arbitrage. You. Are always

7:37

looking for new tenants whereas with ownership

7:39

you typically issue like a one year

7:41

or longer lease. This could have its

7:43

pros and cons. If your long term

7:46

tenants are easy to manage, this may

7:48

be preferable because it's it takes less

7:50

work but if they aren't. Could.

7:52

Be a nightmare you're stuck in for at least

7:54

twelve months. If not longer, Rental.

7:57

arbitrage on the other hand allows

8:00

you to have tenants for a short time, but

8:02

of course it may make filling vacancies a

8:04

little more challenging, especially during slow times. And

8:07

then there's the ROI. ROI is impossible

8:10

to predict in every situation, but you

8:12

may have more flexibility in ownership because

8:15

you're in charge. You can choose

8:17

to improve the property to charge higher rent, or

8:20

you can charge rental prices that more

8:22

than cover your mortgage payment. You

8:25

have somewhat less flexibility with rental arbitrage

8:27

because you're kind of at the mercy

8:29

of the rent charged by the landlord

8:31

and their desire to improve the property.

8:34

If you're already paying premium rent, seeing a

8:36

high ROI in some cases can be pretty

8:38

hard. Legal

8:41

landscape and compliance. We gotta touch

8:43

on this. In most

8:45

cities and states, rental arbitrage is actually

8:47

legal, but local ordinances must

8:49

always be checked. Focus

8:51

on short-term rental regulations, including whether Airbnb

8:53

is even allowed in that city. The

8:57

limits, including the maximum number of nights

8:59

you can offer a short-term lease. In

9:02

addition to the local laws and

9:04

regulations, you have to ensure your landlord actually

9:06

allows this thing. Your landlord may

9:08

exclude it from your lease, so if you

9:11

want to do Airbnb arbitrage, find

9:13

a landlord who's going to allow it. So

9:16

here's how to get your landlord on board. Convincing

9:19

your landlord to allow Airbnb arbitrage could

9:21

be your largest hurdle when doing this.

9:24

To convince your landlord of the possibility of

9:26

this business opportunity, focus on how

9:28

this will ensure you keep up with the

9:30

property because it provides you with income. Yeah,

9:33

there are risks that the tenants will damage

9:35

the property, but landlords take that risk no

9:37

matter who they're meant to, both

9:39

short and long-term. Airbnb

9:41

does provide that $1 million liability

9:44

insurance for hosts, and you can

9:46

always layer in third-party insurance, including

9:48

it in your costs and rent

9:50

charges to tenants. This

9:53

just helps provide the landlord with as

9:55

much coverage as possible for potential damages.

9:58

If you rent in an area where you can charge high

10:00

rent to short-term tenants and earn a

10:02

little nice profit on the side, you

10:04

can consider sharing a percentage with your

10:07

landlord or entering into a multiple property

10:09

lease with them in exchange for the

10:11

option to sublease. The key is

10:13

to make it as attractive

10:15

for landlords as possible. Be

10:18

ready to combat any objections your landlord

10:20

has. Some, you

10:22

know, more common ones. Knowles. So

10:25

how are you going to ensure your tenants keep

10:27

the noise level down so as not to bother

10:29

others in the area? Turnover

10:31

bothering other tenants. How

10:33

are you going to screen potential tenants so you

10:36

know they won't be a nuisance to current tenants

10:38

in the building? And then there's

10:40

the property maintenance thing. Constant turnover means

10:42

the property will need more maintenance and

10:44

repairs. So you have to plan

10:46

to work with the landlord on how to handle

10:48

that. Estimating

10:51

your ROI and startup costs.

10:53

So estimating your ROI and startup can help

10:56

determine if Airbnb arbitrage makes sense in the

10:58

area you're planning to do it. Using

11:01

an Airbnb calculator you can estimate the

11:03

potential income and then compare it to

11:05

the rent charged. To keep

11:07

things simple, assume a 50% occupancy

11:10

rate monthly or you'll earn rent

11:12

subleasing 15 days a month. Determine

11:15

the average rate for the area and

11:17

multiply it by 15 days just

11:19

to see how much you can average. Compare

11:21

this number to the cost of renting

11:23

the property plus of keep expenses to

11:25

determine your ROI. Now

11:28

let's touch on running your

11:31

successful Airbnb arbitrage business. Running

11:33

a successful arbitrage business takes

11:35

time, patience, and knowledge. Of

11:37

course, here are some quick

11:40

tips though to get you started and

11:42

you can read more in our in-depth guide

11:44

on investing in short-term rental properties at biggerpockets.com.

11:47

The first thing we'll talk about? Over

11:49

estimate your startup costs. This is

11:51

crucial and it reduces the risk

11:53

of getting it over your head and realizing

11:56

a loss for much of the rental period.

11:58

Think insurance. costs, legal

12:01

fees, decor, furniture,

12:03

extra insurance, cleaning service,

12:05

and maintenance. And

12:07

then build up a direct booking site.

12:09

Airbnb arbitrage is great for beginners, but

12:11

once you get experience, you

12:13

can eliminate the middleman and reduce

12:16

Airbnb commissions, increasing your

12:18

ROI. Know the

12:20

market and its seasonality. Know

12:22

the poll of tourism in the

12:24

area you're considering investing in, and

12:26

closely evaluate its seasonality so you

12:28

can be realistic about vacancies and

12:31

potential profits. Automate

12:33

guest reviews. You need reviews

12:35

to entice more renters. So make

12:37

the guest review process automated so

12:39

you aren't chasing down tenants for

12:41

reviews, or for getting and

12:44

missing this important piece of the marketing

12:46

puzzle. And then, assemble

12:49

a professional team. You

12:51

can't run a short-term rental business all by yourself.

12:54

People need powerhouses like real

12:56

estate attorneys, property managers, cleaning

12:58

crews, and a

13:00

fantastic real estate agent. Some

13:04

final thoughts. If you

13:06

lack a lot of capital or don't want a

13:08

hassle of owning real estate all by yourself, Airbnb

13:11

arbitrage can be a happy medium

13:14

that can yield fantastic profits. Find

13:17

the right area to rent, and working with

13:19

a willing landlord is absolutely key. Airbnb

13:21

arbitrage is one of the easier

13:23

businesses to scale, and

13:25

can quickly help you build a real

13:28

estate portfolio that turns a handsome ROI

13:31

without owning property yourself.

13:36

You made it through another episode of

13:38

Bigger Pockets daily. Did you learn something

13:40

new? If you still have

13:42

questions about this subject, go ahead and

13:44

jump onto the forums at biggerpockets.com/forum. It's

13:47

like being at a 24-7 networking event. Without

13:51

all the business cards and awkward small

13:53

talk, the weather is

13:55

really not that interesting. Otherwise,

13:57

you know the drill. We'll have another

13:59

episode. The still waiting for you and the morning. Data.