• Platform
    Meet Breezway

    Save time with the leading property operations and experience platform.

    See all products
  • Solutions
  • Integrations
  • Resources
    Learning Center

    Access industry-leading guides, ELEVATE webinar recordings, resources, reports, and Airbnb checklists.

    Visit the Learning Center

Airbnb rental arbitrage: How to start a profitable business without buying a property

Lizzie Griffin
Airbnb rental arbitrage

Imagine running a profitable Airbnb business without ever owning a single property. If that sounds a little too good to be true, you’re not alone—it’s a model that can surprise many new and aspiring Airbnb hosts. But this idea, known as Airbnb rental arbitrage, is real and has gained significant traction over the past few years. Rental arbitrage allows entrepreneurs to lease a property long-term, then re-rent it on Airbnb and other vacation rental platforms, capitalizing on the difference between monthly rent and nightly bookings.

For those looking to start or expand in the short-term rental (STR) industry, Airbnb rental arbitrage offers a way to get started with lower capital real estate investing compared to purchasing a property. However, it’s not a one-size-fits-all solution, and it comes with its unique challenges, responsibilities, and considerations.

In this guide, we’ll dive into everything you need to know about Airbnb rental arbitrage to decide if it’s right for you. We’ll answer common questions, weigh the pros and cons, walk through how to get started, and give you tips for managing and scaling your business efficiently.

Master Airbnb arbitrage operations
Breezeway helps Airbnb superhosts save time and make money with tools to run their business more efficiently.

Book a Demo

What is Airbnb rental arbitrage?

Airbnb rental arbitrage is a business model in which a host rents a property on a long-term basis, typically for 12 months or more, and then lists it on Airbnb and other short-term rental platforms. By setting a nightly rate that, when averaged over the month, exceeds the cost of rent, utilities, and other expenses, hosts can turn a profit.

Example scenario:
Let’s say you lease a two-bedroom apartment for $2,000 a month in a popular tourist area. During peak season, you may be able to charge $200 per night. Assuming you can book around 20 nights per month, your total monthly Airbnb income could reach $4,000, allowing you to cover expenses and make a healthy profit.

For many hosts, rental arbitrage opens the door to running a vacation rental business without the financial and legal complexities of buying property and the hassle of becoming a homeowner. However, it’s crucial to understand the rules and regulations that come with the model, as well as the operational demands.

How does Airbnb rental arbitrage work?

Starting an Airbnb rental arbitrage business requires more than simply signing a long-term lease and posting an Airbnb listing. To set yourself up for success, it’s essential to follow a few key steps that lay the groundwork for long-term profitability:

  1. Lease agreement and landlord approval
    Lease agreement and landlord approval Securing permission from the landlord is one of the first and most critical steps. Unlike regular leases, where subletting is often restricted, short-term rental arbitrage requires a landlord’s explicit consent to re-rent the unit on a short-term basis. A strong pitch is essential, where you demonstrate that you’ll maintain the property, prevent property damage, and handle guest check-in and check-out professionally.

    Pro Tip: Showcasing the use of professional software like Breezeway to clean and maintain the property can help build trust with landlords and make your business feel more legit. Book a Demo

  2. Rental property setup
    Investing in high-quality furnishings, decor, and essential amenities will make your property more attractive and help ensure a steady stream of bookings. Keep in mind that you’re setting up a space for guests, not permanent residents, so include amenities that meet guests' short-term needs, like extra toiletries, a coffee maker, fresh linens, and a fully stocked kitchen.
  3. Marketing and listing optimization
    A well-crafted listing on platforms like Airbnb, Vrbo, or booking.com is essential. Write a compelling description, highlight unique amenities, and invest in professional photos to stand out from competitors. On top of that, research your local short-term rental market to price competitively; you can consider using dynamic pricing tools to adjust rates based on demand.
  4. Operations and maintenance
    One of the largest considerations in Airbnb rental arbitrage is the day-to-day management. Breezeway’s property management software can simplify operations by automating turnover cleanings, inspections, and guest messaging. By keeping operations efficient, you’ll reduce stress and provide a consistent experience for guests, leading to higher ratings and more bookings.

Is Airbnb rental arbitrage legal? Understanding the regulations

Before you jump in and make an initial investment, it’s essential to understand that short-term rental regulations can vary significantly from city to city. Some cities require permits or licenses, while others have outright bans on short-term rentals, especially in residential neighborhoods and HOAs.

How to navigate regulations and compliance:

  • Research local short-term rental laws: Start by visiting city websites or consulting local authorities to learn about local laws concerning short-term rental.
  • Seek legal advice: Consult with a real estate attorney if you’re unsure about compliance in your area.
  • Neighbor relations: Be mindful of noise levels and neighborhood dynamics, as some cities monitor complaints related to short-term rentals.

Regulatory compliance can feel like a hurdle, but it’s crucial for a sustainable and legally sound Airbnb rental arbitrage business. When done right, you’ll not only avoid fines but also foster a positive relationship with your community.

Pros and cons of an Airbnb arbitrage business

Airbnb rental arbitrage has gained traction for good reason—it’s an accessible and potentially profitable business model. However, it’s important to weigh both its benefits and drawbacks to determine if it aligns with your goals.

Pros of Airbnb rental arbitrage

  • Lower startup costs: Unlike buying an investment property, rental arbitrage doesn’t require a significant down payment, making it accessible to new hosts.
  • Faster returns: Hosts can potentially generate revenue as soon as they start listing properties, with profits that scale based on occupancy and pricing.
  • Scalability: Once hosts have one property running smoothly, they can replicate the model across other units, growing their business without the financial strain of property ownership.

Cons of Airbnb rental arbitrage

  • Unpredictable income: Short-term rental income can vary greatly, and hosts risk vacancy during low seasons.
  • Legal hurdles: Navigating regulations is a top challenge and can be a deal-breaker in certain areas.
  • Operational complexity: Hosting involves much more than listing a property; managing turnovers, cleanings, and guest inquiries requires efficient systems and reliable partners like Breezeway.

Master Airbnb arbitrage operations
Breezeway helps Airbnb superhosts save time and make money with tools to run their business more efficiently.

Book a Demo

Getting started: A beginner’s guide to launching an Airbnb rental arbitrage business

For those ready to dive in, this step-by-step guide provides a clear path to launching a successful Airbnb rental arbitrage business:

  1. Conduct market research
    Before leasing a property, research the market conditions to ensure demand for short-term rentals in the area. Platforms like AirDNA and Mashvisor provide valuable data on occupancy rates, average nightly prices, and seasonal trends.
  2. Negotiate with landlords
    Approach landlords with a clear pitch that outlines your business plan and emphasizes your commitment to maintaining the property. Offer to include routine maintenance, inspections, and even revenue-sharing if needed to gain their buy-in.
  3. Choose and prepare the property
    Look for units that are already furnished, as this can save on setup costs. If you’re furnishing the space yourself, consider the needs of short-term guests: prioritize quality, comfort, and amenities like Wi-Fi, TV, and laundry facilities.
  4. List your property and begin marketing
    High-quality photos, a captivating title, and an optimized description are must-haves. You can also leverage social media and local groups to promote your listing and boost visibility. Finally, dynamic pricing tools help ensure your rental rates are competitive and responsive to market fluctuations.
  5. Use technology to streamline operations
    Breezeway’s software can help by automating messaging, turnover tasks, and inspection checklists, freeing you up to focus on guest interactions and growth. Automating these operational aspects will keep you organized and minimize the time you spend on repetitive tasks.
  6. Build a strong guest experience strategy
    Aim to deliver an experience that leads to positive reviews and repeat bookings. Enhance the guest experience by responding promptly to inquiries, providing local recommendations, and following up to ensure guest satisfaction. Positive feedback builds credibility, helping to boost your listing’s ranking and attracting more bookings.

Pro Tip: Breezeway Guide is the ultimate guest experience tool, providing your guests with a digital welcome book equipped with everything they need to know about the property and local area to make the most of their stay.

How to maximize profits with Airbnb rental arbitrage

The goal of Airbnb rental arbitrage is to turn a profit—and ideally, a substantial one. Here are strategies to help maximize your profits and establish consistent cash flow:

  • Seasonal pricing strategy: Adjust your nightly rates to align with seasonal demand, using peak times to boost revenue and off-peak times to maintain occupancy with discounts or long-term rentals.
  • Encourage longer stays during low seasons: Offering discounts for week-long or month-long stays can fill gaps in bookings during low-demand times.
  • Upsell amenities: Provide add-on services such as airport pickup, guided tours, or equipment rentals for an additional fee. These extra services can enhance guest experience and increase your revenue.

Pro Tip: Use Breezeway Upsells to automatically send guests enticing upsell offers at the right time during their stay.

Using these strategies effectively requires a balance between revenue goals and guest satisfaction—something that Breezeway’s platform helps achieve by automating and refining operations so you can stay focused on profitability.

Scaling your rental arbitrage business

Once you’ve established a successful arbitrage property, it’s natural to consider expanding. The scalability of rental arbitrage makes it relatively easy to replicate your business model across multiple Airbnb properties to drive more passive income. However, scaling requires solid infrastructure and reliable systems.

Tips for scaling your rental arbitrage business

  • Streamline operations: Make use of Breezeway’s automation tools to manage turnovers, inspections, and guest communication across multiple properties.
  • Outsource key tasks: When managing multiple units, consider outsourcing cleaning and maintenance to trusted vendors. Automation can help you coordinate these tasks seamlessly.
  • Diversify your portfolio: Expanding into different neighborhoods or property types can mitigate seasonal risks and help attract a more diverse guest base.

Is Airbnb rental arbitrage right for you?

Airbnb rental arbitrage can be a rewarding business model for those who approach it with the right mindset and resources. It offers the potential to start and scale a profitable short-term rental business with less upfront investment compared to property ownership. However, it also requires diligent management, an understanding of local regulations, and a solid operational framework.

For those interested in entering the rental arbitrage market, Breezeway’s software solutions provide essential support in managing daily operations, enhancing guest experiences, and optimizing workflows. With the right setup, you can achieve success in this business model and potentially grow a profitable Airbnb rental business without the need to buy property.

Whether you’re just getting started or scaling up, remember that rental arbitrage is a marathon, not a sprint. With careful planning, commitment to guest satisfaction, and tools that streamline operations, you can create a successful and sustainable Airbnb business.

Master Airbnb arbitrage operations
Breezeway helps Airbnb superhosts save time and make money with tools to run their business more efficiently.

Book a Demo

 

Delight guests and streamline your hosting operations

Streamline operations for short-term rentals and multifamily residential units with Breezeway's automated work coordination and guest experience tools to ensure guests and tenant satisfaction.