The world has seen the biggest online paradigm since the COVID-19 pandemic chaos, while many people lost their jobs, while many found new ways to earn money. Even before the pandemic, the internet took many businesses by storm. Real estate became part of online trends, allowing people to buy, sell and even rent property wherever they want, whenever they want.
Amongst the many real estate businesses putting forward their best game, Airbnb has become the best choice for many- making it a great platform to invest and earn. People travel for business, education, or just for fun. Whichever the case, the biggest area of concern is finding a suitable place for their stay.
If you have the right attributes to deal with people and host them in a comfortable manner, Airbnb can help you build a great business. If you wonder how to invest in Airbnb without owning property, then you are at the right place. Airbnb allows you to manage, co-host, run and affiliate another person’s property with the right attributes, skills, and investment.
Thanks to the rental arbitrage, you can earn a six-digit income without owning a property and from the comfort of your home. To help you set up a frugal real estate business, here is how you can invest in Airbnb without owning property- and even with no money.
With a plethora of opportunities waiting for you, let us get your Airbnb business started without further ado.
The Concept of Rental Arbitrage
Setting up any business - physical or online - comes with great risks. You can either capitalize on a lucrative market or lose the money you have invested. Similarly, your Airbnb business is either a go big or go home kind of situation.
Previously we mentioned the concept of rental arbitrage that can help you earn even if you do not own property on Airbnb. While most of you will be already familiar with the concept of rental arbitrage, some of you- especially the fresh entrepreneurs might find the term alien. First we need to learn, what is arbitrage? It refers to the simultaneous action of buying and selling of any asset in different markets and take advantage of the price difference.
Rental arbitrage in Airbnb is an investment strategy for people to make it big in the business without owning any property. You simply rent a property owned by another person (the landlord) and then rent it out to another person by listing it on Airbnb. You become the host or co-host who sublets the rental property to Airbnb guests.
Are you wondering how you can save money when you have to pay the rent to the landlord? Well, it is simple math. Let us imagine, you rent an apartment or a condo for $2000, and then you list it on Airbnb for $4500. You can collect a profit of $2500 per month.
You can presume Airbnb rental arbitrage as a form of real estate arbitrage. Real estate arbitrage refers to selling a piece of real estate or any property for more than the actual purchase price - making a profit. Therefore, the arbitrage strategy can easily work for short or long-term rentals, including raw lands, residential, and even commercial properties. However, the rental arbitrage in Airbnb deals mainly with residential properties.
The financial strategy to make money on Airbnb without owning property is rental arbitrage and your best bet to quickly build a lucrative business without up front capital. However, to profit from your rental arbitrage investment, you need to earn enough money from your properties that exceeds your rental expenses, property maintenance, and other costs.
The amount of profit generated is directly proportional to the efficacy of your operational strategies. You need to make certain Airbnb business-related things work. Such as:
- To have Airbnb guests, make your listing appear in the “top searches”
- Be a good host to acquire great feedback and reviews
- Even if you are late in responding to the guest’s queries, do not let a booking opportunity let slide out of your hands
- Have a warm and composed attitude, do not let your guests down or have a bad experience
- Whenever possible, upsell your relevant services
Is Rental Arbitrage Legal?
Although rental arbitrage sounds appealing people can be skeptical about it, expecially at first. Many people, including you, might wonder how rental arbitrage is legal? What would happen if the proprietor found out?
Speaking by the book, rental arbitrage in Airbnb is 100 percent legal. However, the rental arbitrage legal regulations may vary from place to place. Therefore, you would have to look into the place you are choosing to rent and you need to thoroughly do your research. Regulations also differ for short-term and long-term rentals.
For example if you have rented a place in a large city, you would have to list the place on Airbnb according to the rental options that place allows. The place might only be available on holidays or offer only a limited number of days every year. Moreover, many towns, cities, and states require a hospitality license when you are doing vacation or holiday rentals, and you will have to get one if you want to work legally.
Once you get familiar with the area you are renting the place in, the next most important thing is to get to know the landlord’s terms and conditions. For example, in most leases, landlords specifically mention that their property are off-limits for vacation or long-term rentals (or allow the property for rental arbitrage for specific cases and people).
Therefore, carefully go through all the legal rental arbitrage aspects to avoid the risk of eviction and a bad Airbnb rating.
After that, ensure that the landlord from whom you rent the property allows short-term rental arbitrage. Some landlords mention in the lease in an explicit manner that it is not allowed or may allow only under certain conditions. So, need to carefully check with the landlord before deciding to sublet your property, or there might be a risk of being evicted.
Here’s How to Invest in Airbnb Without Owning Property
Now that you have the basic knowledge about Airbnb and rental arbitrage, it is time to put the two together and create a profitable business model. From negotiating with the landlords, to Airbnb listings and landing the Airbnb guests, there is a lot to do and consider for a successful rental arbitrage without owning the Airbnb property.
Even though there are various aspects to consider before you invest, one thing is common in all. Making the landlord agree to rental arbitrage and negotiate workable terms. The question is, how do you do that? The answer is simple. Make the landlord acknowledge the long-term benefits they can reap from your Airbnb arbitrage. You can consider the following to get your rental arbitrage:
- Know the rules and regulations of the landlord
- Make an everlasting first impression- in a good way
- Ensure that their property will be in the best shape and in demand all year round
- The landlord will be getting a long-term, active tenant business
- Any damage to the property will be reimbursed by the tenant
- Discuss your business model with the landlord (as a key to assurance that their property is in wise hands)
You cannot survive in the Airbnb business if you get on the wrong terms with your landlord, especially when you have no property. Therefore, the key to arbitrage success is learning how to work with landlords and implementing an effective business model.
Getting Started & Scaling Your Rental Arbitrage Business- Now Is the Time!
We have sprinkled some information on the core business for rental arbitrage and how you can invest in Airbnb without owning property. Now, to take things a little further and help you curate a fail-proof business strategy, here is how you can get started and scale up your rental arbitrage business.
1) Lay down your business foundation
Even though you do not have your own property, you still need to step up your rental arbitrage business. Start by covering the legal aspects and get your business registered (LLC works great for many). Curate flexible business strategies that should include your long-term goals, financial aspects, business network, resources and assets. You need to ensure that you invest your money in the right things to make your Airbnb business flourish.
2) Hire the relevant people
Once you start renting out the properties, you will need assistance. When the business expands, it is never a one-man show. Even while starting, you need to have people by your side, such as an attorney, an accountant, and a person who can search for the right properties that fit your budget. Other than that, you will need a cleaning crew to ensure that the rental property is in top shape at all times. Moreover, if you have more than one property on the rental arbitrage or get busy with other work, it will be smart to have a co-host, a backup who can tend to your Airbnb guests when you are away.
3) Look into the market dynamics
Renting a property in the wrong location can be a disaster. You need to do the Airbnb market research to ensure that you are investing in the right place- high potential income locations. It is essential that you check with the following:
- Firstly, look into the Airbnb regulations to ensure that the laws and terms of the particular location will not hinder your business.
- Secondly, check the arbitrage statistics or potential of your chosen location. Look for the average profit turn out and rental success in that area.
- Lastly, check the seasonality ratio. The higher the ratio, the more risk your business will be at. For example, opting for long-term rentals in a holiday season can be a huge blow to your business.
4) Search for the profitable properties
You must know the marketplace by now, which will make the property hunt easier. The rental arbitrage property must allow you to generate a high income with a low start up cost that should exceed all your Airbnb expenses. Various countries such as the USA, allow you to use a profitability calculator that allows you to roughly estimate the income potential and the Airbnb occupancy rate for each property. Other than that, many rental comps on Airbnb have statistical data and analytics to evaluate the profitability.
5) Get your property to the top of the Airbnb Search
If people cannot find your business on the top searches on Airbnb (and Google) then it may get lost into the plethora of searches on the internet. Work on the optimization, use professional or real-life photographs, and write a detailed listing description for your property with all the features and the right keywords.
6) Automate your business
Dealing with multiple properties in short-term rental arbitrage can be tiresome and time-consuming. The information of Airbnb guests, property listings, and financial up-gradations can take a lot of time when done manually. Therefore, automate your business with a property management software to ease things.
Other Ways to Make Money on Airbnb Without Owning Property
Apart from rental arbitrage, there are other ways to make money with Airbnb without investment. To narrow down your search we have enlisted fives ways for how to invest in Airbnb without owning property.
1) Manage the Airbnb properties
You can help the property owner or rental arbitrage holders to manage their property listings by optimizing, updating the site and uploading attractive photos. You can land them the Airbnb guests, and arrange meetings etc. You can earn 10-20% of the booking revenue without owning any property and even without investing any money.
2) Become the Airbnb house-sitter
The property needs maintenance and occupation. Even when it is not rented out, someone needs to put on the lights and turn them off, manage the house, water the plants and even clean the mess. If the tenants go away for a day or two you can convince them to house-sit their place. This can help you begin to learn the business and earn money.
3) Become an Airbnb co-host
The actual host, who is running the Airbnb business, might be dealing with multiple properties at once, making it impossible to host all their Airbnb guests. You can step in as a co-host and take some burden off their shoulders while landing money in your pocket.
4) Offer Airbnb experiences
This works great for short-term and vacation rentals. When people are new to a place, you can help them get to the location and enhance their Airbnb experience. Airbnb experiences include the following:
- Take guests on a tour around the city
- Make them familiar with the restaurants and clubs in the area
- Teach them how to cook, clean and manage the property (works great if the Airbnb guest is a student or a person who is living on their own for the first time)
5) Sign Up as an Airbnb Affiliate
You can help Airbnb business owner market their properties. You get your commission when they get a client- an Airbnb guest. However, becoming an Airbnb affiliate is not as easy as it sounds. You need to comply with certain terms and conditions.
Airbnb allows you to earn money and make a sustainable living without any investment and owning any property. You just have to look into the right places. Whether you go for rental arbitrage or any other ways to make money on Airbnb, you will have to deal with the landlords, and the actual hosts of the properties. This is why you need to learn everything about Airbnb before you bandwagon the “earning through online platforms” trend.
Now, that you have sufficient knowledge and know how to invest in Airbnb without owning property, go out and get your money rolling into profits!