09/28/2023
I’m seeing more and more individuals talk about “rental arbitrage” in attempts to get a leg up in this current real estate market. In recent weeks, I have seen some even boast of holding 60+ arbitrage properties.
In the simplest of terms, rental arbitrage can be described as one word – subleasing, which is the practice of renting property from a landlord, usually for a term of 1 or more years, then furnishing and decorating the property before listing it as a vacation rental on Airbnb, VRBO, or some other short term rental website for maximum profit.
Seems like a win-win, as long as everyone gets paid… right? Not always.
If you are a landlord in this environment, you need to be aware of this increasingly common practice and make sure, whether or not you are pro-arbitrage, to tailor your lease agreement tightly in order to avoid liability issues and costly legal disputes that can, and frequently do, arise.
If you are looking to start a rental arbitrage business, it can be very lucrative, although you should be aware that there are very real risks involved. Prior to entering any contract, educate yourself about all of those potential risks, as well as the legal intricacies, such as licensing and tax requirements and city ordinances you may need to comply with. Keep in mind how important property and liability insurance are, and evaluate whether other security or protection measures should be taken to keep guests safe.
Importantly, if you’re interested in rental arbitrage, seek advice from professionals who know the ins and outs of negotiating contracts and legally running this type of business. Be sure to call your lawyer and accountant!
Can you build an Airbnb property empire from flats you don't own? According to rent-to-rent influencers, yes.