No longer do you have to own property to make money through renting with rental arbitrage. This method will allow you to not spend the large capital needed to acquire a property. Still, it will enable you to rent properties out.
However, rental arbitrage comes with many unique challenges and pitfalls. You will need to navigate through to ensure no legal troubles arise.
What is Rental Arbitrage?
Rental Arbitrage is the practice of renting out a long-term rental and then using it as a short-term rental. So you may go to a property owner and sign a long-term rental agreement before then turning around and renting to other people on a short-term basis.
It can best be utilized to rent out something like a vacation home, where people will stay only a few weeks and then leave for the next guests to arrive. This also allows you to fluctuate rent based on demand. For example, increasing the rent asked around the holidays, then dropping it in January.
As you can imagine, legal troubles could arise from this practice. Some counties and cities do not allow short-term rentals so checking local laws to ensure that you are in accordance with all statutes before signing a long-term rental agreement is key.
How to Find Rental Arbitrage Properties
A rental arbitrage property must fit two major requirements given that it is legal in the area the property is located. First, the property has to be a long-term rental—ideally a year or longer. If the agreement is too short, you may end up having trouble finding enough people to fill the property for the entire duration of the agreement.
Second, ensure that the landlord is okay with you renting out the property. They do not have control over who you may bring into the property. As a result, damage and disturbances may occur and lower the property’s value after all is said and done.
How to Do Rental Arbitrage
The first step to rental arbitrage is obviously acquiring a property, which is detailed above. The second step is most likely furnishing the apartment and ensuring everything is clean and looks good for all future inhabitants. Then you can list your property on a short term rental site like Airbnb. For more information on how to list on Airbnb visit Airbnb.
Once you get going on Airbnb it is very important to maintain the property’s health. This means selecting quality inhabitants and cleaning each time someone leaves the property. When selecting your visitors it may not be the best idea to rent to people like young college students and instead go with a family. For the best questions to ask potential tenants visit this blog post.
Rental Arbitrage has exploded recently due to the emergence of sites like Airbnb that make it easy to do short-term rentals. Though not without its issues, rental arbitrage can be a great tool to use to diversify your investments and make some extra money on the side.