Looking for a path to extra income that’s both fun and profitable?
Airbnb and vacation rentals could be your answer. Property owners furnish their spaces and watch the money roll in through Airbnb and Vrbo.
But what if you don’t own property?
Let me tell you, it’s still possible to build extra income through Rental Arbitrage.
This article is specifically designed for busy people like us who want to step into the vacation rental industry. It’s a hands-on guide on how to start an Airbnb without owning property.
Let’s jump in.
7 Steps To Become An Airbnb Host Without Owning Property
In today’s digital world, it’s amazing how many opportunities exist for boosting your income, even if you’re not wealthy to begin with. All you really require is the right mindset and taking action. I’m here to demonstrate that it’s not intimidating to Airbnb without owning property.
Follow these 7 steps to become an Airbnb host:
Step 1: Understand Rental Arbitrage
The Rental Arbitrage method has been in practice long before Airbnb’s rise but has become more widely known as Airbnb Arbitrage.
This strategy involves utilizing properties owned by others through lease agreements. The main idea is that you furnish these properties and market them as short-term rentals on platforms like Airbnb, Vrbo, and Booking.com.
The profit emerges when the expenses you cover—rent, utilities, housekeeping, and maintenance—are less than the rental income received from your vacation tenants.
Rental arbitrage is a legitimate and highly effective way of generating income. To ensure a seamless and lawful experience, you need to focus on two main factors:
Firstly, confirm whether short-term rentals like Airbnb or VRBO are permitted in your region, bearing in mind the evolving nature of regulations. Secondly, secure written consent from your landlord, ensuring compliance and a successful Airbnb rental arbitrage endeavor. Read on to find out how.
What Are the Benefits Of Rental Arbitrage?
- Low Upfront Investment: Rental arbitrage requires significantly less capital upfront compared to property ownership, making it accessible to a broader range of people.
- Low Risk Exposure: With a limited investment, you face lower financial risk compared to purchasing a property, where you’d need substantial capital and take on a mortgage.
- High Earnings Potential: Successful Airbnb rental arbitrage can yield impressive returns. If managed well, you can generate a consistent stream of income.
- Vacation Home When Needed: You have the flexibility to use the property for your own vacations when it’s not booked by guests, providing a personal benefit.
How Much Can You Earn Through Rental Arbitrage?
We can calculate the rough earning potential with this formula:
Monthly Earnings Potential = (Monthly Rental Rate) x (Avg. Occupancy Rate) – (Monthly Operating Expenses)
If we assume, we can charge $2500 per month for our short-term rental property at an average monthly occupancy rate of 70%, and an estimated monthly operating expenses, including rent, utilities, cleaning, and maintenance of $1000 per month, the potential monthly earnings from your short-term rental property would be $750.This totals to an additional $9,000 per year in your pockets.
If you choose to manage multiple short term rental properties, your earnings multiply, and you might even reduce operating expenses through economies of scale.
Please keep in mind that these are illustrative figures to explain the general idea of Rental Arbitrage, and actual earnings vary based on factors such as market conditions, seasonality, competition, and property management efficiency.
Step 2: Develop The Right Mindset For Success
The journey to unlocking an exciting and promising future in the vacation rental industry is surprisingly straightforward.
In a nutshell, these three key mindset components lay the foundation for your successful journey:
- Fundamental Knowledge
Invest time in online research to become well-versed in the subject of short-term and long-term rentals and rental arbitrage. Cross-reference information from multiple sources and seek professional guidance when available. Your confidence will even grow with more knowledge. But be careful not to drown in information; aim for a fundamental understanding and start small, following the steps laid out in this blog post.
- Entrepreneurial Thinking & Action
Knowledge, by itself, holds little value if you fail to apply it. In essence, an entrepreneurial mindset revolves around taking that first step and maintaining an unwavering commitment to learning and adapting as you go. Entrepreneurship isn’t as complex as rocket science, and while taking ownership might seem challenging for some, it’s the path to fulfilling entrepreneurial dreams. It’s about embracing discomfort, taking proactive steps, and fostering an eagerness to learn and grow.
- Your Personal Motivation
Staying motivated is much easier when you have a clear WHY. Perhaps you’re striving to save for your dream home, yearning for a personal retreat, or wanting to support your family. Please write down your WHY and revisit it daily for that extra dose of motivation.
The silver lining is that the more you dive into your venture, the easier, more familiar, and more fulfilling the whole journey becomes.
[Extra: I personally lean towards calculated risks and maintaining a well-balanced lifestyle. I firmly believe that being an entrepreneur doesn’t necessarily mean being an audacious risk-taker all the time. If your approach differs, feel free to adapt my advice to embrace bolder strategies, inspired by trailblazers like Sean Rakidzich.]
Step 3: Do Your Research
It’s crucial to gather knowledge on various essential aspects, including understanding short-term rental regulations, assessing market conditions such as profitability and market size, evaluating potential locations, and, most importantly, formulating your personalized business strategy or preferences.
We’d recommend not attempting to absorb all this information in a single day; rather, take your time, allocate it wisely, read up on these topics, engage in conversations with experts and individuals experienced in this field, and dive into online research. Seeking advice from a real estate attorney is highly recommended.
There’s a vast wealth of freely available information out there, akin to gold if you leverage it effectively. Consider answering these important questions:
- Are short-term rentals permitted in your preferred market?
- What specific requirements must short-term rental hosts adhere to?
- What are the prevailing local short-term rental rates in your chosen area?
- What is the average occupancy rate for short-term rental properties?
- What constitutes the socio-economic structure of the neighborhood?
Pro tip: Examine macro data for real estate valuations to get a sense of the value of the area and property. These are data points like population trends, crime rates, proximity to sights, infrastructure and transportation, etc.
Step 4: Understand The Landlord’s Perspective
Landlords are just people – so they are all different, each with their unique motivations and concerns. Nevertheless, we need to understand what makes them tick in order to effectively persuade them to entrust their property for Airbnb usage to you.
You should ideally uncover what drives them, identify their concerns, and pinpoint their pain points. By immersing yourself in their world, you’ll be better equipped to address their needs convincingly.
This process of understanding your landlord is akin to what skilled salespeople do – they delve into the counterparty’s pains to offer tailored solutions.
It’s important to recognize that a landlord’s primary objective is to attain a consistent stream of passive income. Ideally, they seek a hassle-free rental experience where income flows in without significant interruptions.
However, there are three key pain points that landlords commonly face:
- Tenant Turnover: Rapid turnover of tenants can be a significant headache for landlords. It entails a considerable amount of effort, from cleaning up after previous tenants to actively seeking new ones. Ideally, they’d prefer a stable, long-term tenant who doesn’t come and go frequently.
- Vacant Periods: For landlords, prolonged vacancies are the ultimate nightmare. When they can’t secure a renter for an extended period, it means they’re not generating income. Each day without a tenant translates to financial losses, and landlords must work diligently to find new occupants.
- Maintenance and Repairs: Landlords must ensure their properties remain in livable, functional, and appealing condition. This serves a dual purpose: maintaining or even increasing the value of their real estate asset and making it attractive to potential tenants. In essence, they want to keep their properties in top-notch shape.
Understanding and empathizing with these pain points is a crucial part of your journey, especially as you move forward to the next step.
Step 5: Get Permission From The Landlord
The next crucial step is to secure approval from the property owner and execute a lease agreement that explicitly outlines your usage of the property for short-term rentals, ensuring their consent. Seeking advice from a real estate attorney is highly recommended.
Adressing small-scale private property owners will be an easier starting point – the folks who own just a few units and are looking to lease them out.
Here’s a tip: When you approach your landlord, it’s often better to do it in person rather than over the phone. Meeting face-to-face gives you a chance to build a rapport, understand their concerns, and address any questions they may have.
Because, let’s face it, from a landlord’s perspective, this Airbnb proposition might seem a bit unconventional and potentially risky.
So, you’ll need to sell them on the idea. Here are some points you can consider:
- Highlight the guarantee of a long-term lease, providing stability and consistency.
- Assure your landlord that you will secure appropriate insurance coverage to protect against potential damages.
- Emphasize the mutual interest in maintaining the property’s excellent condition, as your success depends on it.
- Mention that deep cleaning and property inspections will occur more frequently than in traditional long-term rentals.
- Optionally, propose offering a premium for each stay booked, providing an incentive for your landlord to participate in the venture.
- If your landlord agrees to these terms, you’ll be ready to commence your Airbnb business with their support.
Here’s a smart little pilot you can try: Next vacation, consider doing a trial run of rental arbitrage with your own rented home. Check local laws on short-term rental and chat with your landlord about renting out your place while you’re away. It’s a great way to dip your toes in the water without approaching new property owners, especially if you have a good rapport with your current one. You’ll get to experience the Airbnb hosting journey without investing anything.
[Extra] We are not diving into the complexities of building an entire rental empire – after all, you’re just starting out! The focus here is on getting the wheels turning before dreaming of a massive real estate rental arbitrage empire from scratch. If the latter is more your style, I think you will like Sean Rakidzich.
Step 6: Furnish The Property
When preparing your short-term rental, one significant consideration is furnishing the property. While this may be one of the more substantial investments you’ll make (aside from any consulting services like attorneys or real estate experts), it’s a crucial one.
The good news is that there are plenty of options available today for purchasing quality furniture at affordable prices. Whether you’re considering second-hand pieces or exploring online deals, there’s no shortage of cost-effective choices. Keep in mind that in the entrepreneurial journey, you often need to invest to reap the rewards.
Remember, when you put this expenditure in perspective and compare it to the cost of buying an entire property, it’s remarkably minimal. It’s a small and manageable investment compared to actual real estate investment.
The vacation rental industry is continuously expanding, with a growing number of individuals able to work remotely from virtually anywhere. These travelers seek accommodations that offer comfort, a comprehensive range of amenities, and, above all, pristine cleanliness and fully functioning facilities.
In vacation rental properties, it’s essential to provide your guests a comfortable and fully-equipped accommodation, as outlined in our Airbnb Host Checklist.
The furniture in your property can be a unique identifier that sets your Airbnb apart from the rest. The more high-end and thoughtfully designed your space appears, the higher you can potentially charge per night. Remember, decoration isn’t just about aesthetics – it adds genuine value by enhancing your guests’ comfort and overall experience at your property. Therefore, investing in a thoughtful design can be remarkably profitable.
Step 7: Market The Property
Now that all the essential building blocks are in place, it’s time to roll up your sleeves and get into the exciting phase of marketing your property on platforms like Airbnb and VRBO.
Here’s the vacation rental marketing 101 to help you make the most of this journey:
- Begin by investing in professional photography to showcase your well-furnished property. High-quality images can make a world of difference in attracting potential guests.
- Craft compelling and comprehensive property descriptions. Highlight all the unique features and amenities that make your rental stand out.
- When it comes to pricing, do your research and ensure your rates are competitive. Consider factors like your property’s location, seasonality, and local demand.
- Effective communication with your guests is paramount. Be responsive and attentive to their inquiries and needs, ensuring a positive and courteous interaction throughout their stay.
- Maintain impeccable cleanliness in your property. A clean and well-kept environment is a top priority for guests and contributes to positive reviews.
Efficiency is key – especially if you are managing multiple rentals. Keep your hosting operations running smoothly, streamline check-in and check-out processes, automate routine tasks, and ensure your guests have a seamless and enjoyable experience. Learn from each guest’s experience and actively seek ways to improve and enhance your offering.
Continuously assess and optimize your hosting processes. As you progress, you may want to explore vacation rental software to streamline your operations. Always keep in mind to keep operating and other business-related expenses low to maximize profits.
Airbnb hosts embark on a rewarding journey, gaining valuable experience, connecting with new people, and creating memorable stays. The Airbnb rental arbitrage route is an entrepreneurial adventure worth savoring.
😎 Enjoy Hosting Your Airbnb Without Owning Property!