How to start making money with Air B&B Arbitrage

I get a lot of people who come out to my workshops that would love to get into real estate but just do not have a lot of money saved up, or any equity they can pull out of a home they own.

Of course, Air B&Bing a unit that you own can be very lucrative but this is one way you can start a ‘side hustle’ that has a low barrier for entry and can give you extra cash to invest.

I introduce you to Air B&B arbitrage, you are signing a long term lease with a landlord then renting that unit on Air B&B or other short term booking platforms. The major benefit is that you don’t have the large upfront cost of purchasing an investment property which needs 20% downpayment. Short term rentals can get double the rent in a month of a long term rental! For example if your long term monthly rent is $3,000 dollars but your unit brings in $5,000 dollars, you have a profit of $2,000 dollars that month. Of course, when starting any business there are risks involved, here are a couple challenges you will face.

The first and most obvious risk is that if you don’t get the unit rented enough to cover your monthly rent, you will lose money on that given month. There are lots of websites that can help you determine areas that are in high demand for short term rentals such as https://www.airdna.co. Once you identify an area you will need to find a solid unit and negotiate a good price so that you are profitable. Offering the landlord a percentage of the profit can be a good way to get the unit at a good price to reduce your risk.

You may also have to convince landlords that this is a good option for them. Here are a couple points you can share with them:

  1. With an Air B&B you do not fall under the RTA (Residential Tenancy Act) which means that if a guest overstays their welcome, you can have the police remove them with one phone call.
  2. Typically any damage that happens would be to the furnishings which would be owned by you, not them. If there is any damage to the unit, your cleaners will report it and either take it from the damage deposit the guest has put down, or Air B&B has insurance that will cover you!
  3. What landlord doesn’t want their unit professionally cleaned 5-6 times a month? In order to get good reviews and lots of bookings, the rental unit has to be in tip top shape at all times. This includes the lawn, garden beds, and the removal of snow on driveways in the winter.

Success in any business typically comes down to management, answering booking questions and cleaning staff will be the biggest challenges. The good news is most people are sending a message with questions about the unit through the app, so if you are comfortable on your phone, this shouldn’t be anything more then extra screen time. It won’t be hard to find cleaning staff but hiring reliable, honest staff that continue to produce quality results will be tricky. I would suggest having backup options in place at all times to avoid having to go clean the unit yourself.

Lastly, you will need to furnish the unit which does have some up front cost. You will want to purchase good quality items that will last. Because you will be washing your bed sheets after each stay, they need to be something that can handle the repeated washing. Quality beds are the very important to guests, they want to know that that what they are sleeping in is clean, and comfortable. If your unit is not well furnished, you will get bad reviews which will eventually kill your business.

The beauty of this business is that it is scalable, with your cleaning staff in place, it’s up to you to find landlords, furnish the unit, then get it up and running. This investment strategy is designed for somebody who wants to work to make extra cash each month but doesn’t have the resources or credit yet to start buying.

I lot of cities are starting to ban or restrict these short term rentals because as you can image, the hotel industry is not happy with the competition. You just need to aware of the city by-laws and find one that has already said they will allow it.

Cameron Cassidy, Investor and Real Estate Broker