What is Airbnb Arbitrage? How to Make Money with Airbnb

Nov 06, 2022
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airbnb arbitrage
Table of Contents
  1. What is Airbnb arbitrage?
  2. How does Airbnb arbitrage work?
  3. Is Airbnb arbitrage legal?
  4. Pros of Airbnb arbitrage
  5. Cons of Airbnb arbitrage

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Airbnb arbitrage is the process of renting units and subletting them to short-term tenants. Airbnb arbitrage works so well because you don’t need to own the properties you rent out like normal Airbnb sellers. 

While there are plenty of benefits to Airbnb arbitrage, there are some risks you should be aware of before you decide to list your home on Airbnb. Continue reading to find out what Airbnb arbitrage is and how you can use this popular investing method to generate passive income this year.

What is Airbnb arbitrage?

Airbnb arbitrage is a fancy term that describes an investing strategy using Airbnb rentals. The investor rents an apartment or home with a landlord. But instead of living in the property, the investor lists it on Airbnb in hopes that someone will book their listing. 

Traditionally, hosts on Airbnb own their properties and list them on Airbnb as opposed to renting and then sub-leasing. Airbnb arbitrage eliminates many of the downsides of owning a home such as maintenance and property management. Since investors rent their homes, any issues are handled by the landlord or management company.

How does Airbnb arbitrage work?

A good example of Airbnb arbitrage is to say that you pay $3,000 in rent each month for your rented apartment. With Airbnb arbitrage, you list your living space on Airbnb for $300 per night. Assuming you get a buyer, you can pay your rent of $3,000 in just 10 days. If you can find additional buyers, the rest of the money you make is pure profit. Some Airbnb investors have hundreds of properties using this method and make millions in passive income each year.

Is Airbnb arbitrage legal?

In short, yes. However, you’ll need to do plenty of research before starting with Airbnb arbitrage because this investing method isn’t allowed in all jurisdictions. Some landlords explicitly state in the rental agreement that sub-leasing isn’t allowed. Failure to comply with this rule may lead to eviction and the termination of your lease.

Additionally, some cities have started to ban Airbnb due to the impact it has on the local housing market. This is most common among cities outside the United States who depend on the local economy.

Pros of Airbnb arbitrage


People wouldn’t continue to do Airbnb arbitrage if there weren’t plenty of benefits of this lucrative investing method. Below are the top benefits for those that decide to pursue Airbnb arbitrage:


  • Little to no upfront costs. The only costs you’ll incur from starting Airbnb arbitrage are the security deposit and the first month’s rent on your new rental. Then you’ll pay your monthly rent payment each month without having to worry about a down payment or mortgage insurance.

  • Scalability. Perhaps the most attractive reason people choose to do Airbnb arbitrage is that the business can scale rather easily. Once you acquire your first property you can rinse and repeat the process for your next deal and so on. You can also hire a team to help automate the business so you can focus on acquiring more properties.

  • Low risk. Airbnb arbitrage isn’t considered a risky investment like hedge funds or stock trading. The only risk that comes with Airbnb arbitrage is ensuring you can continue to pay the monthly rent payments on the properties you sublease.

  • Passive income. Airbnb arbitrage has the potential to turn into passive income. This means that you’ll still generate cash flow even when you’re not actively managing your properties. 


Cons of Airbnb arbitrage


Like we said earlier, Airbnb arbitrage comes with some downsides to consider, including:


  • Paying rent each month. Depending on how many units you have, you’ll need to pay thousands in rent each month to continue to sustain your business. You’ll need to have sufficient cash flow that ensures you can pay rent each month or you’ll get evicted from the property.

  • Legality. Most landlords and property management companies for big apartment buildings or complexes prohibit sub-leasing. This can lead to many risky situations for property managers and they don’t want strangers entering the building. You need to do plenty of research to ensure you’re not breaking any rules.

  • Bad tenants. You’re responsible for making any repairs resulting from damage caused by a previous guest.

  • Long and complex agreements. You’ll probably need to work with a lawyer to draft a professional sublease agreement that is binding and protects you as the lessor.

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Table of Contents
  1. What is Airbnb arbitrage?
  2. How does Airbnb arbitrage work?
  3. Is Airbnb arbitrage legal?
  4. Pros of Airbnb arbitrage
  5. Cons of Airbnb arbitrage