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What is Rental Arbitrage and Why is Everyone Doing It?

By January 1, 2022May 31st, 2022Uncategorized

What if you could be a real estate investor without owning your own property?

One of the current well known trends in real estate over the past few years has been rental arbitrage. This isn’t buying a vacation home by the lake and renting it out – this is a way to sign long term leases, and sublet them out to your guests as a host and make some great profit. Sounds too good to be true, right?

Well.. it’s not, and TONS of people are on board with this loophole in the industry right now!

So, why are people so drawn to it? Let’s dive in.

It’s pretty simple – with some trial and error and trust in yourself as a host to choose the right location, this could potentially bring some great opportunities for you to bring in a consistent profit, without having to fully invest in a property. This allows you to dip your toes in the waters of investing, especially if you are a beginner.

Essentially, you are making money from renting a property, without having to buy it.

When done right, it can be a full on business that generates even more income through social channels and other unexpected endeavors. This can be an overwhelming process in the beginning, so I’m going to list out some of the pros and cons of Rental Arbitrage.

PROS:

  • You Have The Opportunity to Scale Quickly

Shortly after getting everything set up, you can begin to make money and grow quickly.

  • It’s Low Risk, in Comparison

It’s a small upfront cost to get started, in comparison to buying property. Simple as that, it’s a lower risk.

  • It’s a Great Starting Point

Rental Arbitrage is a great stepping stone to get into the real estate investment industry.

  • Everyone Benefits

You care about the property just as much as the landlord does, (this is a great leverage point for when, but that’s another blog for another day!) you need to negotiate this with the landlord) so this creates a space for everyone to benefit from this exchange.

CONS

  • Landlord Negotiation

Some landlords will not agree to the terms. Or, when they do agree they may change their mind later, so there could potentially be a lot of moving involved.

  • Environment

One downside of rental arbitrage IS that you aren’t living in the space, so there could be things that bother the guests that are out of your control such as loud neighbors. This mostly occurs in shared communities like apartment complexes.

  • Maintenance

If in an apartment (which is fairly common with rental arbitrage), things could break orstop working and you would need to put in a maintenance request – and see that request through without it affecting the guest.

Of course, there is ALWAYS a risk involved when it comes to investing in anything! At the end of the day, it will be helpful when feeling overwhelmed to come back to making sure you are taking the right steps, and you have an optimistic viewpoint at each and every obstacle.

What is your opinion? Was this helpful? Let us know in the comments!