Learn what Airbnb rental arbitrage is, if you're ready to jump into this growing business opportunity, and which markets are best suited for short and long-term leasing in 2024.

Airbnb Rental Arbitrage: A Complete Guide for 2024

Airbnb Rental Arbitrage in 2020: Where to Make Money Without Buying Property

What if you didn’t have to buy a property to snag a piece of the Airbnb profit pie? That’s the promise of Airbnb arbitrage, a practice that involves leasing properties for the sole purpose of relisting them as short-term rentals (STR) on platforms like Airbnb. 

While the Airbnb rental arbitrage route can be a fast track, there are also a number of potholes. Whether you’re a seasoned real estate investor or a hosting hopeful, this guide will delve into data behind arbitrage—and how you can use it to earn more in 2024. 

Airbnb rental arbitrage is the act of renting a property long-term and then re-renting it short-term on vacation rental sites like Airbnb or Vrbo. 

Essentially, it's the art of becoming a middleman (or middlewoman) in the real estate game, leveraging the demand for short-term accommodations to generate income without actually having to own a property. It's a bit like flipping houses, but instead of selling, you're renting them out for a tidy profit.

This unique strategy has gained popularity in recent years, fueled by the rise of the sharing economy and the allure of passive income. With the right approach, savvy hosts can turn underutilized properties into lucrative revenue sources while providing travelers with unique and memorable lodging experiences.

Explore the best markets for arbitrage opportunities

Let’s say you rent a house on a long-term lease for $2,500 per month. Subletting the same house as an STR at a rate of $200 per night could earn you more than you pay in rent—in less than two weeks. Any further STR income within the month would be profit for you, minus expenses. STR arbitrage opportunities depend on the difference between what you are paying for the lease and what you’re earning on Airbnb. 

Airbnb rental arbitrage is legal. It’s also been widely adopted, with benefits for STR operators and long-term rental (LTR) property owners alike.

Many LTR property owners understand that a resident’s rental arbitrage business brings increased occupancy, meaning more income for both the long-term renter and, in turn, themselves. Rental arbitrage allows property owners to share in profits from these opportunities and enables them to diversify their rental income. 

Despite its legality, each party should sign a rental arbitrage contract before listing the unit on Airbnb or another platform. It’s also a wise investment to look into ​​rental arbitrage insurance.

Is Airbnb Rental Arbitrage Profitable in 2024? 

Whether Airbnb rental arbitrage is profitable boils down to two main factors: STR revenue and effective LTR rent. The greater the difference between the revenue an STR operator pulls in and the rent they pay, the greater the profit they’re likely to earn. 

Here at AirDNA, we express that ratio as an STR premium, which is the percent difference between STR revenue and LTR rent for any given month.

In 2021, escalating demand for STR stays coupled with slow supply growth sent occupancy rates, average daily rates (ADR), and revenues soaring. Monthly STR revenues for single and multifamily homes reached $4,425, marking a 21% year-over-year (YOY) jump.

Home prices also surged that year, triggering an increase in LTR rents, albeit at a slower rate of 8% YOY. STR revenue was growing significantly faster than that 8%, which is why many markets across the U.S. were ripe with opportunities for profitable Airbnb rental arbitrage. In 2021, STR premiums averaged 170%. 

However, monthly STR revenues slowed in the second half of 2021 as more listings entered the market. Rents also grew, causing STR premiums to decline to 156% in 2022. Arbitrage premiums continued their decline through 2023 on the heels of high supply growth, declining STR revenues, and steep LTR rent. 

Currently, STR premiums for single and multifamily homes across the U.S. average just 124%. Still, that means hosts who engage in arbitrage are earning 124% more in STR revenue than what they pay in rent. That’s a respectable profit, even if it is down from the highs of 2021.  

Top Property Types for Rental Arbitrage in 2024

Not all properties are equally compelling candidates for rental arbitrage, and the right property to lease and re-rent can change by the year. So far, 2024 seems to be the year of the multifamily home. Here’s why: 

During the pandemic, there were arbitrage opportunities aplenty for single-family homes. Fear of crowded cities and shared spaces drove travelers to STR stays in suburban and rural destinations outside major metropolitan areas. In the last two years, though, demand for cities is back in force, turning the tide for STR revenues and arbitrage opportunities toward multifamily homes. STR premiums for multifamily homes averaged 142% as of February 2024, compared to just 104% for single-family properties. 

Multifamily homes have also remained attractive for Airbnb rental arbitrage because LTR rents have grown more slowly. Rent for single-family homes has increased 14% in the last two years, while rents for multifamily homes have only increased 9%. This is due, in part, to the flurry of construction of multifamily units, which has triggered an uptick in vacancy rates and a resulting slowdown in rent growth. 

As of Q4 of 2023, the vacancy rate for U.S. apartments was 6.5%, up 16.6% YOY, according to Apartment List research. Meanwhile, effective rents for new apartment leases were down 1% YOY. As more new construction crops up, greater apartment vacancies and slow rent growth may continue to create opportunities for Airbnb arbitrage. 

While arbitrage opportunities are promising for multifamily homes across the U.S., how profitable they may be depends on the market. 

For example, STR premiums for single-family homes in Detroit are 65% higher than STR premiums for multi-family homes in the city. Meanwhile, in Pensacola, FL, and Tampa, FL, where condos are king, STR premiums for multifamily homes far exceed those of single-family homes. 

In short, to find the most lucrative arbitrage opportunity, you have to understand your market. 

Starting an Airbnb rental arbitrage business requires a blend of market data & analysis, negotiation skills, and a dash of entrepreneurship. Here's a step-by-step guide to help you kickstart your arbitrage venture:

Market Research and Property Identification: Begin by researching your local real estate market to identify areas with a high demand for short-term rentals. Look for properties with potential, considering factors like location, amenities, and rental rates. Remember, the goal is to secure a property that can be transformed into a desirable Airbnb listing.

Financial Analysis and Budgeting: Once you've identified a potential property, conduct a thorough financial analysis. Estimate all costs involved, including monthly rent, utilities, furnishings, and any potential renovation expenses. Develop a budget that outlines your initial investment and ongoing operational costs.

Lease Negotiation and Legalities: Negotiate favorable lease terms with the property owner, keeping in mind the potential short-term rental use. Ensure you have their full permission to re-let the property and document the terms in writing. Research and develop a clear understanding of local regulations regarding short-term rentals to avoid legal complications.

Property Transformation and Furnishing: Transform the property into an inviting and functional space for short-term guests. Furnish it with comfortable and stylish items, paying attention to details that enhance the guest experience.

Airbnb Listing Creation: Craft an enticing Airbnb listing that highlights the unique features of your property. Utilize high-quality photos, write compelling descriptions, set strategic minimum stay policies, and pick your pricing based on market research.

Operational Management: Once your property is listed, be prepared for guest inquiries, bookings, and property maintenance. Implement efficient operational management, including responsive communication, regular cleaning with reasonable cleaning fees, and addressing guest needs promptly.

Dynamic Pricing Strategies: Explore dynamic pricing tools to maximize your rental income. By adjusting your pricing based on demand, local events, and other factors, you can optimize your revenue and stay competitive in the market.

What is the Formula for Successful Airbnb Arbitrage? 

Engaging in successful Airbnb arbitrage involves following a well-defined formula that combines strategic planning, financial savvy, and a data point (or two or three…) Here's a breakdown of the essential elements in a winning arbitrage formula: 

Begin by conducting a thorough market analysis to identify trends and demands in your chosen location. Stay informed about local events, peak seasons, and factors influencing short-term rental demand. This knowledge will serve as the foundation for your strategic decisions.

Every deal is different, and, while the data in this guide may be helpful, it only speaks to the average performance of properties in a given market or submarket. There are pockets of potential opportunity in all markets. On average, a market might appear unappealing for Airbnb rental arbitrage, but all markets have combinations of submarkets and property types that could succeed. 

A single property’s performance may not match the submarket or market average, and you should analyze each property separately before signing on the dotted line. Try more detailed tools like: 

AirDNA App: By analyzing the booking activity of over 10 million vacation rentals on Airbnb and Vrbo, Rentalizer can predict what any home around the world would earn as a vacation rental.

AirDNA Vacation Rental Data: Gain valuable insights into the performance of over 10 million vacation rentals across 120K global markets worldwide. Study the critical trends in your market to understand exactly how the STR industry is evolving.

With any sort of real estate arbitrage, there are inherent risks and a long list of cautionary tales. It is essential to understand the data and how and why the arbitrage opportunity might be temporary. Economic theory suggests that arbitrage should only be temporary and that the market will adjust to supply/demand pressures.  

As discussed earlier, single-family homes have seen a large influx in supply in the last few years, thus reducing the profit opportunity. As more homes are added to an area, that can increase competition for guests, which can lead to discounting and a reduction in the overall revenue potential for an STR. 

Other risks can come from new city or state regulations and even changing policies from the building owner. For example, in recent years, new STR regulations have come into play in Seattle, Los Angeles, Boston, and most recently, New York City. These short-term regulations limit the ability for STRs to operate, and individuals looking to arbitrage in these markets need to be informed. 

Rental arbitrage isn’t a silver bullet, and you shouldn’t enter a lease on a hunch or a while. Instead, integrate data-driven decision-making into your approach. 

Leverage analytics tools and performance metrics to assess the effectiveness of your strategies. Use data to refine your operations, identify growth opportunities, and stay ahead of market trends.


The Best Cities for Airbnb Rental Arbitrage in 2024

The best cities for Airbnb rental arbitrage are those where monthly STR revenue far exceeds LTR rates. Topping the lists in 2024 were markets that have consistently seen high arbitrage premiums over the last few years: 

The table below also offers a city-by-city view of STR premiums. Find your ideal arbitrage market by sorting according to LTR rates, monthly STR revenue, or YOY growth in STR premiums. To find rental arbitrage properties, use the table to identify markets that have seen the most arbitrage opportunity growth in the last year. 

You can also use the real estate and location filters to view data by single-family or multifamily homes or by location type. 

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To help you better understand how Airbnb rental arbitrage may pencil out at a more granular level, we’ve created a tool that allows you to look at LTR effective rents and STR performance across submarkets, meaning neighborhoods, towns, and suburbs within a larger market. 

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Earn More Through Arbitrage With Strategic Pricing

Strategic pricing is the game-changer that can elevate your Airbnb arbitrage venture from profitable to highly lucrative. By implementing dynamic pricing, you can maximize your revenue potential and adapt swiftly to changing market conditions, ensuring optimal returns in response to local events, seasonal demand shifts, or sudden surges in travelers. 

Use Smart Rates™ to optimize your pricing strategy.

Our Airbnb rental arbitrage opportunity analysis includes data on 39 of the largest U.S. markets and their submarkets. LTR rent data was obtained from Zillow research, while short-term rental performance data came from AirDNA. Market data for both datasets was collected by Metropolitan Statistical Area (MSA) as defined by the US Office of Management and Budget (OMB). 

To be included in the analysis, a market needed to have more than 50 total active STR listings in the last year, and submarkets had to have at least 20 active STR listings. We analyzed the revenues excluding cleaning fees, taxes, and other fees, with the assumption that those additional costs would be added to the rental rate to cover those expenses. 

It's important to note that those interested in STR arbitrage should account for the additional expenses of successfully managing an STR property, such as start-up costs (appliances, furniture, decor, and licensing and legal fees) and ongoing costs like utilities, maintenance, toiletries, and insurance. Given the variable nature of these expenses, they were not included in our analysis.

Rental arbitrage can be worth it if you approach it with careful planning. The potential for significant profits exists, especially in cities with high demand for short-term rentals. However, success depends on many factors, including location, market conditions, and your ability to manage properties efficiently.

While rental arbitrage has the potential for passive income, it typically involves active management, especially in the initial stages. You'll need to handle guest inquiries, coordinate cleanings, and manage bookings. Over time, as you streamline processes and gain experience, the level of activity required may decrease, making it a more passive income source.

How do I convince my landlord to arbitrage Airbnb? 

Convincing your landlord to arbitrage starts with transparent communication. Highlight the benefits, such as stable rental income, reliable tenants, and potential property improvements. Offer to share additional profits, ensure insurance coverage, and provide references from other landlords who have benefited from similar arrangements.

How much does it cost to start a rental arbitrage? 

The initial costs vary but typically involve the security deposit, first and last month’s rent, furnishing and decorating the property, setting up utilities, and initial marketing. Some costs may be negotiable with your landlord, while others are essential for creating a comfortable and attractive space for guests.

Can you make a living off of arbitrage? 

Yes, it's possible to make a living off of rental arbitrage, especially if you scale your operations. Success often depends on your ability to manage multiple properties efficiently, adapt to market changes, and provide excellent guest experiences. Like any business venture, careful planning and dedication significantly contribute to long-term success.


Discover the ins and outs of rental arbitrage, its legal status, and how you can leverage it to get your Airbnb business started today.

Airbnb Rental Arbitrage - Models, Methods, & Opportunities | AirDNA

The Formula for Successful Airbnb Arbitrage 

Airbnb Rental Arbitrage: A Complete Guide for 2024

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