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

February 14, 2020

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Since the 2009 recession, homeownership in the United States has, for many, felt more like a pipe dream than any feasible part of the American dream. A 2019 report from ATTOM Data Solutions has confirmed that this sentiment is no longer a hunch -- it’s written in the data. Becoming a homeowner is now more difficult than it has ever been, making rental arbitrage now extremely appealing.


Here’s where we stand: throughout the country, home prices are outpacing wages in 80% of the 755 counties analyzed. Renting a home is now more affordable than buying a home in the nation’s 18 most populous counties and 37 of 40 counties with at least 1 million people (93%).

With wages and home values diverging in different directions, the investment real estate market is witnessing a significant sea change. Buying a home for the purpose of flipping or renting isn’t nearly as achievable as it once was.


When it comes to short-term vacation rentals, however, buying a home is by no means a barrier to entry.

What is Airbnb Rental Arbitrage?


‘Rental arbitrage’ is the act of renting a property long-term and then re-renting it on a short-term basis on platforms like Airbnb and HomeAway. Rental arbitrage is a business model that requires little investment, provides positive cash flow, and poses far less risk -- and yes, it’s entirely legal. 

If you’re wondering how to start an Airbnb business or considering a move into Airbnb arbitrage, we’ve got you covered. Here are the best arbitrage opportunities in the United States.

Airbnb Rental Arbitrage Methodology


For this study, we leveraged long-term rental data from a 2019 report from the U.S. Department of Housing and Urban Development. We then aggregated AirDNA's short-term vacation rental data for two-bedroom properties from nearly 3,000 counties and filtered for destinations with at least 100 active listings. The report -- which is based on county-level data -- ranks U.S. counties by the difference between short-term RevPAR and long-term, lease-style rental revenue. 

States With The Highest Potential for Rental Arbitrage


Starting from a state-level view, below is a map highlighting the states whose counties have the highest average arbitrage potential. Counties in Hawaii top the list where short-term vacation rentals earn on average $3,079 more than than the cost of a traditional month-to-month lease. 


Other states following closely behind include Tennessee ($2,620), Wyoming ($2,492), Michigan ($2,353), Colorado ($2,341), Pennsylvania ($2,060), and Massachusetts ($2,059). 

 

When looking at the top 100 counties for rental arbitrage on Airbnb, some states clearly fare better than others. Many states throughout the Midwest don’t have a single county in the top 100, whereas Florida boasts 13. Here are the states with the most locations optimal for rental arbitrage: 

Ranked: The Best Counties for Rental Arbitrage


Below is a table ranking the top 25 counties in the United States for Rental Arbitrage. In the table you can sort by long-term rental rates, short-term rental rates, and the ultimate determining factor, arbitrage potential.


Emerging Markets for Rental Arbitrage: Counties with the Highest Rates of Growth


For vacation rental professionals looking to capitalize on the best up-and-coming markets, looking at the list above doesn’t do much good. Sure -- knowing that Maui tops the list is nice, but what if you’re nowhere near Maui? Instead, before jumping into the overall top counties, let’s look at the spots where short term rental growth has exploded over the past few years -- places with the largest differences between 2018 arbitrage potential and 2019 arbitrage potential. 


On the negative side of things, there are certain counties in the US that investors should steer clear of. Whereas long-term rental rates have remained stagnant in many of these counties, short-term revenues have plummeted for one reason or another. 

At the bottom of the list is Florida’s Gulf County, a region that was hit particularly hard by Hurricane Michael in October of 2018.

 

Notable Trends

  • Ski destinations continue to see impressive growth in the vacation rental sector with standouts like Pitkin County’s Snowmass and Aspen topping the list. 
  • Washington state’s Kitsap and Grays Harbor regions are proving that the Northwest is no longer just about Seattle. 
  • Sussex County ranks third which proves Coastal Delaware is now a legitimate destination and an alternative to the other pricier East coast short-term rental communities. 
  • Wyoming’s Teton County and California’s Mariposa County (Yosemite) show that national parks are still a dominant travel trend. 

State-by-State Analysis: Best Cities for Airbnb Rental Arbitrage


Finally, let's dive into the top 50 counties for rental arbitrage along with the top-performing vacation rental city in each location. If you’re looking to learn more about any of the destinations below, click the link to navigate to their overview page in MarketMinder

Alabama

Mobile County


Arbitrage differential: $1,998
Best City: Mobile 

Baldwin County


Arbitrage differential: $1,895
Best City: Gulf Shores

Arizona

Yavapai County


Arbitrage differential: $1,762
Best City: Prescott


California

Mariposa County


Arbitrage differential: $3,089
Best City: Mariposa

Napa County


Arbitrage differential: $3,063
Best City: Napa

Monterey County


Arbitrage differential: $2,706
Best City: Monterey

Mendocino County


Arbitrage differential: $2,273
Best City: Mendocino

Mono County


Arbitrage differential: $2,107
Best City: Mammoth Lakes

Santa Barbara County


Arbitrage differential: $1,883
Best City: Santa Barbara


Colorado

San Miguel County


Arbitrage differential: $4,252
Best City: Telluride

Eagle County


Arbitrage differential: $3,472
Best City: Vail

Pitkin County


Arbitrage differential: $2,342
Best City: Aspen

Chaffee County


Arbitrage differential: $1,874
Best City: Buena Vista


Connecticut

New London County


Arbitrage differential: $1,629
Best City: New London

 

Delaware

Sussex County


Arbitrage differential: $1,947
Best City: Ocean View


Florida

Nassau County


Arbitrage differential: $3,084
Best City: Fernandina Beach

Santa Rosa County


Arbitrage differential: $2,931
Best City: Gulf Breeze

Walton County


Arbitrage differential: $2,767
Best City: Miramar Beach

Okaloosa County


Arbitrage differential: $2,489
Best City: Santa Rosa Beach

Bay County


Arbitrage differential: $2,186
Best City: Panama City Beach

Gulf County


Arbitrage differential: $2,012
Best City: Mexico Beach

Monroe County


Arbitrage differential: $1,913
Best City: Key West

Escambia County


Arbitrage differential: $1,906
Best City: Pensacola


Georgia

Chatham County


Arbitrage differential: $1,936
Best City: Savannah

White County


Arbitrage differential: $1,765
Best City: Cleveland


Hawaii

Maui County


Arbitrage differential: $4,444
Best City: North Shore

Kauai County


Arbitrage differential: $3,148
Best City: Koloa

Honolulu County


Arbitrage differential: $2,589
Best City: Honolulu


Louisiana

Orleans Parish


Arbitrage differential: $1,614
Best City: New Orleans

 

Massachusetts

Dukes County


Arbitrage differential: $3,771
Best City: Oak Bluffs


Maine

Knox County


Arbitrage differential: $1,578
Best City: Rockland


Michigan

Allegan County


Arbitrage differential: $3,459
Best City: Saugatuck

Berrien County


Arbitrage differential: $1,935
Best City: Union Pier


Mississippi

Harrison County


Arbitrage differential: $1,731
Best City: Biloxi


Montana

Gallatin County


Arbitrage differential: $1,823
Best City: Bozeman


North Carolina

Swain County


Arbitrage differential: $1,604
Best City: Cherokee


New Mexico

Santa Fe County


Arbitrage differential: $1,949
Best City: Santa Fe


New York

New York County


Arbitrage differential: $2,135
Best City: Manhattan


Oregon

Clatsop County


Arbitrage differential: $1,908
Best City: Seaside


Pennsylvania

Centre County


Arbitrage differential: $2,060
Best City: State College


Rhode Island

Washington County


Arbitrage differential: $1,872
Best City: Narragansett

Newport County


Arbitrage differential: $1,807
Best City: Newport


South Carolina

Charleston County


Arbitrage differential: $1,963
Best City: Charleston

Beaufort County


Arbitrage differential: $1,789
Best City: Hilton Head Island


Tennessee

Sevier County


Arbitrage differential: $2,645
Best City: Sevierville

Davidson County


Arbitrage differential: $2,595
Best City: Nashville


Texas

Nueces County


Arbitrage differential: $2,194
Best City: Corpus Christi


Utah

Summit County


Arbitrage differential: $1,880
Best City: Park City

Grand County


Arbitrage differential: $1,866
Best City: Moab


Vermont

Lamoille County


Arbitrage differential: $1,737
Best City: Hyde Park


Wisconsin

Door County


Arbitrage differential: $2,635
Best City: Egg Harbor

Dane County


Arbitrage differential: $1,814
Best City: Madison


Wyoming

Teton County


Arbitrage differential: $2,492
Best City: Jackson


Conclusions


Based on the data above, it’s clear that the best cities for rental arbitrage are significantly different than the best places to invest in the traditional buy-to-rent model. 

Many of the destinations above have vacation rental markets that are not necessarily overperforming (notice how some hotspots are curiously absent). In the context of rental arbitrage in real estate, undervalued long-term rents are equally as important as the RevPAR potential of its vacation rental markets.


A Note on Legality: Is Airbnb Rental Arbitrage Legal?


Once renters realize the revenue potential of Airbnb arbitrage, naturally the question emerges: “Is Airbnb legal for renters?” Currently, most laws in most countries do not distinguish between hosts who own properties versus those who rent them. Laws target short-term vacation rentals, having little to do with who owns or operates them. 

That being said, it is highly recommended that hosts maintain full transparency among the owner and the rental company. Draft up a legal document outlining your intentions as a vacation rental host to make sure all parties are on board.

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