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.

Airbnb Rental Arbitrage: A Data-Driven Guide

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

As of the second quarter of 2021, there were over 600,000 multifamily listings in the U.S. listed on Airbnb or Vrbo as short-term rentals (STRs). The vast majority of these listings are located in the largest American cities, many of which were ravaged by the COVID-19 pandemic. 

With a large percentage of workers able to work remotely—and the high cost of living that comes with many of these cities—it's no surprise many people have opted to move to lower-cost areas until the benefits of living in the city match or surpass the cost again.  

It appears that some momentum may be underway, with apartment rent soaring in June 2021 and annual growth in long-term rental (LTR) rates growing more than 10% in 53 of the country’s 150 largest metro areas, according to RealPage Market Analytics.

Meanwhile, demand for STRs in the 50 largest cities is up from a 50% drop in 2020. Although demand is still down about 25% from 2019 levels, a full recovery is expected by 2023. Within these cities’ high-density areas, where most high-rise apartments are located, demand is down by more than 37%. Comparatively, demand is down just 7% from 2019 levels in suburban areas full of single-family homes and garden apartments.

Both demand and rent remain in flux for both the long-term and short-term rental industries, but opportunities do exist for renting apartment units as short-term rentals (known as the apartment rental arbitrage model). Having the right data that can provide a good start in finding a rental arbitrage property.

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. 

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


Airbnb rental arbitrage is not only legal but it has been widely adopted, with benefits for STR operators, apartment owners, and building residents.

Many apartment 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 apartment owners to share in profits from these opportunities. It also enables them to diversify their rental income. 

Building owners can use Migo by RealPage to monitor and monetize home-sharing activity in their buildings. However, each party should sign a rental arbitrage contract prior to engaging in practice. It’s also a wise investment to look into ​​rental arbitrage insurance. Migo helps apartment owners to facilitate this as well.

But it’s not all for the apartment owner. Vrbo or Airbnb rental arbitrage provides an additional amenity for other long-term renters in the building. (Wouldn’t it be great to have an STR unit in your building for your in-laws to use next time they came to visit, instead of using your fold-out couch?) Residents should keep this in mind when discussing the prospect with their apartment owner and frame it as a win-win for both parties. 


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 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). 

This analysis focuses on understanding the current opportunity by looking at the difference in the costs of a long-term lease (more than one year) and the potential revenue of renting it out nightly on a platform like Airbnb, Vrbo, or Booking.com. We show how this has changed throughout the pandemic and which markets and submarkets present the most attractive opportunities today in the U.S., leveraging data from the industry’s leading sources: AirDNA as well as Migo and RealPage Market Analytics for long-term apartment performance.

Multifamily listings—primarily located in apartment buildings—are concentrated in the largest U.S. cities, and our analysis includes data on 34 U.S. markets with the most STRs and their submarkets. (LTR rates and occupancy levels are provided by RealPage Market Analytics and Migo, while short-term rental performance comes from AirDNA.) Both include data from 2016 through 2021, and Real Page’s market and submarket geographic definitions were used for both datasets for added consistency.

To be included in the analysis, a submarket needed to have more than 20 total active STR listings throughout the five-year period and at least 10 listings of an individual bedroom type to return results and ensure small samples of listings didn’t skew the results. 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 account for additional expenses necessary to successfully manage an STR property, such as start-up costs (appliances, furniture, decor, and licensing and legal fees), as well as ongoing costs like utilities, maintenance, toiletries, and insurance. Given the variable nature of these expenses, they were not included in our analysis.

Across the 34 markets, the number of short-term multifamily rental listings dropped by just 2% over the past two years but with a significant divergence across markets. Large urban coastal markets saw steep declines in listings, falling by more than 25% in Boston, Seattle, Los Angeles, and New York. On the other hand, listings in Dallas, San Antonio, and Jacksonville, Florida, grew by more than 40% over the same period.

There are many factors that may have contributed to the changes in listing activity including:

New regulations in markets like Boston and Los Angeles

The closing of STR companies like Lyric and Stay Alfred 

New and growing groups like Sonder, Mint House, and Vector Travel  

The changing economics of STR opportunities

Prior to 2021, there was very little correlation between annual percent change in the average revenue per listing earned in the LTR and STR markets, and all markets in prior years generally showed a positive average arbitrage opportunity. That changed throughout the pandemic, as the rents and revenues shifted dramatically. In its wake, demand patterns changed for both the multifamily housing and lodging industries. 

In cities like New York and San Francisco, apartments saw increases in vacancies and declines in effective rents, reducing the average effective rent by 10% to 25%, depending on the size of the unit. This decrease correlated with a significant drop in the revenue earned from STRs over the same period. Given the larger decline in revenue earned for lodging uses, any potential for rental arbitrage appears to have vanished in these markets.

In an opposite but similar vein, demand for both lodging and housing has increased dramatically in many U.S. cities. Demand for STRs in coastal destinations was up over 20% in the second quarter of 2021 versus 2019. That increased demand helped edge the revenue earned per unit even higher for these markets. Coupled with only modest increases in apartment rents, the potential for rental arbitrage expanded in specific markets and submarkets that remained in high demand throughout the pandemic.

What were the best cities for Airbnb rental arbitrage in 2021?

The table below ranks the 34 largest markets with multifamily STR listings, revealing the best cities for Airbnb rental arbitrage. You can sort by LTR rates and—the ultimate determining factor—arbitrage potential. Use the filters to switch between bedroom types (studio, one bedroom, two bedrooms, three-plus bedrooms, and the market average).

<div class='tableauPlaceholder' id='viz1636389710608' style='position: relative'><noscript><a href='https:&#47;&#47;www.airdna.co&#47;'><img alt='Market ' src='https:&#47;&#47;public.tableau.com&#47;static&#47;images&#47;20&#47;2021MultifamilyRentalArbitrage&#47;Market&#47;1_rss.png' style='border: none' /></a></noscript><object class='tableauViz'  style='display:none;'><param name='host_url' value='https%3A%2F%2Fpublic.tableau.com%2F' /> <param name='embed_code_version' value='3' /> <param name='site_root' value='' /><param name='name' value='2021MultifamilyRentalArbitrage&#47;Market' /><param name='tabs' value='no' /><param name='toolbar' value='yes' /><param name='static_image' value='https:&#47;&#47;public.tableau.com&#47;static&#47;images&#47;20&#47;2021MultifamilyRentalArbitrage&#47;Market&#47;1.png' /> <param name='animate_transition' value='yes' /><param name='display_static_image' value='yes' /><param name='display_spinner' value='yes' /><param name='display_overlay' value='yes' /><param name='display_count' value='yes' /><param name='language' value='en-US' /><param name='filter' value='publish=yes' /></object></div>                <script type='text/javascript'>                    var divElement = document.getElementById('viz1636389710608');                    var vizElement = divElement.getElementsByTagName('object')[0];                    if ( divElement.offsetWidth > 800 ) { vizElement.style.width='1366px';vizElement.style.height='877px';} else if ( divElement.offsetWidth > 500 ) { vizElement.style.width='1366px';vizElement.style.height='877px';} else { vizElement.style.width='100%';vizElement.style.height=(divElement.offsetWidth*1.77)+'px';}                     var scriptElement = document.createElement('script');                    scriptElement.src = 'https://public.tableau.com/javascripts/api/viz_v1.js';                    vizElement.parentNode.insertBefore(scriptElement, vizElement);                </script>

Topping the lists again in 2021 were familiar markets. In analyzing the same data over a five-year period, the five markets that would average the highest rental arbitrage premium continue to include Nashville; New Orleans; Savannah, Georgia; Charleston, South Carolina; and Jacksonville, Florida. Reflecting the risk associated with rental arbitrage, only Jacksonville has seen significant gains in multifamily listings since 2018 as new regulations have likely reduced other markets’ growth potential. 

New to the top of the list is San Diego, where apartment rents have grown a swift 4% per year over the past five years but are still significantly lower than the 10% per year for STRs.

Most markets (25 out of 34) saw a decline in revenue potential from rental arbitrage as apartment rents only fell in seven of the 34 markets.

Best areas for Airbnb rental arbitrage opportunities

To give a better understanding of how rental arbitrage may pencil out at a more granular level, we have provided the following tool that allows you to look at average LTR and STR listings’ performance at the submarket level, which submarkets rank at the highest for rental arbitrage opportunity, and which ones have emerged over the past year. Use the dropdowns to filter to a specific market and bedroom count.  

<div class='tableauPlaceholder' id='viz1636390119351' style='position: relative'><noscript><a href='https:&#47;&#47;www.airdna.co&#47;'><img alt='Sub Dash ' src='https:&#47;&#47;public.tableau.com&#47;static&#47;images&#47;20&#47;2021MultifamilyRentalArbitrage&#47;SubDash&#47;1_rss.png' style='border: none' /></a></noscript><object class='tableauViz'  style='display:none;'><param name='host_url' value='https%3A%2F%2Fpublic.tableau.com%2F' /> <param name='embed_code_version' value='3' /> <param name='site_root' value='' /><param name='name' value='2021MultifamilyRentalArbitrage&#47;SubDash' /><param name='tabs' value='no' /><param name='toolbar' value='yes' /><param name='static_image' value='https:&#47;&#47;public.tableau.com&#47;static&#47;images&#47;20&#47;2021MultifamilyRentalArbitrage&#47;SubDash&#47;1.png' /> <param name='animate_transition' value='yes' /><param name='display_static_image' value='yes' /><param name='display_spinner' value='yes' /><param name='display_overlay' value='yes' /><param name='display_count' value='yes' /><param name='language' value='en-US' /></object></div>                <script type='text/javascript'>                    var divElement = document.getElementById('viz1636390119351');                    var vizElement = divElement.getElementsByTagName('object')[0];                    if ( divElement.offsetWidth > 800 ) { vizElement.style.width='1366px';vizElement.style.height='927px';} else if ( divElement.offsetWidth > 500 ) { vizElement.style.width='1366px';vizElement.style.height='927px';} else { vizElement.style.width='100%';vizElement.style.height='2177px';}                     var scriptElement = document.createElement('script');                    scriptElement.src = 'https://public.tableau.com/javascripts/api/viz_v1.js';                    vizElement.parentNode.insertBefore(scriptElement, vizElement);                </script>

What is the formula for successful Airbnb arbitrage?

Ultimately, every deal is different, and it's important to remember that the data presented in this analysis represents the average performance of properties in that market or submarket. There are pockets of potential opportunity in all markets. On average, a market might appear unappealing, but all markets have combinations of submarkets and bedroom types that could succeed.  

No single property’s performance matches the submarket or market average, and each property should be analyzed separately. Some tools to help with a more detailed analysis include:

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

MarketMinder: Gain valuable insights into the performance of over 10 million vacation rentals across 80,000 cities worldwide. Study the critical trends in your market over the past three years to understand exactly how the STR industry is evolving

Migo: Partnered with Airbnb, Migo facilitates home sharing in multifamily buildings allowing owners to enable, monitor, and monetize home sharing activity on Airbnb. Migo has a proprietary revenue calculator (located on Migo.com) that can accurately estimate an owner's home-sharing income for any property based on address and unit mix.

RealPage Market Analytics: This multifamily market intelligence platform provides full visibility into market, business, and asset performance, enabling stakeholders to view, visualize, and leverage insights, information, and reports at market, submarket, and property levels.

The larger the unit, the greater the rental arbitrage opportunity. The STR premium increases from an average of 46% for a studio apartment; 53% for a one-bedroom; 75% for a two-bedroom; and 140% for a 3-plus bedroom apartment.

3. Part-time rental arbitrage offers renters opportunities

With the recent rise of remote work both before and accelerated by the pandemic, more workers have increased flexibility, enabling them to work anywhere with a stable Wi-Fi connection. Renters who want to get into the rental arbitrage business only when traveling have new opportunities as of 2021.

In many submarkets throughout the U.S., renters can rent out their apartments for as few as five nights per month to cover an entire month’s rent—an incredibly alluring prospect for renters in some of the country’s most expensive cities. 

With any sort of real estate arbitrage, there are inherent risks and a long list of cautionary stories. 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.  

In our multifamily example, that would either be through a reduction in supply of available apartment units, increasing the rent for all apartments and thus reducing the profit opportunity. As more units are added to an area, that may also 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 regulation and even changing policies from the building owner.  

Why starting a rental arbitrage business doesn’t have to be complicated

With many rental arbitrage opportunities available across the country, there’s likely never been a better time to get into the space. Like any other venture, there’s due diligence to perform and tools to explore to ensure a successful endeavor. 

That’s where Migo and MarketMinder come in. Migo brings apartment owners and residents together in the rental arbitrage venture, while MarketMinder gives renters the data they need to optimize their pricing strategy to capitalize on revenue opportunities for themselves and their apartment owners. 

Data makes the difference, and Migo and MarketMinder are powered by the most reliable data in the STR space to help optimize rental arbitrage businesses.

Airbnb Rental Arbitrage: A Data-Driven Guide

ARTICLE SUMMARY

Sign up for our newsletter

Solutions

Industries

Resources

Company

Contact Us

USA

Spain