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

Dillon DuBois | February 14, 2020

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 Massechusetts ($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.

 

 

StateCounty2018 LTR2019 LTR2018 STR2019 STRArbitrage PotentialYoY % Growth
HIMaui County$1,739$1,815$5,658$6,259$4,44413%
COSan Miguel County$1,683$1,627$4,406$5,879$4,25256%
MADukes County$1,710$1,879$5,912$5,650$3,771-10%
COEagle County$1,555$1,533$4,736$5,005$3,4729%
MIAllegan County$815$838$3,340$4,297$3,45937%
HIKauai County$1,573$1,686$4,576$4,834$3,1485%
CAMariposa County$989$1,047$2,738$4,136$3,08977%
FLNassau County$1,014$1,047$4,162$4,131$3,084-2%
CANapa County$1,716$1,832$3,941$4,895$3,06338%
FLSanta Rosa County$904$1,016$3,491$3,947$2,93113%
FLWalton County$970$914$3,334$3,681$2,76717%
CAMonterey County$1,534$1,665$4,104$4,371$2,7065%
TNSevier County$777$778$3,143$3,423$2,64512%
WIDoor County$758$796$2,620$3,431$2,63542%
TNDavidson County$1,065$1,175$3,291$3,770$2,59517%
HIHonolulu County$2,092$2,215$4,364$4,804$2,58914%
WYTeton County$1,281$1,316$2,667$3,808$2,49280%
FLOkaloosa County$1,085$1,070$4,010$3,559$2,489-15%
COPitkin County$1,880$1,857$2,732$4,199$2,342175%
CAMendocino County$1,098$1,166$3,389$3,439$2,273-1%
TXNueces County$1,069$1,190$2,823$3,384$2,19425%
FLBay County$1,055$1,077$3,231$3,263$2,1860%
HIHawaii County$1,306$1,548$3,221$3,685$2,13712%
NYNew York County$1,948$1,997$4,159$4,132$2,135-3%
CAMono County$1,314$1,338$3,071$3,445$2,10720%
Filtered by 2-bedroom properties in counties with at least 100 active vacation rental listings

 

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 Deleware 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

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

Deleware

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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