How Airbnb Arbitrage Works – Explained

Airbnb arbitrage is a real estate investment strategy where you act as a middleman between the owner and the guest. You are renting a property while subletting it to Airbnb guests.

How Airbnb Arbitrage Works Explained

This strategy is popular in short-term rental platforms such as Airbnb. It is also similar to buying or investing in a property.

However, this strategy is different; you can start hosting even if you do not own a property. You can generate a good income while paying the property’s original owner.

In this article, we will explain how Airbnb arbitrage works so that you can be able to begin.

Is Airbnb Arbitrage Legal?

Airbnb arbitrage is legal in most places, but it still depends on your local regulations, lease agreements, and zoning laws. You should check your jurisdiction regarding subleasing properties for short-term rentals.

Otherwise, you may be subject to unexpected restrictions requiring specific property owners’ permission.

That is why, before you start to engage in Airbnb arbitrage, take time to research the legal requirements and regulations of STR. Proper compliance with the law will help things go smoothly.

A necessary reminder for every host who wants to enter this property strategy is always to review lease agreements.

Your property owner needs to confirm if they allow subleasing and the conditions they put in the contract. You should also know the licensing requirements, tax regulations, and homeowner association rules.

How Airbnb Arbitrage Works

Airbnb arbitrage has become a popular real estate business due to its low capital investment. It allows the host to diversify their income based on market demand while keeping it flexible. Here’s how it works:

Property Acquisition

If you want to sublease, find properties you can rent from the landlords. Depending on your budget, you can choose from apartments, houses, cabins, or condos.

These can be listed on Airbnb for short-term rentals. You must take the time to research if its location is attractive to tourists. Tell your landlords that you plan to sublease that Airbnb space for guests.

Don’t forget to check if the property is in market demand to ensure it is suitable for Airbnb arbitrage.

Lease Agreement

Once you have successfully found the right property, it’s time for you to enter a lease agreement. The owner must know this to promote transparency when using the property.

It is where you and the owner must outline the lease terms, rental payments, duration, etc. It is essential for the terms and conditions of the property being rented.

The rental arrangement should be straightforward when conducting Airbnb arbitrage. This agreement also serves as a legal contract emphasizing expectations and responsibilities.

Also, remember that you and the owner must communicate effectively for a successful rental transaction.

Listing on Airbnb

How Airbnb Arbitrage Works Explained

Once everything is settled with the owner, you can start listing on Airbnb. Decide on the rental price and availability that caters to short-term guests. You may choose different accommodation booking settings.

Instant booking is suitable for guests who are looking for immediate booking. Through listing on Airbnb, guests who are searching in your place may find your property.

A successful listing is essential for attracting short-term accommodations.

Property Management

After successfully creating a short-term rental listing, you must develop property management. It is essential to manage the property since you are renting and accommodating guests simultaneously.

You need to maintain cleanliness inside and outside the property. In addition to that, you need to include property maintenance, such as checking if the amenities are still working.

Guests are very particular about how comfortable a place is, and you must consider it. Regular upkeep should be on your priority list to maintain functionality for future guests.

Profit Generation

Your profit from Airbnb arbitrage can vary based on your rental income from your guests and the amount to pay to the owner. Aim to maximize your occupancy rates and estimate your rental prices.

This way, you can align how much you should charge your guest per stay.

The difference between the rental income received from guests and the amount paid to the property owner as rent constitutes the profit from Airbnb arbitrage.

You should maximize occupancy rates and rental prices to increase earnings. Here’s how profit generation works in Airbnb arbitrage:

  • Rental Income: Your primary revenue is renting the property to Airbnb guests. Through proper computation, you can earn a decent income while being able to pay the rent.
  • Occupancy Rate: It refers to the percentage of time when a guest books the property. Having reasonable and higher occupancy rates can help increase revenue. Being able to market and price effectively is essential to optimize occupancy.
  • Expense Management: You must know how to compute the profit in Airbnb arbitrage. First, the rental payment to the landowner, property maintenance, cleaning, utilities, etc. You must learn how to do it to guarantee profitability from sub-leasing.
  • Revenue Optimization: This is an essential strategy for you as an Airbnb host to master. You can enhance your profit by adjusting rental prices on seasonality and demand fluctuations. You can offer discounts or promotions to increase short-term rental bookings.
  • Financial Analysis: Always monitor how your financial performance metrics are going. You calculate how much your revenue and monthly expenses are. It will give you a clear glimpse of your profit generation in Airbnb arbitrage. The key performance indicators will help you improve and maximize your profit.

Airbnb Arbitrage Contract

You must know the contract when you choose to enter Airbnb arbitrage. It is a legal agreement between you and the property owner. You are called the sub-lessee, and the owner is the lessor, even if you are the Airbnb host.

Careful Negotiation and Legal Review

How Airbnb Arbitrage Works Explained

Before entering into a contract, you must be careful about negotiating to avoid legal violations. Read and check the regulations and comply with the laws.

Failure to do so can lead to penalties and breaching the terms of the sublease agreement. In addition, always read your municipalities regulations about short-term rentals.

You must review laws such as primary residence requirements to avoid disobeying regulations. If you are from New York, it’s illegal to have paying guests unless it’s licensed.

Law violations can result in fines of $1000 to $5000. Read and review Airbnb regulations per city before finally entering an Airbnb arbitrage contract.

Here, the terms and conditions are outlined. This contract typically includes the following key elements:

  • Lease Terms: This is where the rental amount is, how long your lease would be when to renew it, and its options. Also, the additional fees or conditions can be found listed in the lease terms.
  • Subleasing Clause: When you start to sublease the property on Airbnb, you must read the permissions and restrictions.
  • Responsibilities: The responsibilities are also written in the contract, especially regarding what guests should accept. There, the maintenance of the property is written, and the utilities’ repairs include insurance coverage.
  • Payment Terms: The owner can specify the rental payments, the security deposits, and other revenue-sharing agreements.
  • Termination Clause: This is very important in a contract in terms of breaches of the agreement; this serves as a guide. It is also where the procedures for ending the lease and resolving disputes could be listed.


Airbnb arbitrage can be a lucrative opportunity to earn additional income while renting. Subleasing on short-term rental platforms like Airbnb has been a steady source of revenue for many hosts.

This business model does not require you to invest large capital in a real state just to start hosting.

Always remember that this process takes time to earn, and there are many things to consider first. You must ensure you are hosting in a place that tourists frequently visit.

Most of all, subleasing depends on your landlords and whether they allow this. Operating without their permission can lead to legal violations, so always read the contract and negotiate with the property owner.

Airbnb arbitrage can be a successful business if you know the proper way and the strategies to keep the momentum going.