The most common way to start an Airbnb business without purchasing a property is by signing a long term rental lease agreement with a landlord, and then subletting the property as an Airbnb. This is called rental arbitrage — the goal is to earn more from Airbnb than you pay to your landlord in rent. There are two main benefits to this method over purchasing an Airbnb property. The first is that you have far lower up-front costs, and the second is if the property isn’t profitable, you can always move on to a different property after your 12-month lease expires. Here’s how to do it:

1. 🚧 Know your legal obligations

Understanding your legal obligations as an Airbnb host is crucial to avoid costly legal issues. Familiarize yourself with local short term rental laws and regulations, and property codes to ensure compliance. Obtain necessary permits and consider liability insurance to protect yourself from potential legal disputes. Common issues include zoning laws, occupancy limits, and tax obligations.

2. 🏦 Get your tenant paperwork in order

In order to submit your application to landlords, you’ll need all the necessary tenant paperwork. This usually includes screening documents such as credit checks, employment verification, and references, but some landlords may ask for further documentation. When you find a property you want to rent, you’ll need these at the ready. The faster you can get the paperwork to them, the higher chance you have of securing the property.

3. 🤔 Evaluate the location and comparable listings

When selecting a property to rent, look for proximity to a high GDP urban area and/or locations with high tourist traffic. The closest answer to “how much can this property make?” is to look at real comparable listings that are already on the market. Averaging these out can give you a good idea of how much you can charge as a nightly rate, and what percentage of the time your property will be occupied.

4. 🏖️ Understand short term rental property value

When people are on vacation, they’re looking for novelty and entertainment so they can get out of their normal routine and have fun. Look for a property with at least a few of these: pool, hot tub, games, beach, tourist destinations, views, and novel architecture. These will significantly enhance the appeal of your listing and justify higher nightly rates.

5. 👨‍💻 Calculate the profitability

Even though the profitability calculation is less complicated than owning a property, it still has to be comprehensive. It’s more than just rent and furniture. Utilities, insurance, and repairs have to also be included to get a realistic picture of your ongoing expenses. You’ll want a pre-determined repair fund in case of damages which your landlord isn’t going to cover.

6. 📑 Submit your applications

The rental market is competitive enough as it is. Asking landlords to risk legal issues and damages to their property from Airbnb guests is a big ask. Consider sweetening the deal by increasing the rent 10-20%. Without an incentive, there’s no reason for them to take on extra risk, and they’ll probably just go with a tenant who wants to live in their property.

7. 😄 Prepare to be a host

Being a host involves more than just collecting rental income. Be prepared to handle tenant issues, property maintenance, and administrative tasks. Effective guest communication, handling reviews professionally, and keeping your landlord in the loop are keys to successful hosting on rental arbitrage.