Real estate investing used to be: You save and save and save, find a single family home in a nice area, put down 15%, finance the rest, find a tenant, collect rent, repeat. And maybe in 20, 30 years, you’ll have enough passive income to live off of, right? But today, thanks to technology, you’ve got other options. The trendiest of which is flipping beds on Airbnb. In this article, I’ll explain what that means, and how you can get started, quickly, without owning any property. Cool?
The prim and proper term for this is rental arbitrage. You basically pay for a long-term rental, list it on Airbnb, (hopefully) make more than what you’re paying, and pocket the difference. So say you find a nice condo for rent and they want $1,800 a month for it. You agree, as long as they’ll sign a little waiver giving you permission to list it on Airbnb as a short-term rental. Say they do. Now say it makes you $4,200 per month from Airbnb bookings. Maybe you have $1,000 in expenses. You’d net $1,400.
Compare that to all the upfront capital and time and energy you’d have to pour into a traditional real estate deal—just to cash flow the same amount—and it’s not hard to see why everyone and their auntie wants to flips beds on Airbnb all of a sudden, right? But I know what you’re thinking: It almost sounds too good to be true, doesn’t it? Like, this can’t be legal, can it? Well, as I said earlier, if you’re honest about your intentions, and put everything in writing, and they sign on the dotted line? Yep, perfectly legal.
Now let’s address the elephant in the room. Isn’t it gonna be hard to get some landlord to let you whore out their property, make almost as much (if not more) than they do off it, subject it to some serious wear and tear—and whatever else, right? Like what happens when a buncha college kids rent it for the weekend and throw a rager? Or some creepy old man ends up strangling a stripper in the master bedroom? Okay, fine. That’s probably not gonna happen, but you get what I’m saying, right? There’s just a lot of what ifs.
No two ways about it, this is the one big challenge with this model. Anyone who tells you different—that it’s easy to get landlords to say yes to this—is full of crap. It’s a tough sell. But it is doable. Many-a Airbnb businesses have been built this way: with rental arbitrage. If you’re prepared, if you have a good pitch, and if you hit up enough people, especially those who’ve had vacancies for a number of months, you’ll eventually find a bed to flip. You really have to put yourself in their shoes, and make it make sense for them.
Give them peace of mind by agreeing to a really long contract right from the jump. “Hey, you’re asking for a 12-month commitment; how ’bout I double that and make it 24?” Explain to them that, since this is a business for you, as well, you’ll be incentivized to keep the property in tip-top shape year-round. And that you’re protected somewhat by Airbnb’s $1 million dollar liability policy. And if that still doesn’t do the trick, you might consider sweeting the pot by adding some sorta profit share in addition to your lease agreement.
Assuming you clear that hurdle, and get some beds to flip, what are some of the other downsides here? Based on my research, what a lot of these gurus aren’t telling you—because they want you to buy their $5,000 course—is how much work’s involved in the beginning. The listing and the marketing and the staging and all the back and forth with anyone who stays there, then cleaning up after those filthy animals—am I right? Until you’ve got systems and a solid team in place, it’s gonna be a grind.