What is rental arbitrage?
Rental arbitrage is a term for an emerging trend where a renter leases a property and then essentially subleases the entire property or a portion of it on Airbnb and VRBO for a profit.
You might also hear the term Airbnb rental arbitrage — the popular short-term rental platform spent over half a billion on advertising last year and took a cut of over 45 million stays in the United States alone.
Having the occasional guest occupying a rental unit may not sound like a big deal, but when rental arbitrage is done systematically for profit, it is not usually in the property owner’s best interest.
No matter what you may think of Airbnb, VRBO and other short-term rental platforms, it’s important to understand how rental arbitrage works and how the practice could potentially hurt your investment property.
Why is rental arbitrage a problem?
For property owners, rental arbitrage can be a problem for a number of reasons.
- Increased risk for damages
- Individual guests are not screened by the property manager
- Seasonality and other factors may affect rent payments – for example, Airbnb laws vary from state to state and are subject to new legislation
- Increased wear and tear
- Noise complaints
- Subleasing may not be contractually permitted by the property manager
How we protect Gainesville property owners against rental arbitrage
That last point applies to all of our tenants. Rental arbitrage of any sort is only legal if the property owner or landlord approves it. Here at KNR Property Management, our leases explicitly state that tenants cannot have a short-term rental or sublease a room without talking with us first.
“A rental arbitrage business is only legal if your landlord approves it.”
When we lease a property to a renter or group of individuals, that person or persons goes through our thorough screening process and is fully responsible for the unit.
Our property owner clients get peace of mind knowing that our vetting processes are working as designed. By explicitly prohibiting subleasing of any kind without notification, we protect your investment against liabilities that could crop up from houses that are being used to host parties.
Another thing to consider is the housing affordability crisis here in Gainesville. One factor exacerbating the supply problem is the conversion of existing rental units to short-term rentals. By explicitly prohibiting rental arbitrage without notification, we’re doing our part to make housing available to our hardworking students and young professionals, not short-term visitors.