If you’ve been poking around the internet, chances are that you’ve come across Instagram and TikTok influencers touting the “get-rich-quick” benefits of arbitrage. Arbitrage is the practice of leasing an apartment, condo or house and listing it as a Short Term Rental. In this model, you don’t own the property personally, so the cost of entry is much lower than ownership. Your only investment is a small deposit and your furnishings. But does it live up to the hype? 

My short answer is YES—my nuanced answer is listed below. My experience with arbitrage so far has been incredible. Despite some downsides, the benefits have been well worth it.

What I love: 

• With lower investment cost, you can quickly scale your Airbnb operation. This was huge for me because when I started out, I could only purchase 1 to 2 properties per year. By adding arbitrage units, I was able to generate enough income to bring on additional staff to run the whole operation, while also generating cash to purchase more assets.

• Lower maintenance. If you work with the right property owner, your repair costs will be much lower than on an owned unit. Landlords are responsible for major systems like HVAC, roofs, appliances, plumbing and electric. As an Airbnb Host, there will certainly be times when you pitch in on minor repairs, ESPECIALLY if those are caused by guests. But generally speaking, you don’t have the risk of major unexpected expenses.

• Less time invested for the return. I much prefer arbitrage to co-hosting or management because it takes less time. As the sole host of this unit and recipient of the unit’s income, you aren’t spending excessive time managing a BNB owner’s needs, questions, expectations, and sometimes bizarre feedback. :) You also save time on accounting and invoicing. In my experience, arbitrage has been less of a time commitment per unit than management. 

• Often you can gain access to the newest properties in the BEST locations that, let’s be honest, would be tough to purchase when you’re just beginning your RE career. While my long term goal is always ownership, the cashflow and operational ease of arbitrage are part of what will make that possible. 

• More control. In the same vein, you have a bit more control over the operation of the unit than you would in management. You choose the decor, how frequently you update linens, if you want to give a discount or refund, it’s all up to you and you won’t have to answer to anyone but yourself. VERY IMPORTANT and I will outline it below, but you will have less control than if you owned the property outright. 

What I don’t love: 

• Less control. I know! Confusing because I also said MORE control. What I mean is that you forfeit the control you would have as an owner. Always remember that the life of your arbitrage unit is the life of your signed lease. You cannot control whether or not buildings sell or owners go a different direction. I highly recommend renewing your leases in advance and for longer terms in an attempt to mitigate this lack of control.    

• No appreciation. Because this is not an asset you own, you are not benefiting from the appreciation of the asset, the owner is! As mentioned above, there are still many benefits, but at the end of the day, unless the earnings are being funneled into assets that you do control, it’s just income, not wealth. I’m ok with that! But it’s no substitute for the value of building true wealth. :)  

Is it a get rich quick scenario? Yes and no. On one hand, arbitrage is an incredible vehicle to generate cash quickly, and for a low investment. But in my experience, you do need to give your arbitrage business focus and attention if you want to succeed. Even with a strong team and optimal delegation, a great business requires a great leader.

At the end of the day, there’s nothing more valuable than your time. Take the time to consider where you want to spend your most precious resource. If you develop your empire with the right systems and funnel the cash toward your ultimate goals, arbitrage may just be a great path for you too!