US: Vacation rental data provider AirDNA has assembled a list of the best and worst cities in the United States for rental arbitrage, i.e. renting a property on a long-term lease to rent as a short-term rental.
Rental arbitrage is being recognised as the latest trend to engulf the vacation rental sector. For example, AirDNA claims companies such as Lyric, which recently raised $160 million in a Series B financing round led by Airbnb, base their entire business model on this tactic.
The provider adds that rental arbitrage is particularly popular with middle-income earners as it allows rental entrepreneurs to get their business off the ground without the large down payment required when buying a home.
The trend can be a lucrative proposition for entrepreneurs, but it does not come without its risks. Though there are strict rules covering rent-to-rent models in many cities across the United States, some states recognise the benefits of vacation rentals on the local economy and tax coffers and have since implemented non-restrictive regulations.
According to AirDNA, the most lucrative locations for rental arbitrage are cities with the greatest difference between long-term rental costs and short-term revenue.
For more information, visit the AirDNA website here.
Here is the list compiled by AirDNA:
Worst Markets for Rental Arbitrage for One-Bedroom Properties:
Market Monthly Rent Short-Term RevPAR Arbitrage Potential
San Francisco, CA $3,700 $3,245 -$455
San Jose, CA $2,850 $2,108 -$412
New York, NY $2,850 $2,548 -$302
Oakland, CA $2,270 $1,975 -$295
Laredo, TX $830 $545 -$285
Worst Markets for Two-Bedroom Properties:
Market Monthly Rent Short-Term RevPAR Arbitrage Potential
Scottsdale, AZ $2,080 $1,677 -$403
Irving, TX $1,490 $1,091 -$399
Chandler, AZ $1,440 $1,177 -$263
Laredo, TX $940 $710 -$230
Oakland, CA $2,720 $2,631 -$89
Best Markets for One-Bedroom Properties:
Market Monthly Rent Short-Term RevPAR Arbitrage Potential
Honolulu, HI $1,700 $3,446 $1,746
Nashville, TN $1,380 $3,043 $1,663
Boston, MA $2,400 $3,920 $1,520
Detroit, MI $610 $1,883 $1,273
Des Moines, IA $810 $2,000 $1,190
Best Markets for Two-Bedroom Properties:
Market Monthly Rent Short-Term RevPAR Arbitrage Potential
Boston, MA $2,750 $5,338 $2,588
Honolulu, HI $2,230 $4,772 $2,542
Nashville, TN $1,390 $3,580 $2,190
Corpus Christi, TX $1,070 $2,690 $1,620
Detroit, MI $690 $2,165 $1,475
[Data courtesy of AirDNA]
