Rental arbitrage on two apartments in a mid-size city
Rent long, sublet short (with landlord permission). Modest but real cashflow per unit.
How it works
The model only works in cities where short-term rentals are legal and the delta between long-term rent and nightly rates is wide enough to cover cleaning, utilities and vacancy.
Step by step
- 1Check municipal short-term-rental laws first. Read the city ordinance, permit requirements, night caps, primary-residence rules, and lodging tax rates. Cities change these fast — verify twice.
- 2Model the numbers before signing anything: pull AirDNA for the neighborhood ADR and occupancy. Deduct 40% for cleaning, utilities, supplies, PMS fees, tax, and vacancy. If cashflow is under $500/mo, walk away.
- 3Find landlords who explicitly allow subletting in writing. Small independent owners are far more open than corporate property management. Offer a longer lease and higher deposit as sweeteners.
- 4Get a written STR addendum to the lease — not just a verbal 'sure'. Landlords change their minds; the addendum protects you.
- 5Buy a $1M short-term rental insurance policy (Proper Insurance, Steadily) before the first booking. Landlord's policy will not cover you.
- 6Furnish one unit for $6-8k in a weekend using bulk buys from IKEA, Amazon and Facebook Marketplace. Keep receipts — most of it is depreciable.
- 7Design the space for photography first: neutral walls, one accent wall, real linens, art at eye level. Professional photos add 15-25% to bookings.
- 8Set up a PMS (Hospitable, Guesty For Hosts, Hostaway) from day one. Automate check-in/out messages, review requests, and pricing (Pricelabs or Wheelhouse).
- 9Standardize the cleaning kit and a 40-point turnover checklist. Pay cleaners $10-20 above market — reliable turnover is the whole business.
- 10Reserve 15% of gross revenue in a separate account for taxes, and 5% for replacements (linens, coffee makers, remote controls). They will break.
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