Arbitrage is the practice of taking advantage of a price difference between two or more markets. When it comes to rental arbitrage, you rent a property and rent it out immediately as a vacation rental, pocketing the difference in rent as your profit.
Home ownership has long been considered a key part of many people’s dreams, but with the high cost of housing in many areas, renting may be a more affordable option. But is it always better to rent than own?
Owning can tie up your money and limit your options, which make it harder to take advantage of opportunities that come along during the time you own a house. In this case, renting may make more sense. And if you utilize a resource such as a zero cost vacation rental property management software, managing your vacation rentals can be a seamless ordeal.
Here are a few reasons why you may prefer rental arbitrage over owning:
1. You’re unsure how long you’ll stay in your location.
Let’s say you’re a college student planning to attend graduate school, and you need a place to live for a year or two while you work on your master’s degree. Instead of going through the hassle of trying to sell your house when you know it will be vacant, you could rent it out as a vacation rental to generate good streams of income.
2. You want to keep your options open.
If you own a home, you could face an expensive refinance in the future if interest rates continue to rise. Owning also limits how much money you can invest in stocks or bonds without tying up too much of it in your house equity. Meanwhile, rental arbitrage lets you invest the extra cash you make into other assets.
3. Renting is cheaper than owning.
Home prices have gone up dramatically all throughout the country since the beginning of the pandemic. Although rent prices are at a higher rate as well it still makes it very lucrative to rent then to own. The main savings come from not having to put an initial down payment making it easier to get a return on your initial investment.
4. You’re looking for an investment rather than a place to live.
The best way to build wealth is not by how much you earn, but by what you can keep. That’s why rental arbitrage is so attractive. If you’re able to pay off your vacation rental with the money you’re getting for being a host, then you’re well on your way to success.
There are many advantages to rental arbitrage. You don’t have the hassle of owning a property, which can take up time and money and can sometimes not even offer you enough money to cover your monthly expenses. Most importantly, if you want to manage all your vacation rentals in one place and reduce your overall cost and increase revenue, getting a zero cost vacation rental property management software can help you in the process.