What You Need to Know About Airbnb Arbitrage NYC in 2022

New York City. The Big Apple. The city that never sleeps. Is it a good idea to start an Airbnb arbitrage NYC in the city?

NYC remains one of the most popular cities on almost everyone’s places-to-visit lists. It is home to some of the most famous and influential personalities and celebrities in the world. Celebrity sightings are not uncommon in the Big Apple on any given day.

New York is one of the most diverse cities, not just in the US but in the world, and is considered a melting pot of different cultures. The cultural diversity and the sights and sounds are enough to keep drawing tourists and visitors to the city. They also make the vacation rental business pretty lucrative for potential investors.

However, not everyone can afford an expensive New York investment property. For this reason, business-minded people are looking at the possibility of Airbnb arbitrage NYC. Is it allowed? And if so, how does it go?

Airbnb Arbitrage NYC in 2022: What You Need to Know

From its humble beginnings back in 2008, Airbnb is now considered a worldwide phenomenon. What used to be a small-time “airbed-and-breakfast” offering that three guys came up with is now a huge global vacation rental platform.

With its increasing popularity – and the relaxation of lockdown restrictions – people are wondering how they can build a business and create a positive cash flow around the platform, particularly in New York City. One needs to understand that not everyone can get hold of significant amounts of money to purchase New York Airbnb properties. The local real estate market has long been expensive. But almost everyone faces the need to create an additional income stream, given the pandemic’s economic effects and rising inflation.

How can one become an Airbnb host in NYC without owning any property? Is it possible at all?

Yes, it is: through Airbnb arbitration. We will focus on Airbnb rental arbitrage in NYC in this article.

What Does Arbitrage Mean?

Arbitration is a business model that’s been in existence for quite some time now. It is one that transcends almost every industry known to man. It is basically just leveraging another person’s property by sub-leasing and converting it into another product or service.

In such a case, you are essentially taking a property owner’s house (or apartment since we’re talking about NYC) and making it your own rental business. You’re basically taking Product A to turn it into Product B to sell it at a higher price.

Rental Arbitration

That being said, the concept of rental arbitration is defined as taking a lease on a long-term rental property to get it listed on platforms like Airbnb, VRBO, HomeAway, and other similar vacation rental platforms for a profit. In this case, the market is the New York real estate market.

Airbnb Arbitration

Real estate investors interested in getting a piece of that NYC real estate market pie would like to know if Airbnb arbitrage NYC is a profitable investment.

Airbnb arbitration is taking a long-term New York rental property and converting it into a vacation rental that’s solely listed as an Airbnb New York rental. That pretty much sums up Airbnb arbitrage NYC.

So, with the said business model, you will only need to rent a property long-term and have it listed on Airbnb as a short-term rental home. This way, even if you do not own the property, you’re still making money off of it. Pretty sweet, right?

However, before you go off popping that champagne (or cold beer, whichever you prefer) and celebrating that you’ve found a gold mine, you need to first find out what parameters you’re working with if you intend to go the Airbnb arbitrage NYC route, especially where New York Airbnb legal issues are concerned.

Is Airbnb Arbitration Legal in NYC?

Before we get to the meat of things, let’s talk about legal issues first. While arbitration is pretty common in the world of vacation rentals, certain states impose different rules and regulations about Airbnb rentals in general. Some states like Nevada adhere to stricter short-term rental regulations compared to others. It would be wise for aspiring Airbnb hosts to find out if the State of New York sets out similar restrictions for Airbnb NYC before making any plans for arbitration.

Is Airbnb Legal in NYC?

The short answer is yes. Airbnb is legal in New York City. In fact, NYC is the country’s largest short-term rental market with numerous properties listed on Airbnb, VRBO, Booking.com, FlipKey, and other similar platforms.

It is pretty understandable given how expensive hotel rates are in the city. Vacation rentals provide tourists and visitors with cheaper alternatives to make their NY experience a pleasant one.

However, just like Nevada, NY is home to some of the toughest vacation rental regulations in the US. Most short-term rentals are actually illegal, which is why they are subject to stiffer fines to prevent illegal rentals from multiplying.

Under the amended New York State Multiple Dwelling Law (MDL), it is illegal for Airbnb hosts and operators to list unhosted vacation rentals on home-sharing platforms. Unhosted rentals pertain to rental properties that allow bookings for less than 30 days with no on-site host. Plus, these rentals must be in a building that houses three or more separate units. To put it simply, hosts are not allowed to rent out a unit for less than 30 calendar days unless they are living on-site for the entire duration of the tenant’s stay.

In 2020, NYC amended its city ordinance to provide protection for the hosts’ personal information. The updated ordinance requires home-sharing platforms to share hosting and listing data with the city.

Host and co-host information includes the following:

• Name
• Physical address (this should include the apartment or unit number)
• Phone number
• Email address
• Airbnb profile ID number
• Airbnb profile URL
• The total amount transmitted to the host from Airbnb
• The account information used to receive payments

The listing information, on the other hand, should include the following details:

• Physical address (this should include the apartment or unit number)
• Name of the listing
• Listing ID number
• Listing URL
• Property type (private room, entire home, etc.)
• Total number of booked nights per listing

The amendment was enforced to regulate short-term rental operations and appropriately tax NYC Airbnb owners and hosts. However, if a person does not consent to share their information, they are prohibited from listing the property as a short-term rental.

Any operator and host found violating these rules and regulations can and will be fined up to $2,500 per day by the Mayor’s Office of Special Enforcement (OSE). So if you’re looking at operating an Airbnb arbitrage NYC, it is best to perform further research on restrictions for short-term rentals in the city.

What Are the Parameters of Airbnb Arbitration in NYC?

Apparently, given the city’s restrictions on vacation rentals, anyone who plans to become an Airbnb host must be:

1. A resident of the city; and
2. Living on-site at the time of the rental period.

Both are non-negotiable. An absentee resident cannot rent out his or her home; they have to live on-site.

How Does One Make Money Off of Airbnb Arbitrage NYC?

Once you get past the legal issues and you’re still intent on going the Airbnb arbitrage NYC route, you need to perform due diligence about how you can make arbitration work for you. Residents of NYC may be discouraged from operating an Airbnb rental business due to the MDL and other city regulations, but if you do it right, it can be a very rewarding and lucrative business.

Important Airbnb NYC Data to Consider

As we already mentioned, NYC is one of the largest short-term rental markets in the US. Airbnb demand is high in the Big Apple, which means operators and hosts are more likely to get their properties booked as long as they’re in the right location. Let’s take a look at some of the numbers for NYC:

• Number of Airbnb Listings: 7,697
• Average Airbnb Daily Rate: $170
• Average Airbnb Occupancy Rate: 68%
• Average Airbnb Monthly Rental Income: $3,820
• Average Airbnb Cash on Cash Return: 87%
• Median Property Price: $1,358,025
• Average Price per Square Foot: $1,844
• Walk Score: 60
• Days on Market: 210

The numbers presented above represent the city of New York as a whole. Let’s take a look at the different neighborhoods in the city and how each one fares on the Airbnb scale:

Brooklyn

• Airbnb Monthly Rental Income: $1,005 to $13,867
• Airbnb Occupancy Rate: 6% to 95%
• Airbnb Cash on Cash Return: 1% to 10%
• Listing Price: $365,000 to $4,166,667

Manhattan

• Airbnb Monthly Rental Income: $1,490 to $8,911
• Airbnb Occupancy Rate: 24% to 100%
• Airbnb Cash on Cash Return: -1% to 8%
• Listing Price: $207,000 to $3,027,714

Queens

• Airbnb Monthly Rental Income: $1,135 to $6,240
• Airbnb Occupancy Rate: 12% to 98%
• Airbnb Cash on Cash Return: -3% to 6%
• Listing Price: $165,000 to $1,825,579

Staten Island

• Airbnb Monthly Rental Income: $2,264 to $8,699
• Airbnb Occupancy Rate: 15% to 97%
• Airbnb Cash on Cash Return: 1% to 10%
• Listing Price: $376,475 to $1,179,841

The Bronx

• Airbnb Monthly Rental Income: $537 to $10,250
• Airbnb Occupancy Rate: 0% to 100%
• Airbnb Cash on Cash Return: -6% to 21%
• Listing Price: $60,000 to $3,027,714

As you can see, the ranges in each category per borough appear to be on the opposite ends of their respective spectrums. For instance, the Airbnb occupancy rate in The Bronx shows us that certain listings get zero bookings while some are never vacant.

And as far as the cash on cash return rate in Manhattan is concerned, some operators and hosts get a dismal -1% COC return rate while others get to enjoy a very good return of 8%. That’s why it’s important for investors to perform their due diligence as each neighborhood has different things to offer.

Market and Airbnb Data Analysis with Mashvisor

The numbers above were taken from the most recent and updated database of Mashvisor, an online real estate market platform that allows investors to find the best properties that align with their investment goals.

The site is used by several thousand real estate investors who look for profitable investments and analyze important market and neighborhood data. It estimates and presents Airbnb cash on cash return, median property prices, rental income, rental expenses, and other data needed to calculate if a property is profitable or not.

Investors who intend to purchase property to convert into Airbnb rentals typically use the site’s Airbnb profit calculator to see if the math checks out. The analysis and calculations will determine if the projected Airbnb income is worth the money, time, and effort.

To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here to go to Mashvisor.

Related: What’s the Best Airbnb Analytics Platform?

Becoming an Airbnb Arbitrage NYC Host

So, given all the parameters and numbers, how does one earn from Airbnb arbitration in New York without violating any laws?

Here are a few things to keep in mind:

1. Do your homework.

As we’ve already mentioned a few times, those who want to start an Airbnb rental business should always perform due diligence. Research the local market and the neighborhood you’re considering. Run the numbers and see if they meet your criteria and expectations.

Find out the limitations on rental properties, especially short-term rentals, so you don’t violate any laws. Fines are hefty so it is in your best interest to know the specific parameters you can work with as an Airbnb host.

Related: How to Evaluate an Airbnb Investment

2. Review your lease agreement.

Go over your lease agreement and see if short-term rental is allowed for the unit you’re renting. Again, you don’t want to be slapped with a fine or an eviction notice. If short-term rentals are allowed, find out what the limitations are, especially when it comes to rental charges.

If your contract states that renting part of the unit is prohibited, you may talk to your landlord and ask for special consideration. Whether you think your landlord will agree to your proposal or not, it is always best to talk to them first before proceeding with your plans.

3. Work on the legal documents required for Airbnb operations.

Let’s say you’re allowed to operate a short-term rental business in your unit. You now need to secure the necessary documents and permits to legally operate your business. Business permits, tax documents, and certificates of occupancy are some of the most important documents needed for Airbnb operations.

4. Prepare the property and make sure it meets Airbnb and city standards.

Once you’ve acquired all the necessary documents, you need to make sure your unit is fit to receive guests and visitors. Careful inspections need to be done to determine if the unit will need certain repairs and updates before it gets listed as a vacation rental.

Keep in mind that every repair and update performed on the property needs to meet not just Airbnb standards but city standards as well, especially the fire and building codes.

5. Get it listed on Airbnb and disclose all the necessary information to the NYC government.

When you’re finished doing home improvements on the rental property, you can already get it registered and listed on Airbnb as a short-term rental in NYC. Provide the necessary information upon registration. Make sure to keep your landlord in the loop, especially with any physical changes done to the unit.

6. Market and maintain the property well.

As a tenant yourself, you need to keep the property clean and well-maintained at all times. Perform regular property inspections during transition periods. It will allow you to immediately spot any problems or concerns that could be problematic if they are not addressed.

Since you are renting out the space to others, the responsibility of keeping the property orderly and fully functional falls on you. Anything that goes beyond your scope of responsibility, such as structural repairs, should be reported immediately to your landlord.

Related: How to Boost Airbnb Profitability in 2022: 7 Tips

Final Thoughts

Airbnb arbitrage NYC can be quite challenging, given the stricter short-term rental regulations in the city. If you plan to get a property listed as a vacation home but don’t intend to stay in it, you need to abide by the MDL rules. Otherwise, you will put yourself at risk of incurring hefty fines and possible eviction. But, if you take the hosted or traditional rental route, Airbnb can be a very lucrative business to get into.

To learn more about how we will help you make faster and smarter real estate investment decisions, click here.