If you cannot allocate $100,000 to buy a short term rental, you should not get discouraged. There are ways to get into the Airbnb rental business with no money down. Let’s take a look at the most popular ones:
How to Start an Airbnb Business With No Money?
Airbnb Arbitrage
Rental arbitrage is an old concept that’s been gaining more popularity in the US market in recent years, especially in light of the expanding short term rental industry. Airbnb rental arbitrage allows hosts to run an Airbnb business without owning a house. It means that you can make money with Airbnb with no money down.
What you do is you rent a long term rental property from a landlord and then rent it out to guests on a short term basis. Before doing so, you should make sure that your rental lease agreement and the applicable HOA rules do not prohibit such a setup.
To optimize your return on investment, you should aim for a market and a property where long term rental rates are relatively low, while Airbnb daily rates are high. The bigger the difference between what you get on Airbnb and what you pay to the landlord, the higher your monthly income and rate of return.
You can use the Mashvisor platform to identify neighborhoods and properties that meet the above criteria. Specifically, our heatmap will help you search for areas with low traditional rental income and high Airbnb income. The property search engine, on the other hand, will allow you to zoom in on properties with such qualities.
Part of Mashvisor’s Investment Property Search Engine is the real estate heatmap. It gives a quick overview of the parts of a city with the highest/lowest Airbnb rental income or another metric you’re looking into.
House Hacking
House hacking is yet another way to start making money on Airbnb with no money down, or at least with very little money.
It refers to buying a small multifamily home, usually a duplex or triplex, with the purpose of living in one unit while renting out the others. You can easily apply the house hacking concept to a vacation rental and rent out the extra unit(s) on Airbnb.
The advantage to a first-time investor here is that you need a smaller down payment (starting at 3% of the property price) when applying for a conventional mortgage. It is because you buy a home and not an investment property. Moreover, it gives you access to an FHA loan, which offers a low down payment, lower interest rates, and less strict credit score requirements.
Hard Money Loans and Private Money Loans
Although the first thing that comes to mind when thinking about financing an investment property is a mortgage, there are other feasible loan types.
Hard money lenders, for example, are individuals or companies that specialize in providing beginner investors with the financial resources to purchase a property. The terms can be quite flexible, thus sometimes allowing investors to buy an Airbnb property with no money down. However, most hard money loans come with short terms and higher interest rates.
Similarly, private money lenders include individuals, frequently acquaintances of the investors, who lend them money to start a rental business. Such loans are even less formal than hard money loans, and the two parties can negotiate specific terms. It means that Airbnb hosts might be able to get access to a new property for virtually free.
Real Estate Partnership
Last but not least, if you’re looking for a way to start running an Airbnb rental business with no money down, consider a partnership. Real estate partnerships can take many different legal and structural forms, depending on the experiences, expertise, and means of the parties involved.
For instance, if you have a good understanding of the real estate market and lots of free time, you can be the mind and the legs of the Airbnb rental business and find another investor to provide the financing. While it will mean a lot of active work for you, it will provide you with an opportunity to start an Airbnb business with minimal or no initial investment.
What is an Airbnb Business?
Starting an Airbnb business can be a great investment, allowing vacation rental owners to tap into the global pool of customers and resources. Everything, from spare rooms to grand beach homes, is available on the home-sharing platform.
It’s important that potential Airbnb hosts weigh out both advantages, as well as any potential risks involved, before diving in headfirst. In order for your venture to succeed, you should gain a strong understanding of the model by taking into account what could go wrong with starting such a business.