Last updated on June 22nd, 2023
Are you interested in achieving financial independence through passive income? Here’s a disclaimer: you don’t need to own a property to start the Airbnb rental arbitrage business! In this article, we featured the entire process of Airbnb rental arbitrage in Leeds, its profitability, and the best areas and neighborhoods. Continue reading to learn more about short-term regulations and ways to convince landlords to sublet properties for rental arbitrage!
What is Rental Arbitrage?
Rental Arbitrage is a way to start an Airbnb business with no money. By convincing landlords to lease you a property, you can furnish and sublease it on Airbnb and VRBO. No need for you to buy a property!
It is perfectly legal and is a proven scalable business model. In my podcast, I have spoken to various entrepreneurs doing Airbnb arbitrage full-time.
Here’s a proof! In Leeds, Rhifa manages 21 listings and I’m pretty sure she doesn’t own all the properties. She made £376,344 in the last 12 months.
How much can I make with rental arbitrage in Leeds?
Before you dive in and start putting out your hard-earned money on a property, it’s important to know how much profit you can make. For instance, the best neighborhood to invest in is Leeds City Centre, located in the LS1 district which has an average yield of 5.97% in Leeds.
Since this neighborhood is situated in the inner-city, business professionals and students are mostly within this area. Therefore, boosting rental demand and yields!
Profit & Monthly Expense in Leeds
Based on Airbtics’ data, you can earn a whopping £2,128 per month for a 3-bedroom apartment in Leeds City Centre alone. With the data provided, you can certainly tell that investing in a property in Leeds is profitable!
| Average Rent Price | Airbnb Monthly Revenue | Monthly Expense | Monthly Profit |
|---|---|---|---|
| £1,230 | £2,128 | £425 | £472 |
Source: Airbtics dashboard
The monthly profit can be calculated by subtracting the Airbnb monthly revenue, the rental price and monthly expense (£2,128-£1,230-£425 = £472).
Startup Cost in Leeds
Now that you have an overview of how much your monthly expense & revenue, let’s talk about the start-up cost! How long does it take for an investor to get back the startup cost? Let’s take a look at this calculation:
| Total Startup Cost (Average startup cost + 2 months rent price) | Cash Return Time |
|---|---|
| £4,460 | 9 months |
The average estimated startup cost (for furnishing) in Leeds is around £2,000. To compute the total startup cost, it is necessary to add the 2 months of average rent price (£2,460). Now that we have a total startup cost of £4,460, cash return time can be calculated by dividing this by the monthly profit (£472).
Given your monthly revenue of £472, it will take approximately 9 months time to get back the startup cost! In such a short period of time, you can already expect profit and consider starting your second unit for rental arbitrage. If this sounds promising to you, then go ahead and look at the other best areas for rental arbitrage in Leeds!
Best Areas for Rental Arbitrage in Leeds
Before investing in a particular area in Leeds, you have to take a look at the top markets and number of listings to set your expectations towards success. Check out the top 3 neighbouroods in Leeds ranked by their annual revenue, along with their occupancy & daily rates!
1. Leeds City Centre (LS1)
This is the most preferred area by investors who are looking to achieve a higher monthly income. Leeds City Centre is filled with tremendous businesses and is becoming a commercialised area in Yorkshire. Here’s what you can expect in this neighbourhood:
| Type of Bedrooms | Average Rent Price (pcm) | Average Airbnb Revenue | Occupancy Rates | Average Daily Rate |
|---|---|---|---|---|
| 1-bedroom | £656 | £2,334 | 73% | £120 |
| 2-bedrooms | £928 | £2,970 | 67% | £167 |
| 3-bedrooms | £1,230 | £2,128 | 60% | £264 |
According to our Airbtics Dashboard, there are more than 302 Airbnb listings with 41 private room properties and 144 one-bedroom properties in this area. The monthly revenue for most properties in Leeds City Centre is more than £1,447.06 per month with occupancy being more than 53%.
2. Armley (LS6)
This neighborhood is a popular location for Leeds property investors due to low house prices and consistent rental growth. Here’s what you can expect in this neighbourhood:
| Type of Bedrooms | Average Rent Price (pcm) | Average Airbnb Revenue | Occupancy Rates | Average Daily Rate |
|---|---|---|---|---|
| 1-bedroom | £525 | £910 | 58% | £67 |
| 2-bedrooms | £625 | £961 | 65% | £97 |
| 3-bedrooms | £894 | £1,302 | 45% | £152 |
This area has a total of 37 Airbnb listings with 21 private room properties and 28 one-bedroom properties. The monthly revenue for most properties in Armley is more than £203 per month with occupancy being more than 41%.
3. Morley (LS27)
Morley is becoming one of the most popular investment hotspots in the city of Leeds because of its community feel and has shown some of the strongest growth in the UK property market. Here’s what you can expect in this neighbourhood:
| Type of Bedrooms | Average Rent Price (pcm) | Average Airbnb Revenue | Occupancy Rates | Average Daily Rate |
|---|---|---|---|---|
| Studio Type | £525 | £2,527 | 58% | £134 |
| 1-bedroom | £542 | £2,527 | 33% | £67 |
| 2-bedrooms | £712 | £1,386 | 32% | £90 |
This area has a total of 16 Airbnb listings with 4 private room properties and 8 one-bedroom properties in this area. The monthly revenue for most properties in Morley is more than £637 per month with occupancy being more than 61%.
Short-term rental regulations in Leeds
To begin with, it’s certainly important to be familiar with the Airbnb rules in Leeds to make sure that your business will run smoothly. Here are some of the short-term rental regulations and laws to take note of:
- Mandatory Licensing of Houses in Multiple Occupation (HMO)
If the property consists of a mixture of self-contained flats and flats where the tenant has to go out of their flat usually through a communal area to make use of an amenity as described above (whether for their exclusive use or not), then this may require an HMO licence. In addition, properties let above commercial premises may require an HMO licence. - In order to even advertise your property, it is a legal requirement to have an EPC Energy Performance Certificates (EPC) for each property. Once an EPC is obtained, it is valid for 10 years unless the property is sold and a new EPC must be obtained at that point.
- Employers’ liability insurance is a legal requirement if you employ anyone at your holiday home – i.e. if you have a host, housekeeper, cleaner, or gardener.
- If you have a mortgage, your lender will require you to have building insurance.
- If the property is leasehold, the terms and conditions might prevent short-term letting, so check your lease and speak to the freeholder.
How to Find Landlords for Airbnb Rental Arbitrage
Airbnb investment through rental arbitrage is one of the best strategies to have passive income. However, it could be a challenge to find a landlord that allows their property for subletting on Airbnb. You can also convince a landlord by following the rental arbitrage email template & be extra creative!
Here are ways how you can find landlords that allow Airbnb rental arbitrage:
Real Estate Websites
Renters in the digital world who are looking for properties online can easily connect with landlords. Some of the most recommended online real estate websites which allow you to filter by city, state, or ZIP code are:
However, you can also find apartment & condominium properties online in the following websites:
Search Engines & Marketplaces
There are numerous property owners who are leasing their properties and you can easily find them on Google & online marketplaces. Check out some of the most recommended marketplaces:
- Craigslist allows renters to specifically state what kind of property they are looking for. You can try typing in ‘landlords allowing Airbnb’ or ‘sublease property in (city name)’ and try other keywords to get you on the right track.
- Facebook marketplace has a vast community of landlords & renters, so you can try joining the right groups to lead you on the right path. Here are some of the finest Facebook groups that you can join:
Communicate with Landlords
If you are currently renting a space or know someone who is, then it’s also recommended to speak with them. Start by asking if there are vacant rooms or properties and let them know about your intentions of putting them up for rental arbitrage. They might also be able to recommend neighbors or local friends who are also interested in this idea!
