Last updated on September 4th, 2023
Did you know that don’t need to own a property at all in the Airbnb rental arbitrage business? In this article, we featured the entire process of Airbnb rental arbitrage in Melbourne, its profitability, Airbnb key metrics including occupancy & average daily rates, along with the best areas for investment.
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 perfect 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 Melbourne, Dave manages 78 listings and I’m pretty sure he doesn’t own all the properties. Overall, he made A$3,467,284 in the last 12 months.
Is Rental Arbitrage Profitable in Melbourne?
In order to start a rental arbitrage in Australia, particularly in Melbourne, it’s primarily important to take note of the overall cost & potential revenue.
For instance, the best neighborhood to invest in is Southbank. As its leading contemporary art gallery is located in Southbank, a host can earn an average of A$3,060 monthly. Using Airbtics’ income generator, you can easily find out that rental arbitrage in Melbourne is profitable.
Profit & Monthly Expense in Melbourne
Based on Airbtics’ data, you can earn a whopping A$7,605 per month for a 3-bedroom apartment in Southbank alone. With the data provided, you can certainly tell that investing in a property in Melbourne is profitable.
| Average Rent Price | Airbnb Monthly Revenue | Monthly Expense | Monthly Profit |
|---|---|---|---|
| A$4,780 | A$7,605 | A$1,521 | A$1,304 |
Source: Airbtics dashboard
The monthly profit can be calculated by subtracting the Airbnb monthly revenue, the rental price, and the monthly expenses (A$7,605 – A$4,780 – A$1,521 = A$1,304).
Startup Cost in Melbourne
Now that you have an overview of how much your monthly expense & revenue are, 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 |
|---|---|
| A$11,560 | 9 months |
The average estimated startup cost (for furnishing) in Melbourne is around A$2,000. To compute the total startup cost, it is necessary to add the 2 months of average rent price (A$9,560). Now that we have a total startup cost of A$11,560, cash return time can be calculated by dividing this by the monthly profit (A$1,304).
Given your monthly revenue of A$1,304, it will take approximately 9 months time to get back the startup cost in Melbourne.
In such a brief period of time, you can already expect profit and can even start considering a 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 Melbourne.
Best Areas for Rental Arbitrage in Melbourne
Before investing in a particular area in Melbourne, 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 suburbs in Melbourne ranked by their annual revenue, along with their occupancy & daily rates!
1. South Yarra
This neighborhood is ideal for tenants as it has great proximity to the essential stores in Melbourne. Check out the Airbnb data such as the average revenue, occupancy rates, and more in South Yarra:
| Type of Bedrooms | Average Rent Price | Average Airbnb Revenue | Occupancy Rates | Average Daily Rate |
|---|---|---|---|---|
| 1-bedroom | A$1,738 | A$2,856 | 78% | A$173 |
| 2-bedrooms | A$2,564 | A$4,973 | 82% | A$255 |
| 3-bedrooms | A$3,889 | A$6,804 | 84% | A$564 |
According to our Airbtics Dashboard, there are more than 307 Airbnb listings with 32 condo properties and 159 one-bedroom properties in this area. The monthly revenue for most properties in South Yarra is more than A$3,772 per month with occupancy being more than 60%.
2. Mornington
This neighborhood is popular for its wineries and local produce. While the majority of locals prefer to hang by the seaside of Mornington, there are also tourists who are visiting the attractions near the area. Check out the Airbnb data such as the average revenue, occupancy rates, and more in Mornington:
| Type of Bedrooms | Average Rent Price | Average Airbnb Revenue | Occupancy Rates | Average Daily Rate |
|---|---|---|---|---|
| 1-bedroom | A$1,521 | A$5,816 | 82% | A$296 |
| 2-bedrooms | A$2,173 | A$5,444 | 72% | A$383 |
| 3-bedrooms | A$2,781 | A$6,854 | 74% | A$487 |
This area has a total of 62 Airbnb listings with 6 private room properties and 26 one-bedroom property. The monthly revenue for most properties in Mornington is more than A$4,934 per month with occupancy being more than 65%.
3. Southbank
Southbank is a beautiful inner-city suburb that is home to fine dining restaurants, shopping districts, and art galleries. Check out the Airbnb data such as the average revenue, occupancy rates, and more in Southbank:
| Type of Bedrooms | Average Rent Price | Average Airbnb Revenue | Occupancy Rates | Average Daily Rate |
|---|---|---|---|---|
| 1-bedroom | A$1,999 | A$3,060 | 81% | A$170 |
| 2-bedrooms | A$2,650 | A$4,721 | 78% | A$287 |
| 3-bedrooms | A$4,780 | A$7,605 | 77% | A$574 |
This area has a total of 379 Airbnb listings with 59 private room properties and 138 one-bedroom properties in this area. The monthly revenue for most properties in Southbank is more than A$3,560 per month with occupancy being more than 60%.
DISCOVER PROFITABLE LOCATIONS IN AUSTRALIA FOR AIRBNB INVESTMENTS
Check out other best places for buy to let investment in Australia!
Short-term rental regulations in Melbourne
To begin with, it’s certainly important to be familiar with the Airbnb rules in Melbourne to make sure that your business will run smoothly. Here are some of the short-term rental regulations and laws to take note of:
- Short-term rentals and short stays are considered as accommodation and residential buildings by the Victoria Planning Provisions. This means that a planning permit is NOT required to operate a short-term rental.
- The city of Melbourne does not impose any night limits or other restrictions on short-term rentals.
- If an apartment is issued with three breach notices in a 24-month period, Victorian Civil and Administrative Tribunal (VCAT) will be able to make orders restricting that apartment from being let for short-stay purposes for a period of time. The breach notices must be issued for separate events (rather than a single event that attracts multiple complaints).
- According to the City of Melbourne and Consumer Affairs Victoria, there are no current zoning restrictions for short-term rentals or short stays in Melbourne.
Rental Properties in Melbourne
To run an Airbnb rental arbitrage in Australia, you can look at property websites and get a grasp of the ranging prices in Melbourne:
1. Domain
2. Rent AU
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!
