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 Newcastle, 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 Newcastle, Ryan manages 18 listings and I’m pretty sure that he doesn’t own the all properties. He made £432,910 in the last 12 months.
How much can I make with rental arbitrage in Newcastle?
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 Newcastle City Centre, located in the NE1 district which ranks the highest yields (averaging 8.16%) in Newcastle.
Since this neighborhood offers a variety of options from period properties to building apartment blocks, it attracts the majority of investors. Not to mention that it is near the tourist attractions such as the Tyne Bridge & Newcastle Cathedral, which boosted rental demand and yields! Now that we have the best neighborhood to invest in Newcastle, let’s talk about profitability and monthly expenses.
Profit & Monthly Expense in Newcastle
Based on Airbtics’ data, you can earn a whopping £2,327 per month for a 2-bedroom apartment in Newcastle City Centre alone. With the data provided, you can certainly tell that investing in a property in Newcastle is profitable!
| Average Rent Price | Airbnb Monthly Revenue | Monthly Expense | Monthly Profit |
|---|---|---|---|
| £1,031 | £2,327 | £465 | £831 |
Source: Airbtics dashboard
The monthly profit can be calculated by subtracting the Airbnb monthly revenue, the rental price and monthly expense (£2,327-£1,031-£465 = £831).
Startup Cost in Newcastle
Now that you have an overview of how much your monthly expense and revenue is, let’s talk about the start-up cost! How long does it take for an investor like you 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 |
|---|---|
| £4,062 | 2 months |
The average estimated startup cost (for furnishing) in Newcastle is around £2,000. To compute the total startup cost, it is necessary to add the 2 months of average rent price (£2,062). Now that we have a total startup cost of £4,062, cash return time can be calculated by dividing this by the monthly profit(£831).
Given your monthly revenue of £831, it will take approximately 2 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 Newcastle!
Best Areas for Rental Arbitrage in Newcastle
Before investing in a particular area in Newcastle, you have to take a look at the top markets and number of listings to set your expectations for success. Check out the top 3 neighbouroods in Newcastle ranked by their annual revenue, along with their occupancy & daily rates!
1. Newcastle City Centre (NE1)
This area is incredibly attractive to investors because of its waterfront rental properties and historic buildings. It also has an exciting yield of 8.16%! 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 | £733 | £1,877 | 60% | £137 |
| 2-bedrooms | £1,013 | £2,327 | 65% | £177 |
| 3-bedrooms | £1,220 | £2,119 | 54% | £174 |
According to our Airbtics Dashboard, there are more than 132 Airbnb listings with 15 private room properties and 45 one-bedroom properties in this area. The monthly revenue for most properties in Newcastle City Centre is more than £830 per month with occupancy being more than 86%.
2. Jesmond (NE2)
One of the most popular student property areas in Newcastle, Jesmond offers an average rental yield of 4%. Because this area is usually filled with student lets and shared student properties, there are relatively cheaper property prices! 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 | £671 | £1,875 | 65% | £129 |
| 2-bedrooms | £867 | £1,862 | 71% | £148 |
| 3-bedrooms | £1,143 | £2,320 | 49% | £184 |
This area has a total of 55 Airbnb listings with 25 private room properties and 34 one-bedroom properties. The monthly revenue for most properties in Jesmond is more than £829 per month with occupancy being more than 60%.
3. Gosforth (NE3)
Last but not least, Gosforth is a sweet suburb situated near the city center. Many investors prefer to have buy-to-let properties in this area because it is near Newcastle airport & A1 motorway. 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 | £699 | £2,264 | 58% | £131 |
| 2-bedrooms | £950 | £2,737 | 78% | £142 |
| 3-bedrooms | £1,332 | £1,956 | 63% | £93 |
This area has a total of 29 Airbnb listings with 6 private room properties and 11 one-bedroom properties in this area. The monthly revenue for most properties in Gosforth is more than £1,239 per month with occupancy being more than 29%.
Short-term rental regulations in Newcastle
To begin with, it’s certainly important to be familiar with the Airbnb rules in Newcastle to make sure that your business will run smoothly. Here are some of the short-term rental regulations and laws to take note of:
- Energy Performance Certificates (EPC’s) are needed whenever a property is built, sold, and rented. A holiday accommodation that’s rented out for less than 4 months a year or is let out under a licence does NOT need an EPC.
- It is required to pay Council tax in Newcastle.
- Any property with five or more people who form unrelated households, and share amenities such as a kitchen or bathroom, must have an HMO licence. Learn more about an HMO licence in Newcastle.
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!
