Here’s the objective of this blog: To build a property search filter to accurately identify high-return rental arbitrage properties repeatedly. Being able to identify the right opportunities will help you to achieve the ultimate financial freedom by scaling your Airbnb business.
How long does it take to build such filters? It will take about 10 minutes for you to evaluate 5 neighborhoods and build filters.
Any major cities with more than 1 million in population or with more than 2,000 Airbnb listings are a good place to start if you don’t know where to start. Here’s our list for those cities in the US, UK, Canada, Australia, and Spain. If you aren’t living in any cities with the above criteria, you still can get started, but you may encounter problems in scaling later on.
Understanding the regulations
Different cities have different regulations, all of the above 150 cities are legally allowing to operate Airbnb business. However, you need to understand and master the rules and you need to plan the right approach. For instance, London (UK), only allows you to let out a residential property as a short-term rental for 90 days per calendar year. Tough! Still, there are a few ways to get around this – by renting it out as private rooms, filling the low season with mid-term bookings, and getting bookings from other channels.
You need the right mindset to start a business. There will be obstacles, but they should not stop you from building your Airbnb empire.
Market Research – Neighborhood and Bedrooms
The first step of your market research starts with identifying the average Airbnb (or short-term rental) revenues from various size and neighborhood combinations. For the explanation purpose, I will use the Bristol market as an example: BS1 (Bristol Downtown, UK) and BS8 (Clifton, UK).
Neighborhood | Type of Bedrooms | Average Rent Price (pcm) | Airbnb Revenue Top 25% | Rent – Revenue gap |
BS1 | 1 bedroom | £1,282 | £2,341 | £1,059 |
BS1 | 2-bedrooms | £1,804 | £3,320 | £1,516 |
BS1 | 3-bedrooms | £1,837 | £4,047 | £2,210 |
BS8 | 1-bedroom | £1,039 | £2,517 | £1,478 |
BS8 | 2-bedroom | £1,431 | £3,333 | £1,902 |
BS8 | 3-bedrooms | £1,858 | £4,976 | £3,118 |
The purpose of building this table is for you to understand which bedroom and neighborhood combination has good rental arbitrage opportunities on average. You can focus on areas with the big gap between average rent price and average Airbnb revenue.
How do you build this dataset? It is very simple. Go to our market research app, and search for your market, and click the “market overview” button. It’ll generate a CSV file with Airbnb revenue of different bedrooms in a click. You can repeat the process with a few zip codes or neighborhoods, then you will have a clear idea of what type of bedrooms and where are profitable.
*For average rent price, you can get the data from property websites like Zillow, or simply, find 5 properties for rent in that neighborhood and get the average.
Build a property search filter for rental arbitrage
Now you have ideas on which areas have good profit potential. It’s time for you to build a property search filter. Creating this allows you to identify profitable properties at scale.
A property search filter has 3 criteria 1) rental price 2) location and 3) size. This is the filter you will use to find properties for rent. For the rental price, you should use the average rent price you used above, but you can adjust it depending on your situation.
Here is an example
- A 3-bedroom apartment in BS8 for under £1850 per month.
Once you set the filter, you can go to Zillow, find all properties that match your criteria, and contact the owners to learn more about the properties before sending offers to them. These properties are supposed to give you a high return.
That’s it!
