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Airbnb Rental Arbitrage Market Research 101

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.

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    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.  

     

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    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! 

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    5 Best AirDNA alternatives for 2022 (Free and Paid)

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    Fueled by the rise of Airbnb, AirDNA has become known to many Airbnb hosts as a short-term rental analytics tool. AirDNA provides two products:

    1) MarketMinder

    2) Investment Explorer

    The product is priced at around $100/mo for most of the major cities in the world. 

    AirDNA may be a well-known short-term rental analytics software option, but many users have been complaining about the data not being accurate. What most Airbnb hosts and short-term rental investors don’t know is that there are currently AirDNA alternatives out there and people are starting to look for alternatives so they can make better investment decisions. 

    There are actually so many awesome short-term rental analytics tools in 2022! Choosing the right short-term rental analytics application is a hard task because it is probably your first time hearing about the alternatives or considering subscribing to one. 

    We have tried our best to list out all the AirDNA alternatives to help you find what’s best for you, but first, let’s quickly review why you would want to use a short-term rental analytics tool in the first place.

    We also included one free AirDNA alternative at the end of the article!

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    What is the use of Short-term Rental Analytics?

    1. To understand the potential cash return of a new short-term rental investment

    People who are thinking of buying a vacation home need to figure out how much they will make if they buy a certain property. It’s especially important for short-term rental investments because depending upon the location and demand for the property, the net rental yield can vary from 1% to 25% annually. The right data points should allow you to differentiate high yield properties from the low ones.

    1. To increase Airbnb’s income by pricing better

    If you already own rentals, pricing is one of the most important aspects if you’d like to increase your revenue. The correct pricing helps you to get more bookings at better prices, attract the right guests, and keep running a profitable short-term rental business! The right short-term rental analytics should provide actionable insights into the prices you should set for your property. 

    1. To set benchmarks based on the top-performing properties

    The saying goes, “If you can’t measure, you can’t improve”. If you’d like to improve your short-term rental business, you need to compare your property against the market’s top performers and average performers. What is your property’s performance (occupancy rate, daily rate, booking lead time) when measured against your market? The right short-term rental analytics should allow you to benchmark your property against competitors. 

    There are two points to mention in our coverage of short-term rental analytics options. 

    Data quality is important, and we measured data quality by the type of metrics they are showing and the granularity of the data. 

    Data coverage is another essential factor, and we measured data coverage by geographic coverage and data update frequency. Now, let’s get to the tools we looked at for this article.

    Review of Top 7 AirDNA alternatives & competitors

    1. Airbtics
    Our Airbtics review score

    Airbtics provides all the short-term rental data for investing in and managing your Airbnb business smarter. To begin with, we gave five stars for data coverage since they cover global markets and update data every day or every week, depending which plan you choose. We again gave five stars for data quality because they provide individual booking and pricing projections, guest origin, detailed revenue breakdown, and individual property performance data. Furthermore, they have the best Airbnb Calculator.

    The only downside is that their pricing isn’t as cheap as other providers. (Updated in 2022: Their pricing is now lower, $30/market, than AirDNA and AllTheRooms!!!) Nevertheless, Airbtics customers seem to be pretty happy with the value they’re getting. 

    2. AllTheRooms Analytics
    Our Alltherooms analytics review score

    AllTheRooms Analytics helps you to analyze short-term rental markets and monitor your short-term rental competition.

    First, we gave four stars for data coverage since they cover global markets, but they don’t clearly state how frequently they update their data. What our analysts found is that their market data seems to be updated every month.

    Secondly, we gave three stars for data quality because AllTheRooms provides supply, booking lead time, and future booking data at the market level. Unlike Airbtics, the platform doesn’t have guest origin or individual property performance data. Their filter allows you to get insights into the market performance of various types of properties and has a few more options than AirDNA.

    3. Mashvisor
    Our Mashvisor review score

    Mashvisor helps property investors immediately find out what kind of returns a property will provide and what you need to outperform the rental market. We gave one star for data coverage since Mashvisor only has U.S. market data.

    Next, we gave two stars for data quality because Mashvisor doesn’t provide details for important metrics like booking lead time, property level future pricing data, extra guest fees, and the like.

    Even though they don’t provide detailed short-term rental metrics, their pricing seems to be attractive for U.S. property investors. At this time, you can explore market data of a few U.S. neighborhoods at $50/month. 

    4. SeeTransparent
    Our SeeTransparent review score

    SeeTransparent helps you to optimize your vacation rentals with their Smart Rental data dashboard. We gave four stars for data coverage because they cover global markets and update data every week.

    And, yet again, we gave four stars for data quality because they provide individual booking and pricing data for the next 12 months as well as individual property performance data. They don’t seem to provide guest origin data. In order to fully use their dashboard, you need to pay 3,000 EUR for an annual subscription. 

    5. WheelHouse, PriceLabs, DPGO, etc

    Before we sum up, we’d also like to mention the above dynamic pricing solution providers in this post since AirDNA also offers future pricing data to properly set a price for your rentals. But did you know that these dynamic pricing tools also show some basic market insights and advanced pricing data for your markets? If you already manage properties and you are looking for a tool for pricing, these 3 tools are for you. 

    Still, many tech-savvy revenue managers (or Airbnb hosts) are not happy with dynamic pricing solutions because they constantly have to override the suggestions. If this sounds reasonable to you, you may want to check out Airbtics CompSet page, which allows you to build your own Competitor Sets and track their next 365 days’ rates and booking situations.

    To learn more, here is a youtube video that explains more about the CompSet feature. 

    Airbnb data

    What are the best AirDNA alternatives?

    To sum up, Airbtics, AllTheRooms, SeeTransparent are AirDNA’s direct competitors and Mashvisor, WheelHouse Pricing, Beyond Pricing are AirDNA’s indirect competitors. 

    After our analysts compared all the tools, they concluded that Airbtics is the best AirDNA alternative based on our criteria (data volume, data coverage, pricing). Here are the things we liked best about Airbtics:

    • Covers markets globally and has daily updated data 
    • Has 12 months of projected pricing data at the property level
    • Features historical individual listing performance data
    • Has advanced filtering options  

    A growing number of people are choosing Airbtics over AirDNA in 2021, but as you can see, choosing the right short-term rental analytics tool for your property investment or Airbnb management business requires you to evaluate quite a few things! Not a simple task. Hope our post guided you a little better. 

    Are there any free AirDNA alternatives? 

    InsideAirbnb: It’s a free website launched by Murray Cox in 2016 to debunk illegal Airbnb listings in NYC. It only has coverage in a few cities. Therefore, if you are looking for data points for investing or managing Airbnb, this might not be the best tool.

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