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Short Term Rental vs Long Term Rental in Chicago

short term rental vs long term rental in chicago

Key Takeaways:
  • For traditional landlords in Chicago who want to up their rental collection, short-term rentals are a way to go. But for it to work, Airbnb hosts also need to do their part. If you’re already a short-term rental operator, incorporating data analytics into your strategy will give you a ton of insights when it comes to charging a nightly rate.

Introduction

Pundits have declared that the 2023 recession is inevitable. As someone who owns one or several rental properties in Chicago, you are surely restrategizing to make the most out of your real estate investments. So, we’re here to guide you through. 

Whether you own a short-term or long-term rental property in Chicago, this article is for you!  We believe that economic analysts should not be the only people who have access to numbers. You too can make sound investment decisions in the upcoming downturn by relying on easy-to-use data analytics.

Differences between Short Term Rental Vs Long Term Rental

Let’s first distinguish one from the other. As we all know, long-term rentals have been a traditional form of housing. They are offered to tenants who choose to reside on a property for at least 6 months with a binding lease agreement. Property owners decide to collect a higher rent than the mortgage to generate monthly income that remains unchanged regardless of the ever-changing economic circumstance.  

On the other hand, the setup for a short-term rental is renting out a property to visitors or guests for a very short period. It works pretty much like hotels where guests can stay in for only a couple of days. This can viably extend to weeks or even months. Short-term rentals offer a cozy atmosphere as well as significantly cheaper nightly rates compared to hotels. This is why guests keep coming back to short-term rentals. 

Since short-term rentals have become widely used all over the world, rental arbitrage is another popular trend.  It has given a lot of nonproperty owners a steady stream of passive income by simply re-renting a unit and listing it on Airbnb, VRBO, or HomeAway. This is a wise, effective, and legal income-generating hustle. Just imagine having a side income from a property that you do not own. 

If you’re interested in having more streams of income via real estate, here’s everything you need to know about rental arbitrage in Chicago.

Rental Regulations in Chicago

Chicago Long-Term Rentals 

Traditional forms of rentals in Chicago are regulated by the Residential Landlord and Tenant Ordinance. As a nudge to improve the quality of housing conditions in the city. it highlights the rights and responsibilities of both the property owners and tenants. The ordinance is a comprehensive guide that covers rental agreements, security of deposits, foreclosure, and habitability of the rental property. 

Chicago Short-Term Rentals

The Chicago rental market trends have influenced the local government to oversee the industry in the city. Short-term rentals are regulated by Chicago’s Shared Housing Ordinance. This compels property owners to obtain necessary licenses from Business Affairs and Consumer Protection.  Licenses are valid for 1 year, and hosts have to pay $125 annually for every registered unit. Only then that they can list and advertise their Chicago rental properties on Airbnb, VRBO, HomeAway, and similar websites. 

Advantages of Long-Term Rentals in Chicago:

Below are the advantages of operating a long-term or traditional rental property in Chicago:

  • Strong population – With over 2.5 million residents, Chicago is the largest city by population in Illinois and third in the United States. This fact alone can guarantee landlords a strong market demand for long-term rental properties.
  • A steady stream of income – You are ensured to have a steady and regular monthly income immune to erratic economic conditions. The average monthly rent in Chicago is $1,950.
  • Steady operating costs – You do not need to shell out money upfront for furnishings since the tenants will most likely have their own.
  • Laid-back management – You will have less interaction with your tenants, and you do not need to be hands-on with managing your property. This is risky, however, since damages on the property can get worse if they’re left unattended. 

Advantages of Short-Term Rentals in Chicago:

On the other hand, here are perks that short-term rentals can offer to Airbnb hosts in Chicago:

  • Moderate seasonality – While the seasonality is 69%, your unit will still get booked in most parts of the year.
  • Flexible pricing – You can adjust the nightly rate depending on seasonality or market demand
  • Experience managing the property – Building connections with people by hosting different guests. If this is not your thing, you can still manage the property remotely via automated management tools.
  • Feel more control over the property –  Since guests only stay in for a limited time, you can easily make changes to your property. Without getting worse, any damages can be repaired in no time and also be covered by Airbnb insurance. 

Do you make more money on Airbnb or long-term rentals in Chicago?

According to Airbtics’ Data, you can earn more from an Airbnb in Chicago. For example, a 2-bedroom property can earn $1,850 / month or $22,200 annually. But an Airbnb with the same property size close to the area can earn $67,431 per year. The earning can come from the average nightly rate of $335 with a 52% occupancy rate.

Short-Term Rental Markets in Chicago

We already have an idea of short-term vs long-term rental income in Chicago. Airbnb is the way to go. Chicago is already a rental market – and a very huge one at that. Not for nothing this city’s market is regarded as one of the short-term rental trends in the US 2023. But what landlords do not know is Chicago can be broken down into smaller markets where you can monitor your closest competitors. 

It just so happens that Airbtics has this innovation that allows users to create a Custom Market. Let us now dive deep into the top rental markets in Chicago and learn the best property features with the highest occupancy rate and corresponding annual revenue:

1. Lincoln Park
  • Existing Airbnb listings: 233
  • Average daily rate: $206
  • Airbnb occupancy rate: 71%
  • Airbnb annual revenue: $57,441
  • Best property size: 2 bedrooms
    • Occupancy rate: 75%
    • Annual revenue: $69,908
2. Wicker Park
  • Existing Airbnb listings: 153
  • Average daily rate: $195
  • Airbnb occupancy rate: 69%
  • Airbnb annual revenue: $52,310
  • Best property size: 2 bedrooms
    • Occupancy rate: 79%
    • Annual revenue: $54,007

3. Logan Square

  • Existing Airbnb listings: 289
  • Average daily rate: $135
  • Airbnb occupancy rate: 74%
  • Airbnb annual revenue: $40,940
  • Best property size: 2 bedrooms
    • Occupancy rate: 77%
    • Annual revenue: $44,879

Maximize Your Rental Income

Every investor wants to get the most out of their investment This is understandable because their capital can be a few hundred thousand to even a million dollars. Real estate investments can be a bit tricky since there’s really nothing much that you can do with the property. Instead, homeowners can strategize their rental business for their financial freedom to be unscathed in the upcoming economic recession. This can allow homeowners not only to keep but also increase their market rent in Chicago.

For traditional landlords who want to up their rental collection, short-term rentals are a way to go. But for it to work, Airbnb hosts also need to do their part. If you’re already a short-term rental operator, incorporating data analytics into your strategy will give you a ton of insights when it comes to charging a nightly rate. As we have seen, Airbtics can provide us with macro and micro views of rental markets for you to arrive at a data-driven decision!

Take your Airbnb to the next level, try this powerful Short-Term Rental Profit Calculator

Make your Airbnb in Chicago Recession Ready

short term rental vs long term rental in chicago
Categories
Airbnb Occupancy All About Airbnb

Chicago Airbnb Occupancy Rate and Best Neighborhoods to Invest

Chicago Airbnb Occupancy Rate

Key Takeaways

Chicago is among the major US cities, making it a profitable market in any field, including short-term rentals. In fact, a two-bedroom Chicago investment property can earn an average annual income of $45,221.  

♦ Get insider Chicago real estate investing leads with the help of short-term rental data analytics. This article will provide insights into the average Chicago Airbnb occupancy rate as well as the peak season in its investment property market.

Introduction:

Chicago is home to major global companies. This fact alone already makes it an ideal place for any type of investment. But let’s talk about the viability of the Chicago property market. What are the key indicators that need to be discussed? And how can hosts and investors benefit from short-term rental data analytics

In this article, we will find out the local Airbnb occupancy rate throughout the year and when can Chicago real estate investors expect a spike in occupancy and revenue. This answers the question of whether or not Chicago is a profitable short-term rental market.

Is Chicago good for rental investment?

Chicago is indeed a good place for a rental investment like an Airbnb. It is among the top destinations of millions of tourists from around the world. In fact, the numbers also confirm Airbnb’s profitability in the city. According to Airbtics, the 2,596 local Airbnb listings have an average occupancy rate of 69%. With this, hosts can expect around $36,598 in annual revenue.

Chicago Airbnb Occupancy Rate

Is Chicago a good place to start an Airbnb? 

You do not have to spend a fortune to gain a bigger one in Chicago real estate. In fact, you can try out the local Airbnb market without actually buying a property investment via rental arbitrage. Of course, you still need some preparation in order to make money. And once you’ve learned the ins and outs of rental arbitrage in Chicago, it is best to know the upcoming events that guarantee high occupancy rates:

1. Shamrock Shuffle
  • When:  March 26, 2023
  • Where: Chicago’s Loop
  • Last year’s participants: 32,000
2. Chicago Comic & Entertainment Expo
  • When: March 31 – April 2, 2023
  • Where: McCormick
  • Last year’s participants: 90,000
3. Chicago Blues Festival
  • When: June 8 – 11, 2023
  • Where: Millennium Park
  • Last year’s participants: 500,000
4. Chicago Annual Pride Fest
  • When: June 17 – 18, 2023
  • Where: Waveland Avenue
  • Last year’s participants: 1M+
5. Lollapalooza
  • When: August 3 -6, 2023
  • Where: Grant Park
  • Last year’s participants: 1M+

These events drove the occupancy rate of Airbnb properties in Chicago last year, and even Airbnb confirms this. By using the Airbtics Dashboard, we can see that the 70% median occupancy rate in March peaked at 100% in July. At its peak, the average revenue was $4,781.

What are the best neighborhoods in Chicago for Airbnb?

Using Airbtics’ Custom Market feature, we can zoom into an Airbnb market and study its key metrics. In Chicago Airbnb neighborhoods, the following areas are the best places for a short-term rental investment:

1. Lincoln Park
  • Existing Airbnb listings: 235
  • Average daily rate: $205
  • Airbnb occupancy rate: 71%
  • Airbnb annual revenue: $56,980
  • Best property size: 2 bedrooms
    • Occupancy rate: 75%
    • Annual revenue: $69,908
2. Wicker Park 
  • Existing Airbnb listings: 153
  • Average daily rate: $194
  • Airbnb occupancy rate: 69%
  • Airbnb annual revenue: $52,446
  • Best property size: 2 bedrooms
    • Annual revenue: $54,007
    • Occupancy rate: 79%
3. Logan Square
  • Existing Airbnb listings: 292
  • Average daily rate: $135
  • Airbnb occupancy rate: 74%
  • Airbnb annual revenue: $41,131
  • Best property size: 2 bedrooms
  • Annual revenue: $44,880
  • Occupancy rate: 77%

Conclusion:

It is a no-brainer that investing in real estate in Chicago is indeed a wise decision. The city is a profitable Airbnb market all year round because of the tourists who come in and need accommodation. While tourism is already strong in Chicago, hosts can expect higher profits beginning in March due to the world-renowned spring events in the city.

In this article, we have learned the key metrics that can inform hosts and investors as they navigate the local property market. All this is possible with the help of short-term rental data analytics. With this, we are able to find out the average occupancy rate, annual revenue, and the best property size that gives the optimal profit. 

Now that you know the benefits of using short-term rental data, try this Airbnb profit calculator for free and maximize your revenue potential. 

Explore The Most Profitable Airbnb Locations in Chicago and Nearby Cities

Categories
Airbnb Investment All About Airbnb

Top 10 Places to Start Airbnb Investment near Chicago: Airbnb Investment in 2023

Learn about the best places to Airbnb in Chicago in 2023! This article features expert tips for Airbnb investment and Airbnb data in Chicago.

Top 10 Places to Start Airbnb Investment near Chicago: Airbnb Investment in 2023

Best places to Airbnb in Chicago

Top 10 Places to Start Airbnb Investment near Chicago: Airbnb Investment in 2023

Learn about the best places to Airbnb in Chicago in 2023! This article features expert tips for Airbnb investment and Airbnb data in Chicago.

Key Takeaways

  • Chicago’s overall economic stability & tourism has helped various hosts in the area to earn a passive income. Particularly during big events such as Lollapalooza, where most tourists across the globe visit Chicago for the music festival.
  • Discover what real estate investors can anticipate when starting an Airbnb investment in Chicago and nearby areas. Primarily highlighting the potential profitability of Airbnb investment in Chicago – along with its annual revenue and gross rental yield.
  • Learn about the top 10 profitable areas for Airbnb nearby Chicago along with the Airbnb dataset. This includes the most recommended property size and the number of bedrooms to achieve a high gross rental yield.

Introduction

Chicago has one of the strongest and steadiest economic stability, making it a suitable city for real estate investment. Even during the pre-pandemic and re-opening of borders, this city’s tourism industry was consistently on an upward trend. 

The Chicago government even noted an 86% increase in tourism in 2021, generating $1.3 billion in tourism tax revenue.

In fact, Airbnb also recently shared the high demand for accommodation due to big events happening across Chicago. They stated that more Airbnb hosts opened their doors to travelers and helped them earn extra income.

Are you looking to start a real estate investment in Chicago but don’t know where to start?

This article will guide you through! We’ll present the Airbnb dataset in Chicago, set expectations for Airbnb investment, and discover the top 10 cities nearby Chicago. Continue reading to learn more.

Why invest in an Airbnb in Chicago?

There are various reasons why property investors are eyeing property investments in Chicago. Apart from the city’s tourist attractions and iconic events, here are some of the major reasons why investing in an Airbnb in Chicago is ideal: 

1. Strong Renters Market 

 Chicago agent magazine revealed that this city is one of the top 10 cities for real estate investment in 2023. Over 50% of Chicago’s population are renters, which redirects to a strong rental market. Since it is also considered one of the most affordable metros, more renters are looking for housing opportunities.

2. Strong Economy & Job Growth

Chicago is home to more than 390 major corporate headquarters and has the third-largest gross metropolitan product in the USA. Not to mention its 5 major professional sports teams and major universities! Because it offers bountiful job opportunities, Chicago is wrapped as a perfect package for property investors.

3. High Quality of Life

In comparison to other major cities in America, Chicago offers a relatively affordable cost of living. In fact, Forbes even ranked it as one of the best places to do business and leverage careers. Chicago’s high quality of life is one of the perks for both investors and residents alike!

Is Airbnb Profitable in Chicago?

Airbtics confirms that Airbnb is certainly profitable in Chicago. It’s good to note, however, that the level of profitability depends on your location and property type. Rental Arbitrage in Chicago is also a popular option for those who are on a limited budget! 

According to Airbtics’ data, an Airbnb host can earn up to $109,551 annually for operating a 4-bedroom property in Chicago, Illinois. You can also anticipate a good GRY of 29.35%.

Best places to Airbnb in Chicago

Source: Airbtics Dashboard

Top 10 Best Areas to Airbnb nearby Chicago

Chicago has almost 100 neighborhoods and suburbs, so it can be difficult to filter the best ones. Using Airbtics’ Discovery Tool, we discovered the nearby cities & best places to Airbnb in Chicago: 

1. Chicago City

To operate an Airbnb in Chicago, hosts will have to register with their local city and obtain a Shared Housing Operator License (for more than 1 registration). 

  • Best bedroom size: 4 bedrooms
  • Median property price (4-bedroom): $373,320
  • Airbnb Annual revenue: $109,551
  • Gross rental yield: 29.35%
2. South Bend

Getting a short-term rental permit from the local government of Indiana is required to operate an Airbnb. South Bend is located about 71 miles from Chicago (1 hour & 41 mins drive).

  • Best bedroom size: 4 bedrooms
  • Median property price (4-bedroom): $228,200
  • Airbnb Annual revenue: $100,778
  • Gross rental yield: 44.16%
3. Milwaukee

If you’re planning to start an Airbnb business in Milwaukee, the best part is that there are currently no Airbnb regulations. Milwaukee is about 83 miles from Chicago (1 hour & 28 mins drive).

  • Best bedroom size: 3 bedrooms
  • Median property price (3-bedroom): $185,356
  • Airbnb Annual revenue: $61,148
  • Gross rental yield: 32.99%
4. Saint Louis

St. Louis does not have any city ordinance about short-term regulations. It is located about 146 miles from Chicago (4 hours & 35 mins drive).

  • Best bedroom size: 1 bedroom
  • Median property price (1 bedroom): $136,194
  • Airbnb Annual revenue: $30,804
  • Gross rental yield: 22.62%
5. Indianapolis

To operate an Airbnb in Indianapolis, it is required to get a short-term rental permit from the local government of Indiana. Indianapolis is situated 183 miles from Chicago (2 hours & 59 mins drive).

  • Best bedroom size: 2 bedrooms
  • Median property price (2-bedroom): $152,871
  • Airbnb Annual revenue: $46,072
  • Gross rental yield: 30.14%
6. Green Bay

Green Bay is a city in Milwaukee so it follows no specific Airbnb regulations. Green Bay is located 183 miles from Chicago (3 hours &17 mins drive).

  • Best bedroom size: 3 bedrooms
  • Median property price (3-bedroom): $205,571
  • Airbnb Annual revenue: $66,990
  • Gross rental yield: 32.59%
7. Ann Arbor

A short-term rental license is required prior to operating an Airbnb in Ann Arbor. Located Indianapolis is situated 196 miles from Chicago (3 hours & 49 mins drive).

  • Best bedroom size: 2 bedrooms
  • Median property price (2-bedroom): $294,242
  • Airbnb Annual revenue: $54,464
  • Gross rental yield: 27.67%
8. Traverse City

Traverse City requires all Airbnb hosts to get a permit unless the property is located in a commercial zoning district. It’s also situated 223 miles from Chicago (5 hours & 6 mins drive).

  • Best bedroom size: 2 bedrooms
  • Median property price (2-bedroom): $327,394
  • Airbnb Annual revenue: $67,320
  • Gross rental yield: 20.56%
9. Cincinnati

All Airbnb hosts in Cincinnati must register their short-term rentals and obtain liability insurance. Cincinnati is located 250 miles from Chicago (4 hours & 40 mins drive).

  • Best bedroom size: 3 bedrooms
  • Median property price (3-bedroom): $221,368
  • Airbnb Annual revenue: $53,521
  • Gross rental yield: 24.18%
10. Louisville, KY

To operate an Airbnb in Indianapolis, it is required to get a short-term rental permit from the local government of Indiana. Indianapolis is situated 183 miles from Chicago (2 hours & 59 mins drive).

  • Best bedroom size: 3-bedrooms
  • Median property price (3-bedroom): $232,828
  • Airbnb Annual revenue: $73,499
  • Gross rental yield: 31.57%

Conclusion

Nearby cities in Chicago have several exciting property investment opportunities. There are other neighborhoods that can bring exceptional rental yields and annual revenue, so it’s best to explore them now! The best investment property in Chicago can be discovered in one click and the same goes for other profitable STR locations in the US.

Now that you have an overview of Airbnb Chicago dataset, take a look at Airbtics’ Airbnb profit calculator and stand out among the rest. It’s built to help you maximize profitability and find long-term profitable investments. Get ahead of your competitors now and look at other Chicago investment properties!

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Short-Term Rental Data
Find unsaturated neighborhoods with the highest occupancy history.

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Short-Term Rental Data
Find unsaturated neighborhoods with the highest occupancy history.

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Categories
Airbnb Investment All About Airbnb

Investing in Property for Sale: How to Buy A Profitable Property for Airbnb in Chicago City Centre

airbnb property for sale Chicago City Centre

Chicago is a beautiful city filled with green spaces around every corner, from charming neighborhood parks to sandy beaches with skyline views. In the heart of the city, Millennium Park and Grant Park are home to lush gardens and this city is also known for its cultural institutions, iconic public art, and popular events.

To begin with, it’s certainly important to consider the major costs and revenue before deciding to purchase a property in Chicago. While rental arbitrage in Chicago is fairly popular and does not require you to purchase a property, it’s still recommended to learn about buying a property for Airbnb in the future and making sure that it’s profitable.

airbnb property for sale Chicago City Centre

Chicago can be an excellent investment for plenty of reasons. According to a recent report, there is an increase (3 – 5%) in home prices in Chicago. Not to mention the increase in demand for rental housing! 

Airbnb occupancy rates by city also state that an average host in Chicago can earn up to $34,032 during the peak seasons of July – September. With over 4,546 Airbnb listings in Chicago, it’s certainly a catch for property investors.

Aside from looking at a property’s fascinating architectural design, proximity to major tourist areas, and accessibility to the best go-to places, the primary step is to determine profitability. In this article, we’ll discuss the metrics in order to gauge the best property investment.

This includes the best website recommendations for property investment in Chicago, property gross rental yield, cash-on-cash return, and annual revenue, along with some of the most ideal and profitable properties according to their location. Stoked to learn more? Continue reading!

Is Property Investment Profitable in Chicago City Centre?

In Chicago, condos have traditionally been a good investment. The city’s robust economy and many desirable neighborhoods have helped to drive up values for the last decade. Using an Airbnb calculator, it was discovered that a 2-bedroom apartment in Chicago City Centre can generate an annual revenue of $83,694 with a steady occupancy rate of 78% and a nightly rate of $239.

airbnb property for sale Chicago  City Centre

airbnb property for sale Chicago City Centre

New Construction Homes for sale in Chicago City Centre

Finding the best properties that have the potential to produce high yields and capital growth are certainly some of the preferences of major investors. It’s always best to ask for assistance from real estate agents to access exclusive and unique properties during the development stage. 

At the same time, it’s even better when a property investor like you conducts research about predicted growths and market forecasts. Some of the preferred neighborhoods in Chicago are Garfield Ridge, Norwood Park, and Bridgeport. Here are some of the profitable properties in Chicago City Centre along with the calculated gross rental yield, cash-on-cash return, and annual revenue:

airbnb property for sale Chicago City Centre
airbnb property for sale Chicago City Centre

830 Elder Rd #B206, Homewood, IL 60430

1. Studio-type Property for Sale Chicago
1.3 miles to Willow School

Asking Price: $88,500

GROSS RENTAL YIELD 24.25%
ANNUAL REVENUE $21,458
CASH ON CASH RETURN 46.97%
airbnb property for sale Chicago City Centre
airbnb property for sale Chicago City Centre

3808 W Washington Blvd #E3, Chicago, IL 60624

2. 1-Bedroom Property for Sale Chicago
Near East Garfield Park

Asking Price: $99,900

GROSS RENTAL YIELD 23.81%
ANNUAL REVENUE $23,786
CASH ON CASH RETURN 45.66%
2-Bedroom Chicago
2-Bedroom Chicago

6730 S South Shore Dr APT 206, Chicago, IL 60649

3. 2-Bedroom Property for Sale Chicago
Near South Shore

Asking Price: $135,000

GROSS RENTAL YIELD 23.40%
ANNUAL REVENUE $31,591
CASH ON CASH RETURN 44.43%
3-Bedroom Chicago
3-Bedroom Chicago

1222 S Millard Ave, Chicago, IL 60623

4. 3-Bedroom Property for Sale Chicago
Very walkable to Lawndale

Asking Price: $165,000

GROSS RENTAL YIELD 25.10%
ANNUAL REVENUE $41,419
CASH ON CASH RETURN 49.54%
4-Bedroom Chicago
4-Bedroom Chicago

615 N Monticello Ave, Chicago, IL 60624

5. 4-Bedroom Property for Sale Chicago
Near East Garfield Park

Asking Price: $299,900

GROSS RENTAL YIELD 24.28%
ANNUAL REVENUE $72,814
CASH ON CASH RETURN 47.07%

Conclusion

Since Airbnb is rapidly increasing and constantly changing for each city in the world, it is crucial to make decisions based on wild guesses. The data points mentioned in this article for Chicago such as Airbnb occupancy rates, annual revenue, and average daily rate should be the primary basis before investing in a property. 

Hence, if the data presented above has given you ideas to boost your strategic pricing plan for your business, then an Airbnb rental arbitrage calculator is certainly what you need for success in the long run. It’s a fact that some of the STR investors are also considering Airbnb Rental Arbitrage, but they still need to have a reliable data tool on which to base their conclusions! 

As we live in a digital era, an accurate data analytics tool can help your business stand out among your surrounding competitors and benchmark your property by tracking the occupancy rates of competing listings in your preferred city.

Airbtics
Categories
Airbnb Rental Arbitrage All About Airbnb

Rental Arbitrage Chicago


Table of Contents
    Add a header to begin generating the table of contents

    What is Rental Arbitrage?

    Rental Arbitrage is a method similar to house hacking, however, the only difference is that you don’t own the house. Instead, you convince a landlord to lease you a property which will be furnished and subleased on Airbnb and VRBO.

    Rental Arbitrage is a smart technique to earn money in any type of property including a multifamily house, duplexes, or triplexes. You can easily use the money from your short-term rental to pay off your lease and profit some more. If you own a duplex or triplex then it is pretty straightforward and easy. You can live in one section and rent out the other – which is also known as house hacking. People use this after taking a loan on a property and use the rent to pay off the mortgage. The short-term rental income helps you pay for the long-term lease that you have on the house. This helps you keep the difference at the month-end after paying for the long-term lease.

    Assume you are renting a duplex in Chicago for $1,800/month. You are living by yourself on one of the sides and you decide to sublease the other on Airbnb. Let’s say you listed it for $100/day and got 80% occupancy. This will bring in approximately $2,600/month in revenue. Not only will it help you pay off your complete rent, but give you a profit of $800. This, in a nutshell, is called Rental Arbitrage.

    Read more about Short-term Rental Arbitrage and be guided accordingly!

    What are the things I need to do before getting started?

    How to convince the landlord

    Let’s say you want to get into Rental Arbitrage. Now comes the big question, how to find a good property and how to convince the landlord. Later in the blog, we’ll be explaining how to find a good property by doing proper research using short-term rental analytics. In this section, we will be focusing more on how to convince landlords. As you’ll begin your Rental Arbitrage journey, you’ll come to know that this is the hardest part of the whole process.

    You need to be prepared and well researched, good communication skills come in handy here. Also, one thing to always keep in mind: never sublease without informing the landlord, there will be a huge number of people coming in and going out when you’re sub renting, it will not be hard for the landlord to figure out that you are subletting and you might end up getting in trouble.

    For the convincing, rule number one is always talking about the upsides. If you can rent the property on Airbnb, so can the landlord himself. You need to make a deal with the landlord that is beneficial to them. So they lease the property to you instead of renting it by themselves.

    Points to tell an indecisive landlord
    • Doing Rental Arbitrage is a full-time business. It doesn’t generate passive income like long-term leasing. You should try approaching older people who are looking for some sort of passive income. They are more likely to agree to a fixed long-term lease. You can also reach out to full-time working professionals or business owners. They will also be happy with a source of passive income till their property is well maintained. This brings us to our next point.
    • You are more likely to take care of the house than a normal renter. As you are using the property to do business you will take good care of it to make sure you get better reviews. Having a beat-up property isn’t good for business and you are more likely to monitor it often. Not monitoring it will affect your revenue a lot. You may end up paying a huge sum of money for damages done by someone else. So telling this to the landlord might instill some confidence in them.
    • You can ensure timely monthly rent. You can tell the landlord that doing Rental Arbitrage is a full-time business with ups and downs. It doesn’t guarantee fixed income at all like long-term leasing. But if they lease it to you, you’ll make sure to pay the lease no matter what. Either from the money made after rental arbitrage or from your savings. You need to ensure timely monthly lease payments to gain a landlord’s trust. 

    In conclusion, you need to take care of the property like your own. Make sure to timely pay the monthly lease and keep the situation beneficial for both parties.

    how much can you make on airbnb
    Ensure the Property and Gain landlord’s trust

    Being on the safe side is always a good idea. From trouble guests to bothering landlords. You need to make sure you are using the right tools to ensure the property is safe and neighbors are happy. Many landlords will have this concern when renting out their property to you. They will be worried about neighbors raising noise complaints. It is a legitimate concern. To help you with all these problems here are some suggestions that you can implement and have peace of mind.

    • Simply Safe – These are home monitoring tools that you can install in the house to make sure no suspicious activity is happening there. Make sure to let the guests know about them and have their consent.
    • Auto host – Automatically screens problematic tenants.
    • Alexa Guard: If you already own an Alexa, you can use its Alexa guard feature to detect parties. It is an inbuilt feature that monitors changes in sound and sends you an alert in case the guests are having a party and making too much noise.
    • InsuraGuest – This insurance and tech company helps you with risk analysis and gives protection beyond Airbnb and VRBO policies. 
    • Airbnb ROI Calculator – Give your landlord ease of mind by providing income estimates backed by Airbnb data.

    You can integrate the majority of these tools with a PMS of your choice.

    rental arbitrage pros and cons

    What is the initial cost of starting a rental arbitrage in Chicago?

    You can expect to spend anywhere between $3,000 to $5,000. This cost includes Deposit, Furnishing, Amenities, Legal Paperwork, and LLC Incorporation.

    But doesn’t this contradict the Low upfront cost of Rental Arbitrage? Well, these estimates vary from city to city. There is a possibility to do Rental Arbitrage for even less than this depending upon your situation and the type of property you lease.

    Still, the amount is lesser than investing in a new property and getting a mortgage of thousands of dollars. In addition to this, you won’t be on the hook for property maintenance expenses and being stuck for years with debt.

    But this doesn’t mean Rental Arbitrage can be done with zero or very tight budget. There will be some upfront costs that you have to expect so it’s ideal to own some extra cash is also a good thing to have. This will help pay off the lease during off-season in case bookings don’t happen right away.

    Expense 1: Rental Deposits

    A rental deposit is going to be one of the first and major expenses. You would need money to be able to sign a long-term lease with the landlord. Therefore, you will need a security deposit, along with your payment for the first and last month’s rent. Sometimes you can negotiate with the landlord and use the first month’s rent as a security deposit.

    Expense 2: Furnishing

    Most of the time you should always aim to lease a place that is semi-furnished. As someone with a fully furnished home might be doing short-term rentals themselves. Also furnishing a place from scratch can add anywhere from $3,000 to $5,000 to your initial capital.

    If the place is semi-furnished, then your best bet is to shop for cheap stuff. You can go and find cheap supplies from places like Home Depot and IKEA. Sometimes even Walmart can have a hidden gem if you look closely.

    Expense 3: Photography

    Do it yourself! iPhones have good cameras. DIY photography will save you some money.

    Expense 4: Cleaning Services

    This is included in the starting costs, but you will eventually end up spending on cleaning services. The best way to save money is to do it yourself initially if you have the skills and experience.

    If you have no experience or you don’t want to invest time in cleaning a place. Then your best bet will be to hire a professional cleaner. This can cost you anywhere from $50 to $250 depending upon the size and location.

    Maintaining a professional relationship with a Real Estate lawyer can be very helpful in the Airbnb business. Airbnb regulations keep updating and you would need some legal guidance on the way to adjust your business accordingly.

    They can also come in handy if you face any legal issues with the landlord or guests. They can help in damage claims and insurance as well in case of any mishappening.

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    Legality and Regulations in Chicago

    Chicago Government site provides more information about Chicago’s shared housing rules, including occupancy restrictions, guest record keeping, and minimum stay requirements. Penalties for violating these requirements may result in the suspension or cancellation of your registration number. You may also be fined. 

    Visit the City of Chicago website for more information. 

     The City of Chicago requires a “vacation rental” license. Section 46300 of the Municipal Code contains information on licensing procedures and the responsibilities of holiday rental permit holders. 

    Vacation rental houses can be advertised or published through platforms such as Airbnb, but they must be registered and approved by BACP before they can be listed on the intermediary platform. 

    The landlord must publish the permit number of his property on his listing. Additional details are provided on the City of Chicago Commercial Licensing page, including fee and process information. 

    • Bed and Breakfast Permit

     The City of Chicago requires a “Bed and Breakfast” permit. Section 46290 of the Municipal Code contains information on the licensing procedures and duties of bed and breakfast licensees. 

     B&B can advertise or publish rental information through platforms such as Airbnb, but it must be registered and approved by BACP before it can be listed on the intermediary platform. The landlord must publish the permit number of his property on his listing. Additional details are provided on the City of Chicago Commercial Licensing page, including fee and process information. 

    • Hotel License 

     The City of Chicago requires a “hotel” license. Section 46180 of the Municipal Code contains information on licensing procedures and the duties of hotel license holders. 

     hotels can advertise or publish rents through platforms such as Airbnb, but they must first register and obtain BACP approval before they can be listed on the intermediary platform. The landlord must publish the permit number of his property on his listing. Additional details are provided on the City of Chicago Commercial Licensing page, including fee and process information. 

    • Zoning Regulations

     The Chicago Zoning Regulations stipulate the city’s zoning requirements and land use. You should refer to the Zoning Regulations and the Shared Housing Amendments to the Municipal Code in 2016, 2017, and 2020-here to see if your list covers any zoning requirements or definitions of use. 

    •  Taxes 

     Chicago imposes a 4.5% hotel room tax, a 4% shared housing surcharge, and a 2% domestic violence surcharge, including any cleaning fees for bookings of 29 nights or less. Airbnb collects and remits these taxes and fees in Chicago. For more information, please click here. 

    Cook County also imposes a 1% hotel accommodation tax on list prices, including any cleaning fees for bookings of 29 nights or less. Airbnb collects and remits this tax in Cook County. 

    • Other rules 

     It is also important to understand and abide by other contracts or rules that require you, such as rules for leases, apartments or cooperative committees, rules for homeowners’ associations, or rules set by tenant organizations. Read your lease, and if applicable, consult your landlord.

     Reasons for these laws and regulations 

     As more and more commercial investors enter the vacation rental business, these laws and regulations are formulated to control the general rental market in the region and make accommodation affordable for locals. 

    In the next section, we will be suggesting the 2 best areas to start your rental arbitrage journey in Chicago. For specific neighbourhoods of these cities and data of different cities check out Airbtics.  

    References: Airbnb | City of Chicago

    Best areas for Rental Arbitrage in Chicago

    Some obvious places come to mind when thinking of Chicago like Heart of Chicago, and West Town. You can consider these areas when buying investment properties in these neighbourhoods of the Chicago real estate market. 

     Chicago’s population and employment growth are accompanied by economic growth elastic, which promotes the growth of the Chicago real estate market. West town promotes the city’s Airbnb business. As a real estate investor, given the positive financial metrics of Chicago short-term rentals, investing in Airbnb rental properties in Chicago is recommended. 

    1. West town 

    rental arbitrage chicago west town

    According to our Airbtics Dashboard, West town is the top market to start your Rental Arbitrage business. Overall, there are more than 9,948 Airbnb listings out of which 1 bedroom is 3,112 in Chicago where Airbnb helped in Monthly revenue for most properties being more than $2,000/month with occupancy being more than 44%.

    2. Heart of Chicago 

    rental aribitrage chicago heart of chicago

    According to our Airbtics Dashboard, the Heart of Chicago is the top area to start your Rental Arbitrage business. Overall, there are more than 4,000 Airbnb listings out of which 1 bedroom is 1,400 in Chicago where Airbnb helped in Monthly revenue for most properties being more than $2,258/month with occupancy being more than 56%.

    See Full Stats for Chicago  – Click Here

    FIND STATS FOR YOUR CITY – CLICK HERE

    Read More:  Rental Arbitrage California

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