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 Southampton, 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 Southampton, Gaia manages 32 listings and I’m pretty sure she doesn’t own the all properties. She made £128,516 in the last 12 months.
How much can I make with rental arbitrage in Southampton?
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 Ocean Village, located in the SO14 district which has the highest yields (averaging 6.9%) in Southampton.
Since this neighborhood covers the city centre and is a hotspot for student rentals, Ocean Village has boosted rental demand and yields! Now that we have the best neighborhood to invest in Southampton, let’s talk about profitability and monthly expenses.
Profit & Monthly Expense in Southampton
Based on Airbtics’ data, you can earn a whopping £2,587 per month for a 2-bedroom apartment in Ocean Village alone. With the data provided, you can certainly tell that investing in a property in Southampton is profitable!
| Average Rent Price | Airbnb Monthly Revenue | Monthly Expense | Monthly Profit |
|---|---|---|---|
| £1,019 | £2,587 | £517 | £1,050 |
Source: Airbtics dashboard
The monthly profit can be calculated by subtracting the Airbnb monthly revenue, the rental price and monthly expense (£2,587-£1,019-£517 = £1,050).
Startup Cost in Southampton
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 |
|---|---|
| £4,039 | 4 months |
The average estimated startup cost (for furnishing) in Southampton is around £2,000. To compute the total startup cost, it is necessary to add the 2 months of average rent price (£2,038). Now that we have a total startup cost of £4,039, cash return time can be calculated by dividing this by the monthly profit (£1,050).
Given your monthly revenue of £1,050, it will take approximately 4 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 Southampton!
Best Areas for Rental Arbitrage in Southampton
Before investing in a particular area in Southampton, 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 Southampton ranked by their annual revenue, along with their occupancy & daily rates!
1. Ocean Village (SO14)
This area is a mixed-use marina, residential, business, and leisure development on the south coast of England that attracts numerous investors. 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 | £731 | £951 | 64% | £111 |
| 2-bedrooms | £1,020 | £2,587 | 56% | £175 |
| 3-bedrooms | £1,253 | £1,683 | 64% | £209 |
According to our Airbtics Dashboard, there are more than 48 Airbnb listings with 12 private room properties and 30 one-bedroom properties in this area. The monthly revenue for most properties in Ocean Village is more than £1,049 per month with occupancy being more than 66%.
2. Shirley (SO15)
Located near the northwest of the city centre, Shirley has its own high street along with a selection of schools and hospitals in Southampton. 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 | £718 | £1,712 | 73% | £94 |
| 2-bedrooms | £822 | £1,670 | 64% | £136 |
| 3-bedrooms | £1,193 | £2,715 | 58% | £172 |
This area has a total of 245 Airbnb listings with 109 private room properties and 164 one-bedroom properties. The monthly revenue for most properties in Shirley is more than £978 per month with occupancy being more than 52%.
3. City Centre (SO14)
Last but not least, Southampton’s City Centre is one of the best areas for professional lets because of its proximity to the tourists and business developments! 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 | £731 | £2,061 | 70% | £124 |
| 2-bedrooms | £989 | £2,555 | 66% | £168 |
| 3-bedrooms | £1,122 | £3,600 | 63% | £245 |
This area has a total of 20 Airbnb listings with 9 private room properties and 11 one-bedroom properties in this area. The monthly revenue for most properties in the City Centre is more than £1,658 per month with occupancy being more than 60%.
Short-term rental regulations in Southampton
To begin with, it’s certainly important to be familiar with the Airbnb rules in Southampton to make sure that your business will run smoothly. Here are some of the short-term rental regulations and laws to take note of:
- If you are a landlord renting out a property the responsibility for paying the Council Tax bill depends on what sort of letting arrangement you have. Usually, the tenants pay the Council Tax but, in some cases, the owner or landlord will pay the Council Tax bill even though there are tenants living there.
- The property is let on a multi-tenancy basis rather than a single tenancy
- The rent agreed was in respect of a room (or part) of the property only
- Tenants sharing a property don’t have a tenancy for the same period
- The tenancy agreement states an individual rents each rather than a collective rent (where there is more than one occupant)
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!
