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 Santa Barbara, its profitability, along with 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 perfect 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 Santa Barbara, Cody manages 17 listings and there’s a huge possibility that he doesn’t own all the properties. He has made $1,492,424 in the last 12 months.
Is Rental Arbitrage Profitable in Santa Barbara?
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 Downtown Santa Barbara where an average host can earn $10,313 monthly for a 3-bedroom apartment.
Using Airbtics’ income generator, you can easily discover that rental arbitrage in Santa Barbara is profitable.
Profit & Monthly Expense in Santa Barbara
Based on Airbtics’ data, you can earn a whopping $18,537 per month for a 3-bedroom apartment in Downtown Santa Barbara alone. With the data provided, you can certainly tell that investing in a property in Santa Barbara is profitable.
| Average Rent Price | Airbnb Monthly Revenue | Monthly Expense | Monthly Profit |
|---|---|---|---|
| $4,517 | $18,537 | $3,707 | $10,313 |
Source: Airbtics dashboard
The monthly profit can be calculated by subtracting the Airbnb monthly revenue, the rental price, and the monthly expenses ($18,537 – $4,517 – $3,707 = $10,313).
Startup Cost in Santa Barbara
Now that you have an overview of how much your monthly expense & revenue, let’s talk about the start-up cost. How long does it take for an investor 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 |
|---|---|
| $11,034 | 1.1 month |
The average estimated startup cost (for furnishing) in Santa Barbara is around $2,000. To compute the total startup cost, it is necessary to add the 2 months of average rent price ($9,034). Now that we have a total startup cost of $11,034, cash return time can be calculated by dividing this by the monthly profit ($10,313).
Given your monthly revenue of $10,313, it will take approximately 1.1 month 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 Santa Barbara.
Best Areas for Rental Arbitrage in Santa Barbara
Before investing in a particular area in Santa Barbara, you have to take a look at the top markets and number of listings to set your expectations towards success. Check out the top 3 boroughs in Santa Barbara ranked by their annual revenue, along with their occupancy & daily rates!
1. Downtown Santa Barbara
Downtown Santa Barbara is best known for its shopping districts and antique stores. The distinctive architecture in this neighborhood attracts most tourists to revisit Santa Barbara. Check out the Airbnb data such as the average revenue, occupancy rates, and more in Santa Barbara:
| Type of Bedrooms | Average Rent Price | Average Airbnb Revenue | Occupancy Rates | Average Daily Rate |
|---|---|---|---|---|
| 1 bedroom | $3,019 | $6,523 | 92% | $302 |
| 2-bedroom | $3,540 | $11,607 | 91% | $479 |
| 3-bedroom | $4,517 | $18,537 | 89% | $781 |
According to our Airbtics Dashboard, there are more than 155 Airbnb listings with 14 condo property and 3 one-bedroom properties in this area. The monthly revenue for most properties in Downtown Santa Barbara is more than $7,593 per month with occupancy being more than 80%.
2. Oak Park
This neighborhood in Santa Barbara has great access to public transportation and is often preferred by travelers with families. Check out the Airbnb data such as the average revenue, occupancy rates, and more in Oak Park:
| Type of Bedrooms | Average Rent Price | Average Airbnb Revenue | Occupancy Rates | Average Daily Rate |
|---|---|---|---|---|
| 1 bedroom | $2,523 | $5,847 | 95% | $296 |
| 2-bedroom | $2,950 | $9,668 | 92% | $399 |
| 3-bedroom | $3,500 | $12,902 | 86% | $600 |
This area has a total of 84 Airbnb listings with 28 private room properties and 31 one-bedroom property. The monthly revenue for most properties in Oak Park is more than $5,646 per month with occupancy being more than 82%.
3. East Mesa
East Mesa is a perfect area for investors who prefer to invest in a property by the sea in Santa Barbara. This neighborhood’s upscale coastal living is friendly and has plenty of public green spaces. Check out the Airbnb data such as the average revenue, occupancy rates, and more in East Mesa:
| Type of Bedrooms | Average Rent Price | Average Airbnb Revenue | Occupancy Rates | Average Daily Rate |
|---|---|---|---|---|
| 1 bedroom | $2,200 | $7,648 | 92% | $421 |
| 2-bedroom | $4,762 | $10,724 | 95% | $666 |
| 3-bedroom | $5,600 | $12,410 | 96% | $894 |
This area has a total of 28 Airbnb listings with 4 private room properties and 9 one-bedroom properties. The monthly revenue for most properties in East Mesa is more than $9,385 per month with occupancy being more than 86%.
Short-term rental regulations in Santa Barbara
To begin with, it’s certainly important to be familiar with the Airbnb rules in Santa Barbara 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 your unit is within an R-4, Commercial (C), or Manufacturing (M) zone, you can register with the City and get a business license.
- Short-term vacation rentals are unlawful in Santa Barbara, including in the coastal zone, unless they are permitted by the City and are located within zoning districts that allow for hotels or motels.
The City will not issue business licenses for unpermitted STRV’s outside of the Coastal Zone.
Rental Properties in Santa Barbara
There are plenty of best places to Airbnb in California, particularly in Santa Barbara. Here are the ranging prices of rental properties in Santa Barbara:
1. Realtor
2. Compass
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!
