Airbnb Rental Arbitrage is a way of investing in an Airbnb business without the requirement of owning or purchasing a property from which to operate your Airbnb. Instead, you rent a property and re-rent it on Airbnb. You pay the rent using the income from your Airbnb business and pocket the remaining profit. Rental arbitrage is a low risk Airbnb business strategy that allows you to scale much faster.
Las Vegas is a popular and well known tourist destination worldwide. In fact, a quarter of Brits named Las Vegas one of the top 3 US cities they’d most like to visit. In 2019, the famous city attracted over 42 million tourists. Even in 2020, at the height of the pandemic, Las Vegas recorded 19 million visitors.
Las Vegas attracts more than just guests looking to party or gamble however. In fact, 15% of visitors in 2019 traveled to attend a convention in the city.
The desert city offers enough attractions and activities to entertain many types of guests. Visitors can get a bird’s eye view of the lights and sights from the High Roller, a 30 minute experience on a Ferris wheel that peaks at 550 feet or catch a night time tour of the Strip and Downtown Vegas on the double-deckerer Big Bus. Many tourists fly in from all over the world just to catch an iconic Vegas show, whether it’s Cirque du Soleil, a classic Vegas magic show or an artist in residence like Celine Dion or Jennifer Lopez. There are also tours of iconic movie shooting locations and the Neon Museum, performances by The Las Vegas Philharmonic, and vibe dining experiences.
Best known for its kitschy casinos and gambling, travelers can choose from a range of options, whether its blackjack or at the slot machines, all the while sipping on free drinks. Then spend their winnings shopping at the Fashion Show Mall, Forum Shops, the luxury shops at Crystals, or Grand Canal Shoppes. Others sleep through the day and enjoy the world famous nightlife, maybe even run into a celebrity. Las Vegas is also well known for attracting bachelor and bachelorette as well as wedding parties.
For the sport and adventure minded tourist, Las Vegas offers experiences like ziplining from building to building, riding The Big Apple Coaster through the casino and across the Strip, renting a luxury car and driving through the desert at maximum speed, bungee jumping off the tallest building in Vegas the Stratosphere, and playing arcade games, hang gliding indoors, or engaging in an escape room experience at Area 15.
Even budget travelers can find plenty of free things to do, like the fountain show at the lake in front of the Bellagio, the active volcano at The Mirage, or the Fremont Street Experience.
According to AirDNA, the leading provider of data and analytics for the short term rental industry, Las Vegas is one of the top US cities for rental arbitrage in 2021.
In Las Vegas, according to AirDNA:
Average Daily Rate (ADR) is $257 (October 2021)
Average Occupancy Rate is 78% (July 2021)
Average Monthly Revenue is $3,900 (July 2021)
Meanwhile, 2021 AirDNA data shows that in Las Vegas
Effective rent is 1,243
STR premium is 92.2%
Nights to cover rent 8.3
Furthermore, the data and analytics platform indicates that West Las Vegas and The Strip are the best submarkets for rental arbitrage with STR premiums of 163.1% and 146.6% respectively. Meanwhile, Henderson and East Las Vegas are the fastest growing emerging markets for rental arbitrage in Las Vegas.
The city of Las Vegas defines a short term rental or vacation rental as the leasing of a residential dwelling unit for periods of 30 consecutive days or less.
Airbnb vacation rentals located in Las Vegas are subject to a number of laws, regulations, and taxes at the city, county, and state levels.
All short term rentals must be owner occupied when being rented out, have not more than three bedrooms, and be not less than 660ft from another short term rental. They must also meet all regulations on licensing, noise, and parking. No waivers of conditions are allowed.
Short term rentals are prohibited in apartment buildings.
Airbnb vacation rentals are allowed in most residential neighborhoods as long as they are not less than 660ft from another short term rental. They are however prohibited in Summerlin (including Sun City Summerlin), Symphony Park, Town Center, Grand Canyon Village, Skye Canyon, Las Vegas Medical District, Cliff’s Edge, and Providence Square.
All short term rentals are required to obtain a business license from the city to operate legally.
You submit for a Conditional Use Verification and Business License at the Planning Desk at Las Vegas City Hall or online. As part of the licensing process, a home inspection by a member of the Code Enforcement section will also have to be conducted. The inspector will verify the number of bedrooms, building permits for all changes/additions to the original structure and applicable building and fire safety codes. The license application also requires proof of liability insurance coverage of at least $500,000 and an affidavit attesting to compliance with all relevant regulations.
Permits must be renewed annually.
Maximum occupancy is restricted to two people per bedroom, excluding children under the age of 12, or as established by the Uniform Housing Code.
Outside music or excessive noise that can be heard 50ft from the property line is a violation of the Las Vegas Municipal Code
All vehicles associated with the residents of the Airbnb must be parked in the driveway and must not block neighboring properties’ driveways or community mailboxes
Trash and refuse must not be left out or stored in public except in trash collection containers in keeping with the requirements of Chapter 9.08 of the Las Vegas Municipal Code.
If the vacation rental property is located in a gated subdivision or a controlled-access building that is governed by an owner’s association, you will also have to present a letter from the association acknowledging and granting permission to use the unit as a short term rental as part of your license application.
All short term rentals are required to display a placard (8” x 11” at minimum) in plain view of the general public that lists maximum occupancy allowed and 24 hour contact info in legible font.
The city can suspend a permit or impose fines or - penalties if a short term rental owner or manager violates the ordinance. Fines for a single violation against an individual renting out a property must not be less than $1,000 or more than $10,000.
Weddings, birthday parties, bachelor/bachelorette parties, and other types of special events are not permitted to be held at short term rentals.
The city provides a 24 hour hotline to handle complaints regarding noise, excessive number of tenants, large parties, trash, parking, and other issues.
Nevada’s AB363 bill of 2021 recognizes short term rentals as transient lodging, subjecting them to the same taxes as hotels.
The Clark County hotel tax rate ranges from 10% to 14% depending on the specific location of the vacation rental in the city.
Las Vegas continues to be a hotspot for tourists, from the US and the rest of the world. As pandemic led restrictions continue to be lifted and people begin to travel as freely as before, the city is slated to reach its former growth trajectory as evidenced by the number of visitors even at the height of the pandemic. The huge numbers allow Las Vegas vacation rental property managers to compete with the over 150,000 room hotel inventory in 2021.
As shown further by average ADRs and monthly revenues for vacation rentals in the latter half of 2021, Las Vegas continues to be a top US city for rental arbitrage.