Airbnb rental arbitrage is the strategy of renting a property, such as an apartment or a house, and then sub-renting it on a short-term basis for a higher price, on Airbnb. The goal of rental arbitrage is to generate a profit by taking advantage of the difference between the long-term rental cost and the higher short term rental rates.
Unlike purchasing a property to use as a vacation rental, the rental arbitrage method requires far less upfront investment, is easier to get started, and is much faster to scale.
While some localities may have restrictions on Airbnb rental arbitrage, it is legal in the state of Florida.
Known as the ‘Venice of America’, Fort Lauderdale is a stereotypical Florida destination in that it offers white sandy beaches, great shopping, historic districts, arts, culture, and entertainment. Compared to the crowds that throng Miami or Orlando however, Fort Lauderdale has a more laidback vibe, is less populated, and is more affordable.
According to Visit Florida, an estimated 37.9 visitors traveled to Florida in Q1 2023, an increase of 4% year-on-year, of which over 4.6 million visited Fort Lauderdale, a 20.6% increase year-on-year. Total enplanements in the state also rose, with Fort Lauderdale experiencing a growth of 20.6%. Meanwhile, according to a Visit Lauderdale hospitality report, vacation rental gross revenues in Q1 ’23, the slow season, was $118.9 million.
The combination of its obvious tourist attractions combined with solid growth in visitor arrivals show Fort Lauderdale to be an attractive destination for visitors and thus hosts.
In November 2022, AirDNA named Fort Lauderdale one of the best U.S. markets for rental arbitrage.
According to the most recent AirDNA data, in Fort Lauderdale,
Rental demand index is 76/100 (very high)
The average daily rate (ADR) is $285 (March 2023)
Average occupancy is 86% (March 2023)
Average monthly revenue is $4,947 (March 2023)
Vacation rental properties with 1, 2, and 3 bedrooms are the most common and average 5.8 guests. Eighty-six percent of properties on Airbnb and Vrbo are entire homes.
According to Zillow, the median long term rental rate for all bedrooms and all property types in Fort Lauderdale is $3,200. According to Zumper, the average rent for a studio apartment is $1,850, a 1-bedroom apartment $2,000, and a 2-bedroom apartment $2,800, indicating massive arbitrage opportunity.
Vacation rentals in Fort Lauderdale are subject to short term rental laws, regulations, and taxes on the city, county, and state levels.
According the Code of Ordinances of the City of Fort Lauderdale, a vacation rental is “any unit or group of units in a condominium or cooperative or any individually or collectively owned single-family, two-family, three-family, or four-family house or dwelling unit that is rented to transient occupants more than three times in a calendar year for periods of less than thirty days or one calendar month, whichever is less, or which is advertised or held out to the public as a place regularly rented to transient occupants, but that is not a timeshare project.”
While this definition allows for a range of property types, accessory dwellings are not permitted in some zoning districts to be used as vacation rentals.
All vacation rentals in Fort Lauderdale must be registered with the city. Before property managers can obtain their application, however, they must first apply for and obtain state and county licenses.
1. State and County Licenses
You are exempted from this license requirement if the property is a homestead, owner-occupied, and renting a room. A notarized letter attesting to this must be provided to obtain the exemption.
Since Airbnb collects and remits the State of Florida sales tax for each stay, you must submit a notarized letter attesting to this and include the name of the platform.
Since Airbnb collects and remits this tax, you must submit a notarized letter attesting to this and include the name of the platform.
2. Proof of Ownership
Since you would not be the property owner, you must submit a notarized letter of authorization from the owner(s).
3. Lease Agreement
A blank/sample copy of the lease agreement that will be furnished to your guests that includes the required information in the Vacation Rental Ordinance must be submitted. This must include a photograph or sketch of the off-street parking you will provide along with the statement “No on-street parking”.
Your vacation rental application can be completed at LauderBuild. Once the application is processed, you will receive an email with the vacation rental account number and invoice for registration payment, A City of Fort Lauderdale Business Tax account will be generated and invoiced after the application is approved. Upon paying the registration and business tax fee, you will receive an appointment for a property inspection.
Upon passing the inspection, a Certificate of Compliance is issued within 3 business days.
Other Regulations in Fort Lauderdale
No noise can be plainly audible from the rental property line for one minute at 25ft (10pm-7am) or 50ft (7am-10pm).
Parking must be provided within the property or in its designated parking spaces only. Guests cannot park in the street or in a manner that blocks another driveway.
Maximum occupancy is 2 persons per bedroom. This is verified during the property inspection. Maximum gathering occupancy is 1.5x the sleeping occupancy, not exceeding 20 persons in total.
All trash must be disposed inside City approved receptacles and trash carts cannot be kept out before 6pm on the day of the pickup and must be removed before midnight of the same day.
As the vacation rental business owner, you are responsible for submitting all state taxes to the relevant authorities in time. These include the Florida Transient Rental Tax (6%) and Florida Discretionary Sales Surtax. You will also be subject to the Broward County Tourist Development Tax (6%).
Taxes are calculated on the total listing price, including cleaning fees. For reservations longer than 182 nights (approximately 6 months), the taxes and rates applicable will be different.
If you list your short term vacation rental on Airbnb, the above-mentioned taxes will be collected directly from the guests and remitted to the authorities on your behalf.
With Fort Lauderdale property prices up 10.1% in May 2023 compared to the previous year to reach a median of $550,000, purchasing a property for short term rental now requires a significant investment. In an ever more competitive landscape, the risks attached to purchasing for investment are also higher. Whilst renting in Fort Lauderdale is also costly, average occupancy rates and revenues as shown by the data combined with visitor arrivals shows a landscape that is still profitable for rental arbitrage. The regulatory environment too, which permits rental arbitrage and has clearly spelled out rules, makes it easier for hosts to remain compliant.