Rental Arbitrage in Orlando | What You Should Know!

Rental Arbitrage in Orlando | What You Should Know!

You don’t have to own property to become a short-term vacation rental host on an OTA (Online Travel Agency) or otherwise. Whether you’re still saving up to buy your own property and just don’t want to wait any more to follow your dream of becoming an Airbnb host, or have no intention of owning property in doing so, rental arbitrage may be the way forward for you. Keep reading to find out how you can leverage this low investment, low risk business strategy to get you started hosting in Orlando, Florida without having to put down a sizable downpayment.

What Is Rental Arbitrage?

Rental arbitrage is when you rent a property long-term and list it on a short-term vacation rental platform like Airbnb or VRBO, essentially re-renting it for profit. It’s a business model that does not require a large investment and carries less risk. Rental arbitrage allows you to host a wide range of spaces, from a house to a tent cabin or even just a room, without actually owning any of it. For a detailed look at rental arbitrage check out our blog here.

Orlando Vacation Rental Industry

Orlando offers a multitude of attractions, drawing visitors from across the US and the world. The city is home to a number of world-class theme parks, including Universal Orlando, Walt Disney World and SeaWorld, and offers a fantastic shopping experience, a thriving nightlife scene, world-renowned golf courses, boat rides around local swamps and general fun under the sun. It is no surprise then that Orlando welcomes a multitude of visitors, making it a great location for the vacation rental industry and thus rental arbitrage.

According to AirDNA, Orlando has seen steady growth in demand for vacation rentals as the US recovers from the pandemic. Average daily rates have risen by $180 since November 2020, occupancy has increased by 67% with 87% occupancy reported for the month of July, and revenue has increased by over $2,000 since January. Of the over 7,000 active vacation rentals in Orlando, 81% are home rentals and strict cancellation policies are the most favoured. As more and more people look to go out on vacation after the pandemic enforced stay-at-home orders, Orlando is well positioned to welcome a sizable chunk of their numbers.

Rental Arbitrage In Orlando

Yes, rental arbitrage is perfectly legal in Orlando. However it is important that you inform your landlord of your plan to list the property on a vacation rental platform. Make sure you have a legally binding agreement between the two of you that clearly states the rules of hosting that you have both agreed to. Also consider incorporating liability insurance provided by platforms like Airbnb and VRBO in your agreement. For a detailed look at managing the homeowner relationship, check out our blog here.

Don’t forget to look into other contracts or rules that may bind you, such as condo-board or co-op rules, Homeowner’s Association (HOA) rules or rules established by tenant organizations. Other important requirements to meet to ensure you are operating your vacation rental business on the right side of the law are licensing, health & safety regulations, and taxes.

Rental Arbitrage

Vacation Rental License

As the person who has been authorized by the owner, through a rental agreement or contract to rent out the property, you are recognized by the state of Florida to be a ‘licensed agent’. As a licensed agent you are expected to hold a vacation rental license from the Department of Business and Professional Regulation (DBPR). There are two types of licenses relevant to you:

  • A Group License covers all units within a building or group of buildings in a single complex that are licensed to a licensed agent. (Multiple group licenses may be issued to different licensed agents for units located on the same property.)
  • A Collective License is issued to a group of houses or units found in separate locations that are represented by the same licensed agent. (A collective license may have a maximum of 75 houses or units per license and is restricted to counties within one district.)

Because the state of Florida recognizes vacation rentals as being either condominiums or dwellings, and if you operate both vacation rental condominiums and vacation rental dwellings, you cannot combine them on the same license in either category.

Florida state law defines vacation rental condominiums as:

“a group of units or singular unit in a condominium complex or in a cooperative” and vacation rental dwellings as:

“single-family houses, townhouses, or unit/group of units in a duplex, triplex, quadraplex or other dwelling units that collectively have up to four units”

You are required to renew the license each year, making sure it is always current and displayed conspicuously in the vacation rental or made available upon request.

Hosted Rental License

If you are only hosting a single room or rooms other than the whole unit that you have rented out from the owner, you are not required to obtain a vacation rental license from the DBPR. You do however have to obtain a short-term rental permit from the city of Orlando.

  • As the host, the city requires you to:
  • Have notarized permission from the owner to operate as a home share rental
  • Be at home during bookings
  • Only rent up to half of the total number of bedrooms in the home
  • Limit to one booking at a time

If the property is part of a mandatory HOA, you must have an approval letter to gain registration.

Health & Safety Regulations

Once you have registered your rented property as a vacation rental, you are responsible for ensuring the property meets a number of health and safety requirements in order to keep your vacation rental license. As the licensed agent, you will be held responsible for all violations cited during an inspection if it occurs while the property is listed under you. For example:

  • Halls and entrances must be clean, well-lit and well-ventilated
  • If you provide dishes and glassware, they must be sanitized, between guests, according to public food service establishment standards
  • The kitchen sink must have hot and cold running water under pressure
  • Smoke alarms must be installed
  • A properly charged and accessible fire extinguisher must be present
  • If the vacation rental is three or more stories high and has railings, stairwells or balconies not in common areas, you must get a balcony inspection completed by a licensed inspector and renewed every three years.

Taxes

As the host, you will be liable for state, county and city taxes related to your rented vacation rentals. OTAs such as Airbnb and VRBO collect some taxes on behalf of hosts and remit them to the government. For example, guests who book an Airbnb listing located in Orlando will be charged the Orange County Tourism Development Tax of 6%. Airbnb will also collect the Florida Transient Rental Tax and Florida Discretionary Sales Surtax, of 6% and 0.5-1.5% respectively. All of these taxes are based on the listing price including cleaning fees. You will however be responsible for collecting and remitting other taxes as per relevant city of Orlando, Orange County and state of Florida laws.

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