Rental Arbitrage in Tampa | What You Should Know!

Rental Arbitrage in Tampa | What You Should Know!

What is Rental Arbitrage?

Rental arbitrage is a means of running a short term vacation rental business without owning the vacation rental property. As the name implies, rental arbitrage is when you rent the property that you will then use to re-rent to travelers as a short term vacation rental. Rental arbitrage doesn’t require you to expend a large amount of capital via outright purchase or mortgage of property while still allowing you to benefit from short term vacation rental business opportunities.

Tampa as a Tourist Destination

Tampa, Florida is more than just a city in the second most “fun state” in the United States with theme parks and water parks. The city offers a great mix of historic architecture, museums, modern landmarks, fantastic Cuban food and a thrilling nightlife. In fact, Hillsborough County businesses generated $4million in tourism related spending in April 2021 despite the post-pandemic context.

Only a short drive to the beaches, the city is attractive to travelers of various demographics. Visitors can enjoy the lively music and late night dancing in the historic Ybor City, shop till their wallets drop at the upscale Hyde Park, hike, bike or paddle through the Hillsborough River State Park, take in impressive art at the Tampa Museum of Art, enjoy a concert at Curtis Hixon Park, get a glimpse of a manatee at the Manatee Viewing Center, ride a thrill-coaster at Busch Gardens or enjoy a pro football game.

Furthermore, not only is Tampa a major business center but a top startup location in the world, attracting business travelers and digital nomads. All this makes Tampa a great location for a short term vacation rental with significant potential for growing revenue.

Rental Arbitrage Opportunity in Tampa

According to AirDNA, the leading provider of data and analytics for the short term rental industry, tracking the daily performance of over 10 million properties in 120,000 global markets as well as additional data from over a million partner properties, Tampa is one of the best cities for rental arbitrage in the United States.

As per AirDNA data, for the year 2021 in Tampa:

  • Average daily rate (ADR) is $188 (February 2021)
  • Occupancy rate is 88% (March 2021)
  • Average monthly revenue is $2,775 (July 2021)

Meanwhile, according to collated data for both Tampa and neighboring city St. Petersburg (Tampa-St. Petersburg) from AirDNA, in 2021:

  • Effective rent is $1,410
  • STR premium is 11.5%
  • Average number of nights taken to cover rent is 8.2

Rental Arbitrage Rules in Tampa

Rental Arbitrage Rules in Tampa

Even though you don’t own the property you are renting as a short term vacation rental in Tampa, as the operator of the business you are considered legally responsible.

Florida State Rules

Florida state law defines a vacation rental as: “any unit or group of units in a condominium or cooperative or any individually or collectively owned single-family, two-family, or four-family house or dwelling unit that is also a transient public lodging establishment but that is not a timeshare project.”

As the 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:

  • 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.)
  • However, because the state of Florida defines condominiums and dwellings as separate types of short term vacation rental housing, you cannot combine the operation of both a condominium and a dwelling in one license.

Licenses must be renewed annually and displayed prominently in the vacation rental or made available when requested.

If you are listing a short-term rental such as a single room or rooms other than the whole unit while the host remains in the home, you are not required to obtain a license from DBPR.

Once the property is registered with the state as a vacation rental, you will be held responsible for meeting all applicable health and safety rules as well as any violations. These range from ensuring hygiene and cleanliness, providing a safe, sanitary and comfortable environment to guests, as well as scheduling and passing regular inspections.

As the owner of the vacation rental business, you are responsible for submitting all state taxes to the relevant authorities in time. These include the Florida Transient Rental Tax and Florida Discretionary Sales Surtax. If you list your short term vacation rental on Airbnb or VRBO, both taxes will be collected directly from the guests and remitted to the state authorities on your behalf.

Hillsborough County Rules

Hillsborough County does not directly regulate short term vacation rentals. However, if you rent your property for less than 7 days at a time, you will be required to be zoned properly or face fines.

You also owe the county the Hillsborough County Sales Tax and Tourist Development Tax.

Conclusion

Tampa offers great opportunity for rental arbitrage with high visitor numbers and wide visitor variety, reasonable rents, and uncomplicated rental arbitrage rules.

Check out our other articles on rental arbitrage in markets worth investing: Orlando, Nashville, Houston, Austin, Myrtle Beach, Fort Lauderdale, Boston, Charleston, San Diego, Savannah, New Orleans, and Jacksonville.

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