Rental Arbitrage: What You Should Know

Many people use Airbnb to begin their dealings with rental arbitrage. Airbnb is typically used as a short-term rental site, although some listings do have long term options. As the ebb and flow of available housing continues, many renters are searching for and utilizing strategies like rental arbitrage to put some much-needed money into their pockets. This seemingly business-like-plan affords Airbnb hosts, some who do not own property, the ability to rent out a property on a long-term basis and then post that property on Airbnb for a higher fee than what they are paying for rent.

Before you decide to embark on this endeavor, keep in mind that each city and state may have different laws in place regarding short-term rentals, therefore it is wise to view local laws to ensure you or your tenant are in compliance. For example, on October 18, 2022, the Riverside County Board of Supervisors adopted new regulations for short term rentals in unincorporated areas of Riverside County. The new system, Ordinance, No. 927, stipulates that “a maximum of 10 people will be permitted to stay in a short-term rental residence that occupies a half-acre or less. For residences on lots that are half-acre to two acres, up to 16 guests will be permitted” (Riverside County Planning Department). There are many other provisions included like outdoor noise monitors and following the county’s quiet rules during certain hours.

If you’re interested in how much the fees are from just Riverside County, be prepared to spend some money. There is an application fee that is dependent on the building size and ranges from $250-$740, or if you want to go the annual route it’s $100-$540. Now, if you happen to be in violation of any of the rules set forth by the ordinances, get ready to shell out between $1,000-$5,000 in violation costs. Other costs to consider are utilities, internet, whether you will clean or hire a service, and any upgrades you will need to make the stay comfortable for guests.

Something else to keep in mind is your eligibility to begin this process. Airbnb has a help article on their website that provides the same information that is found on Riverside County’s website. A great section that Airbnb highlights that is very helpful for hosts or potential hosts to consider are other contracts and rules that are included in the lease or HOA. There could be a clause in your lease or building rules “even if the landlord says it’s ok.” So, be sure you thoroughly do your research. It’s also suggested that besides having an agreement and great relationship with your landlord, you also understand the dynamics of your residential community. Riverside County has a Good Neighbor Brochure for Short-Term Rentals, if you’re stuck on how you should engage if neighbors. If your rental is booked for a stay more than thirty consecutive days, then you don’t have to charge your occupant for the Transient Occupancy Taxes (TOT). However, you must file for an exemption from the TOT, Office of the Treasure-Tax Collector, Riverside County, California.

Written by: Rhonda Cloud, Library Assistant 


By rcll

December 16, 2022

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