The best and worst U.S. cities for rental arbitrage revealed

US: Vacation rental data provider AirDNA has assembled a list of the best and worst cities in the United States for rental arbitrage, i.e. renting a property on a long-term lease to rent as a short-term rental.

Rental arbitrage is being recognised as the latest trend to engulf the vacation rental sector. For example, AirDNA claims companies such as Lyric, which recently raised $160 million in a Series B financing round led by Airbnb, base their entire business model on this tactic.

The provider adds that rental arbitrage is particularly popular with middle-income earners as it allows rental entrepreneurs to get their business off the ground without the large down payment required when buying a home.

The trend can be a lucrative proposition for entrepreneurs, but it does not come without its risks. Though there are strict rules covering rent-to-rent models in many cities across the United States, some states recognise the benefits of vacation rentals on the local economy and tax coffers and have since implemented non-restrictive regulations.

According to AirDNA, the most lucrative locations for rental arbitrage are cities with the greatest difference between long-term rental costs and short-term revenue.

For more information, visit the AirDNA website here.

Here is the list compiled by AirDNA:

Worst Markets for Rental Arbitrage for One-Bedroom Properties:

Market                               Monthly Rent                Short-Term RevPAR                  Arbitrage Potential
San Francisco, CA              $3,700                                    $3,245                                            -$455
San Jose, CA                       $2,850                                    $2,108                                            -$412
New York, NY                     $2,850                                    $2,548                                           -$302
Oakland, CA                        $2,270                                    $1,975                                            -$295
Laredo, TX                          $830                                       $545                                               -$285

Worst Markets for Two-Bedroom Properties:

Market                              Monthly Rent                Short-Term RevPAR                  Arbitrage Potential
Scottsdale, AZ                    $2,080                                   $1,677                                             -$403
Irving, TX                           $1,490                                    $1,091                                             -$399
Chandler, AZ                     $1,440                                    $1,177                                              -$263
Laredo, TX                         $940                                       $710                                                -$230
Oakland, CA                      $2,720                                    $2,631                                             -$89

Best Markets for One-Bedroom Properties:

Market                              Monthly Rent               Short-Term RevPAR                   Arbitrage Potential
Honolulu, HI                    $1,700                                    $3,446                                             $1,746
Nashville, TN                   $1,380                                    $3,043                                             $1,663
Boston, MA                      $2,400                                    $3,920                                             $1,520
Detroit, MI                       $610                                        $1,883                                             $1,273
Des Moines, IA               $810                                        $2,000                                             $1,190

Best Markets for Two-Bedroom Properties:

Market                             Monthly Rent                Short-Term RevPAR                   Arbitrage Potential
Boston, MA                     $2,750                                   $5,338                                               $2,588
Honolulu, HI                  $2,230                                   $4,772                                               $2,542
Nashville, TN                 $1,390                                    $3,580                                              $2,190
Corpus Christi, TX        $1,070                                    $2,690                                              $1,620
Detroit, MI                     $690                                       $2,165                                               $1,475

[Data courtesy of AirDNA]

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