Serviced Accommodation & Rental Arbitrage
(S.A.R.A.)

Serviced accommodation & rental arbitrage is a business model that focuses on leveraging other peoples properties through sub-lease agreements and renting those properties on online or offline platforms. In essence, rental arbitrage hosts will rent properties from the long-term rental market and resell them on the short term marketplace.

At the end of the day, you’re in the business to make more money than you invested into it. The Return On Investment (ROI) of a rental arbitrage property can be very lucrative in the right markets. Like any business, the ROI will vary depending on location, start-up costs, operating expenses, and various other factors. Use our ROI Calculator to calculate your ROI or use the formula below.

ROI = (Cost of Investment / Net Return on Investment) X 100%

There are plenty of benefits from operating your business with a rental arbitrage model. In fact, many of the leading Airbnb hosts in the world operate their businesses this way.

Benefits of S.A.R.A.:

1. Little Upfront Investment Needed - Since you’re not buying the property, you do not need to outlay thousands of pounds for a down payment. All you need to do is pay your first months rent, damage deposit, and any furniture, linens, or amenities needed to get the property ready.

2. Little Risk - You don’t own the property, so if the roof needs to be replaced, it's on the landlord to fix it. If the property does not generate enough bookings to cover your costs you can walk away from the lease.

3. You Can Scale Quickly - In order for you business to succeed it needs to be scalable and that is exactly what rental arbitrage offers. Most rental arbitrage hosts utilise a multiple location management software to assist in managing multiple locations.

4. Less Bookkeeping Headache - Landlords have to manage and pay multiple expenses, from HOA fees, mortgage, utilities, maintenance, and much more. Instead, the rental arbitrage host only has to pay one flat fee to the landlord each month - rent.
   
   As you can see, rental arbitrage provides several key benefits to a host. The ability to get started for very little, scale rapidly, and do so with very little risk are all huge advantages for any business owner.

While sublease agreements provide a lot of benefits, they also come with several important disadvantages. It is important to note that every business model has its pros and cons, especially in the S.A.R.A. industry.

Disadvantages Of S.A.R.A. :

1. Rent - Whether you made any bookings or not your landlord is going to expect you to pay rent each and every month. If you’re late to pay, or avoid paying altogether, you may face charges, eviction, or in some cases, lawsuits.

2. Property Damage - If one of your guests damages the property, whether that be by accident or on purpose, you as the leaseholder is responsible for the repairs. In some cases, Airbnb, other platforms and/or your insurance provider may help cover the costs.

3. Leasehold Agreements - You will need to write out very detailed agreements with the landlord to ensure that you, the landlord, and all guests are protected. These documents can be time-consuming and costly to have created, oftentimes requiring the assistance of a lawyer.

4. Legality & Permission - You will need to understand the local laws, lease terms, lender terms and in some cases receive permission from neighbours for noise & communal area maintenance if need be.

Again, every business has its pros and cons, so do you due diligence and evaluate which property is worth taking the risk for, and avoid any properties that you suspect will have issues.

Talking about rental arbitrage can be fun, but actually doing it can be challenging if you don’t know where to start. We have compiled a few tips to help you get started.

1. Use Metric Investments to source a B.M.V. property: We will seek out a property with the owner a seeking management solution, being open to S.A.R.A. or that is having financial difficulties with their property.

2. Join Real Estate Investor Facebook Groups: Engage with fellow investors in your local area and let them know how you can make them more money.

3. Networking Events: Every city has a real estate investors networking event. Regularly drop-by those events and see if any of the investors would be interested in partnering with you on a deal.

4. Cold Call: Believe it or not, but cold calling still works. Pick up the phone and start dialling prospective landlords and ask them if they’re interested in subletting the space to you.