Rental arbitrage is quickly becoming one of the smartest ways to enter the booming short-term rental market without buying property. This strategy is gaining traction in Australia, especially after travel rebounded post-pandemic. Whether you're based along Sydney’s coast or in Queensland’s tourist hubs, rental arbitrage offers a low-barrier, flexible way to earn income. Here’s how we break it down:
What is rental arbitrage?
Rental arbitrage is a real estate model where you lease a property long-term and rent it out as short-stay accommodation for holiday guests. Instead of purchasing a home and tying up hundreds of thousands in deposits or mortgage repayments, rental arbitrage lets you enter the short-term rental space with a much smaller upfront investment.
This approach offers flexibility, faster market entry, and less financial risk than traditional ownership. Rental arbitrage grew rapidly in Australia after COVID-19, as short-term travel rebounded and demand for unique, flexible accommodation spiked—especially in coastal cities and regional hubs.
How rental arbitrage actually works
Rental arbitrage is a practical, systemised approach that can create steady income without property ownership if done correctly. Here is a step-by-step breakdown of how to start rental arbitrage:
- Identify a rental property in a high-demand area known for tourism or regular visitor traffic. Coastal towns, inner-city hubs, and near major events are strong options.
- Negotiate with the landlord. You must secure explicit written permission to sublease for STR (short-term rental) purposes to avoid future disputes or lease violations.
- Furnish and style the space. Invest in comfortable furniture and attractive décor. Properties that feel like home with thoughtful touches stand out and attract more bookings.
- List across multiple platforms. Casting a wider net helps boost occupancy rates. Listings should include professional photos, competitive pricing, and clear descriptions.
- Manage guest bookings, turnovers, and upkeep. Good management ensures great reviews and reduces costly wear and tear. Efficiency here keeps operations smooth.
- Profit. Your earnings come from the gap between the rent you pay and the short-term rental income you collect.
Practical example:
- Lease a two-bedroom unit in Sydney for $1,800 a month. Furnish and list it for $100 per night.
- With a strong 80% occupancy rate (about 24 nights per month), your gross earnings would be around $2,400.
- After covering rent and estimated operating costs, you could clear around $800 in net monthly profit.
Is rental arbitrage legal in Australia?
As it is in most parts of the world, rental arbitrage in Australia is legal, but only when two key conditions are met:
- You have explicit, written consent from the landlord allowing short-term use of the property. Verbal agreements won’t protect you if issues arise.
- The property meets local council requirements for short-term rental leasing. This varies widely by state and even by suburb.
Failing to meet either condition can lead to serious consequences. Breaching your lease can result in eviction while ignoring council rules, which could mean steep fines or removal from booking platforms. Insurance policies may also reject claims linked to unauthorised subletting.
Here is a quick overview of short-term rental laws in major states:
Pros and cons of rental arbitrage
Like any business model, rental arbitrage comes with trade-offs. It is attractive for newcomers to short-term rentals, but it is not risk-free. Here is a breakdown:
Why does it work for some?
Rental arbitrage gives you speed. You can test the short-term rental market in emerging tourism hotspots or metro areas without committing hundreds of thousands in purchase costs. It also offers a chance to learn the market while earning.
But flexibility comes at a price. Unfilled nights, changing council policies, or stricter lease terms can quickly reduce STR rental profit margins. Success depends on smart location choices, good guest management, and compliance discipline.
Looking for a way to succeed with rental arbitrage?
One of the biggest challenges with STR arbitrage in Australia is keeping up with changing demand and seasonal fluctuations. Rates that worked last month may underperform today, and guesswork can quickly eat into your margins.
That is where pricing automation becomes essential. Dynamic pricing tools, such as Beyond’s free listing analyser, help you stay competitive by adjusting your nightly rates based on occupancy trends and market competition.
For anyone operating under the rental arbitrage business model, this kind of automation streamlines the pricing process and helps ensure you are not leaving money on the table.
If you own a holiday rental property and want to unlock better returns, try Beyond’s free listing analyser and dynamic pricing tools to optimise your short-term rental profits today.
.png){kind=small}
.png){kind=small}
