(Editor’s note: At May’s AZREIA meeting we promoted we would cover Rental Arbitrage and Airbnb Superhost during the interview with Mike Del Prete. We ran out of time, but we want to be sure you have the information. Mike happily answered our questions in written form below. His contact information is included should you want to reach him.)

When I tell people about my Airbnb business, they automatically assume I bought the properties. I started with my first unit in downtown Phoenix and then added three more units by the ASU campus in Tempe. I liked the fact that I didn’t have to own any real estate, just control it. And if the AC goes out or any major repairs are needed I don’t have to fix it. It reminded me of my roots as a wholesaler – little to no risk. It’s also another way for me to produce income for my business. Even though rental arbitrage has a real estate aspect to it, what I quickly learned is that you are now in the hospitality business. You’re running a hotel. The level of customer service surpasses any rental property.

So, what is rental arbitrage? It’s when you sign long-term leases on properties for the sole purpose of re-renting them on a short-term basis. In the financial world, they call this an arbitrage opportunity – taking advantage of differing prices for the same commodity. By holding the apartment for at least a year, I assume the landlord’s risk of vacancy and the possibility of a declining rental market. In return for taking on that risk, I can charge a higher daily rate for the place. If there’s a significant difference between the monthly rent and the daily rate that can be charged, you’ve found yourself an investment opportunity. These sorts of opportunities can now be fully realized due to the creation of the Airbnb marketplace.

Airbnb has created a reservations process that eliminates most administrative and marketing headaches. This streamlining of the ‘subleasing’ process has brought operational costs down and profit can be realized.

What is an Airbnb Superhost? Superhosts are experienced hosts who provide a shining example for other hosts and extraordinary experiences for their guests. Once a host reaches Superhost status, a badge will automatically appear on their listing and profile to help you identify them. Of the four million Airbnb hosts out in the world, one-tenth are considered “Superhosts” – rated among the site’s best.

Superhosts must host at least 10 trips a year, maintain at least a 90 percent response rate, receive five-star reviews 80 percent of the time, and not cancel their reservations. If anyone hosting guests on Airbnb meets these qualifications, Airbnb automatically grants them the title. Airbnb checks Superhosts’ activity four times a year to ensure they’re keeping up with these requirements.

Is being a Superhost important? I think so because guests trust Superhosts. They’ve proven their solid communication and troubleshooting skills, they never cancel on their guests and the unit is always in great condition. This creates more bookings and earning more money. Guests are known to choose a Superhost over other hosts just for the confidence that their stay will go just the way they want it to go.

If you have thought about getting involved in the short-term rental business and have a few questions, I would be happy to answer them for you. You can email me at Hello@Wehearthouses.com or book a phone appointment online at: https://meetme.so/CallMichael

Mike Del Prete