Arizona renters look to take advantage of rising rent prices through “Rental Arbitrage”

Real estate experts say a unique business practice called “rental arbitrage” is squeezing some renters out of the market.
Published: Jun. 28, 2022 at 5:21 PM MST
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PHOENIX (3TV/CBS 5) -- Kathleen Wardrip, 75, is like many Phoenix-area renters, struggling to find an affordable place to live. “It’s been very frustrating, to the point where you want to cry and pull your hair out,” said Wardrip. “I don’t know where to go.”

And things aren’t getting any easier. Real estate experts say a unique business practice called “rental arbitrage” is squeezing some renters out of the market.

Eric Atencio is the regional manager with Valley King Properties. According to Atencio, a growing number of people and businesses are asking about signing long-term leases at a home or apartment, with the desire to turn around and list that property as a short-term rental. “Their thought process is, on a short term rental they can make more on a daily rate, and it will far exceed what they are going to spend on the monthly rate, based on short term rental prices out there,” said Atencio.

“Rental Arbitrage” allows investors a chance to avoid spending a lot of money to buy a property, opting instead to sign a one-year lease on a place they can still rent out on a daily or weekly basis,” said Atencio.

Kate Bauer is co-founder of the community advocacy group Neighbors Not Nightmares. She said the biggest problem with people turning their long-term rentals into short-term rentals is that it reduces the number of properties desperate renters can move into permanently. “If you have somebody competing for these units for business reasons, to make a profit, it’s keeping it out of the hands of a family that might need it,” said Bauser. “It makes it that much more difficult.”

Most apartment complexes and landlords do not allow tenants to sublet their places, so their approval is required. Some tenants will try to re-rent their places without their landlord knowing, but that could subject tenants to a host of legal issues. If someone thinks a neighbor is re-renting a home or apartment illegally, they can call and report it to the owner of that property.