Most first-time arbitrage operators pick a property, get the landlord to say yes, and only then start thinking about how the lease should actually be structured. That's backwards. The structure you use — sublease, master lease, or a lease written directly to your operating entity — determines who's liable when something goes wrong, how easily you can get approved in the first place, and how much leverage you have if the landlord tries to change terms later. Pick the wrong one and you can do everything else right and still end up in a dispute you didn't see coming.
Here's how the three common structures actually work, and how to decide which one fits a given deal.
The Three Structures You'll Run Into
1. Sublease
The original tenant holds the lease with the landlord, and you sign a separate sublease agreement with that tenant. You never have a direct contractual relationship with the landlord — your recourse is against the sub-lessor, not the property owner.
This structure shows up most in multifamily buildings where an existing resident wants out of their lease early, or where a landlord won't deal directly with a business entity. It's usually the fastest to arrange, but it's also the weakest position for you: if the original tenant defaults, stops paying, or simply disappears, you can be evicted through no fault of your own, with no direct standing to negotiate with the landlord to fix it.
2. Master Lease (Direct Lease with STR Permission)
You sign the lease directly with the landlord or property manager, typically as your LLC, with an addendum explicitly permitting short-term rental use. This is the structure most experienced operators push for, because it puts you in a direct relationship with the person who actually controls the property — renewals, repairs, and rule changes all run through one line, not two.
It's harder to get approved this way, especially with landlords who don't already know what arbitrage is. But it's the only structure where you have real standing to negotiate lease length, renewal terms, and responsibilities in writing before you sign — which matters far more once you've furnished the unit and have guests booked.
3. Corporate Lease Assignment
A hybrid: the landlord leases to your entity, but the lease is written and administered like a corporate housing agreement rather than a standard residential lease — often with different notice periods, insurance requirements, and sometimes a higher security deposit or corporate guarantee. Some landlords who won't touch "Airbnb" will still sign this because it reads like a familiar corporate housing arrangement, not a short-term rental operation.
The tradeoff is cost and paperwork: corporate leases often carry higher deposits, personal or corporate guarantees, and stricter insurance minimums than a standard residential lease would.
Why the Structure Changes Your Risk, Not Just Your Paperwork
The structure you pick determines three things that matter well beyond signing day:
- Who you can hold accountable. In a sublease, your only contractual relationship is with the sub-lessor. If they violate their own lease and get evicted, you're evicted with them — you have no direct claim against the landlord.
- How enforceable your STR permission is. Verbal approval from a sub-lessor, or an approval that isn't in the landlord's own paperwork, isn't binding on the landlord. A master lease with an explicit STR addendum is.
- What happens at renewal. A direct lease gives you a seat at the table when terms change. A sublease means your terms are entirely dependent on what the original tenant negotiates — or whether they renew at all.
What Landlords Actually Prefer
Landlords aren't choosing a structure for your benefit — they're managing their own risk and their own paperwork burden. A few patterns hold across most markets:
- Landlords with in-house management tend to prefer a direct lease with a clear addendum, because it's one document, one point of contact, and no confusion about who's responsible for damage or noise complaints.
- Landlords who are wary of STR use, but won't say no outright, sometimes push you toward a sublease specifically so they don't have to put their name on anything related to short-term rentals.
- Corporate-style leases tend to appeal to landlords who already rent to relocation companies or traveling professionals — they already have the paperwork template and the higher deposit expectations built in.
If a landlord is steering you toward a sublease and won't discuss a direct lease at all, treat that as a signal, not just an inconvenience. It often means they want plausible deniability about the STR use, which leaves you exposed if the arrangement ever gets challenged.
Questions to Settle Before You Pick a Structure
- Is there an existing tenant involved, or is this a vacant unit being leased fresh? A vacant unit gives you the option to negotiate a direct lease from day one.
- Does the landlord require a corporate guarantee, and if so, from whom — your LLC, or you personally?
- What happens to your STR permission if the property is sold or the landlord changes property managers mid-lease?
- Is the short-term rental use written into the lease itself, or only referenced in a side email or verbal conversation?
- What's the renewal process, and does it require the same approval from scratch, or does the addendum carry forward automatically?
If you can't get clear answers to these before signing, that's usually a sign the structure hasn't actually been agreed on — it's just been assumed.
Document the Structure You Choose — In Writing
Whichever structure you land on, the same rule applies: nothing verbal counts. Get the STR permission written into the lease or a signed addendum, not a text message or a hallway conversation. Specify:
- Who holds the lease (you personally, or your entity)
- That short-term or nightly rental use is explicitly permitted
- Insurance requirements and who needs to be named as additional insured
- What happens at renewal, and whether the STR permission survives a change in ownership or management
A sublease agreement should spell out the same points between you and the sub-lessor, plus what happens to your sublease if the original tenant's lease is terminated for any reason.
Common Mistakes
The mistake that shows up most often isn't picking the "wrong" structure — it's not picking one deliberately at all. Operators take whatever the landlord offers, assume a friendly conversation counts as approval, and only discover the gap when a renewal falls through or a new property manager takes over and claims no record of the STR arrangement. The second most common mistake is treating a sublease as equivalent to a direct lease in terms of security — it isn't, and pricing that risk into your underwriting matters as much as pricing the rent itself.
Structure isn't a formality to handle after the numbers work — it's part of what makes the numbers real. Before you lock in a lease structure, it's worth running the underlying deal through a full underwriting pass — AirLoom scores the property itself so you know the arbitrage math holds up regardless of which structure you end up signing.