Airbnb Arbitrage Calculator
Estimate the profitability of an Airbnb arbitrage business by inputting your estimated costs and revenues.
Investment & Operating Costs
Revenue Estimates
Understanding Airbnb Arbitrage and the Calculator
Airbnb arbitrage is a real estate investment strategy where you rent a property and then sublease it on short-term rental platforms like Airbnb. The goal is to generate more income from the short-term rentals than you pay in rent and operating expenses, thus creating a profit. This strategy allows individuals to enter the real estate and hospitality market with lower upfront capital compared to traditional property ownership.
This calculator helps you estimate the potential profitability of an Airbnb arbitrage venture. It takes into account your fixed monthly costs, variable booking costs, revenue potential based on nightly rates and occupancy, and the initial investment needed.
How the Calculator Works:
The calculator breaks down profitability by comparing your estimated monthly income against your estimated monthly expenses.
Key Inputs Explained:
- Monthly Rent Paid: The total rent you pay to the property owner each month.
- Property Management Fee (%): If you use a property manager, this is their percentage of the gross booking revenue. If you manage it yourself, you can set this to 0%.
- Guest Cleaning Fee (per booking): The fee charged to guests for cleaning after their stay. This revenue offsets cleaning costs.
- Average Stay Length (nights): The typical duration a guest stays. This helps estimate the number of bookings per month.
- Monthly Utilities: Costs for electricity, gas, water, and internet that are not covered by the guest and are your responsibility.
- Other Monthly Expenses: Includes costs like supplies (toiletries, coffee, etc.), insurance, minor repairs, software subscriptions, and any other recurring operational costs.
- Initial Setup Cost: The one-time expense for furnishing, decorating, and preparing the property for short-term rental. This is not factored into monthly profit but is crucial for the overall investment analysis.
- Average Nightly Rate: The price you charge guests per night, excluding the cleaning fee.
- Monthly Occupancy Rate (%): The percentage of nights in a month you expect the property to be booked.
The Calculation Logic:
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Total Monthly Revenue:
First, we calculate the total number of nights available in a month (assuming 30 days for simplicity). Then, we determine the number of booked nights based on the occupancy rate. The revenue from bookings is the number of booked nights multiplied by the average nightly rate.
Number of Booked Nights = 30 days * (Occupancy Rate / 100)
Gross Booking Revenue = Number of Booked Nights * Average Nightly Rate
The cleaning fee revenue is the number of bookings multiplied by the guest cleaning fee. The number of bookings is derived from the booked nights and average stay length.
Number of Bookings = Number of Booked Nights / Average Stay Length
Total Monthly Revenue = Gross Booking Revenue + (Number of Bookings * Guest Cleaning Fee)
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Total Monthly Expenses:
This includes the fixed monthly rent, utilities, and other recurring costs. The property management fee is calculated as a percentage of the Gross Booking Revenue.
Monthly Management Fee = Gross Booking Revenue * (Management Fee Percent / 100)
Total Monthly Expenses = Monthly Rent Paid + Utilities Cost + Other Monthly Expenses + Monthly Management Fee
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Net Monthly Profit:
This is the difference between your total monthly revenue and total monthly expenses.
Net Monthly Profit = Total Monthly Revenue – Total Monthly Expenses
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Return on Initial Setup Cost (Monthlyized):
To get a sense of ROI, we can estimate how many months of net profit are needed to recoup the initial setup cost.
Months to Recoup Setup Cost = Initial Setup Cost / Net Monthly Profit (If Net Monthly Profit is positive)
Important Considerations:
This calculator provides an estimate. Actual results can vary significantly due to seasonality, market demand, local regulations, unexpected repairs, and dynamic pricing. Always conduct thorough market research and factor in a buffer for unforeseen costs. Ensure you have legal permission from your landlord to sublease and operate an Airbnb.