Short-Term Rental Profitability Calculator
Gross Monthly Revenue:
Platform Fees:
Net Monthly Cash Flow:
Annual Cash-on-Cash Return:
How to Analyze a Short-Term Rental Property
Investing in short-term rentals (STRs) like Airbnb or VRBO properties requires a different mathematical approach than traditional long-term rentals. While traditional rentals focus on steady monthly income, STR profitability hinges on "RevPAR" (Revenue Per Available Room) and seasonality.
Key Metrics Explained
- Average Nightly Rate: This is the average price you charge per night. Remember that this fluctuates based on weekends, holidays, and local events.
- Occupancy Rate: The percentage of nights per year the property is booked. A healthy STR typically aims for 60% to 80% occupancy.
- Operating Costs: Unlike long-term rentals, you pay for utilities, high-speed internet, lawn care, and frequent professional cleaning.
- Platform Fees: Booking sites usually take 3% to 15% of the booking subtotal as a service fee.
Example Calculation
Suppose you purchase a beach condo for $400,000. Your data shows:
- Nightly Rate: $250
- Occupancy: 65% (approx. 20 nights/month)
- Platform Fees: 3%
- Monthly Operating Costs: $1,200 (including taxes/insurance)
Step 1: Gross Monthly Revenue = $250 × 20 nights = $5,000.
Step 2: Platform Fees = $5,000 × 0.03 = $150.
Step 3: Net Cash Flow = $5,000 – $150 – $1,200 = $3,650 per month.
Step 4: Annual Return = ($3,650 × 12) / $400,000 = 10.95%.
Maximizing Your STR Return
To improve your ROI, focus on dynamic pricing strategies. Increasing your nightly rate by just $10 or improving your occupancy by 5% through better photography and guest reviews can significantly impact your bottom line. Always account for a "Capex" (Capital Expenditure) fund for repairs, as short-term guests often result in more wear and tear than permanent residents.