Short-Term Rental Profit Calculator

Frequently Asked Questions

What is a realistic profit margin for a short-term rental?

Well-managed STRs in strong markets typically generate net margins of 20-40%. Margins below 10% are thin. Negative margins mean the property requires cash subsidies. Compare STR profitability against long-term rental income for the same property.

How is STR profitability different from cash-on-cash return?

This calculator shows total income statement profitability. Cash-on-cash return measures the return on your down payment specifically. Use this calculator to validate the income model, then use the cash-on-cash calculator for investment return on equity.

What occupancy rate should I use for planning?

Urban markets average 60-75%. Seasonal resort markets may average 50-65% annually. Use AirDNA market data for your specific submarket - occupancy varies by zip code, bedroom count, and amenities.

Should I include mortgage principal in annual property expenses?

For cash flow purposes, yes - the full mortgage payment is a real cash outflow. For P&L analysis, some investors show only interest. This calculator treats the full payment as an expense to reflect actual cash required.

How does a maintenance reserve differ from CapEx?

Maintenance reserve covers routine recurring costs: consumables, linens, minor repairs. CapEx covers large infrequent replacements: roof, HVAC, water heater. Model CapEx separately at 1-2% of property value per year.

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Estimates for informational purposes only.

Important Disclaimer: Estimates for informational purposes only.

This calculator provides estimates for informational purposes only. Results are based on assumptions and may not reflect actual outcomes. Consult qualified professionals in relevant fields before making important decisions based on these results.

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How It Works

Annual nights booked = 365 times occupancy percentage. Cleaning revenue is estimated at cleaning fee per stay times (annual nights divided by average stay length). Gross revenue = nightly rate times annual booked nights plus cleaning revenue. The calculator then subtracts three layers of costs: platform host fee as a percentage of gross revenue, a maintenance reserve as a percentage of gross revenue (this is revenue-dependent, unlike fixed expenses), and fixed annual property expenses (mortgage, taxes, insurance, utilities).

Net profit = gross revenue minus platform fees minus maintenance reserve minus annual property expenses. Profit margin = net profit divided by gross revenue. A negative net profit means the property loses money at the assumed occupancy - it does not self-fund and requires cash subsidy from other income.

Key Metrics

Gross revenue: Total revenue including nightly income and cleaning fees. This is the ceiling - every other line is subtracted from it.

Platform host fee: Airbnb charges hosts about 3% of booking value; VRBO charges 5% or a flat annual subscription; Booking.com charges 10-18%. Use your actual platform and verify the current rate, as these change over time.

Maintenance reserve: Set aside a percentage of gross revenue (typically 8-12%) for ongoing repairs, restocking consumables, furniture replacement, and property upkeep. This is different from a CapEx reserve - it covers routine wear and tear from heavy guest turnover.

Profit margin: Net profit divided by gross revenue. Short-term rentals with good management and demand typically achieve 20-40% net margins. Negative margins signal the property is not viable at current assumptions.

Annual nights booked: A useful sanity check - 365 times 65% occupancy is about 237 nights per year, or roughly one booking every 1.5 days on average.

Tips

Use conservative occupancy assumptions for your base case. Model 50% as a stress test, your expected rate as the base, and a best-case scenario at 10-15 points above base.

The cleaning fee matters more than it seems. Cleaning fee revenue can represent 10-20% of total gross revenue on shorter-stay listings, and it also covers the actual cleaning cost you pay - subtract your per-turnover cleaning cost from the cleaning fee to see the net cleaning contribution.

Platform fees are host fees, not guest service fees. The total platform take on a booking (host fee plus guest service fee) can be 15-20% of the booking value. Guests see the full cost including guest fees, which can suppress demand if listed price appears high.

Seasonal properties need a monthly model, not an annual average. A ski chalet that earns most revenue in 3 peak months has very different cash flow dynamics than the annual average suggests.

Check local STR permit requirements and neighborhood association rules before purchasing for STR use. Cities including New York, Los Angeles, and many resort towns have permit caps, owner-occupancy requirements, or outright bans that eliminate the short-term rental model.

FAQ

What is a realistic profit margin for a short-term rental?

Well-managed STRs in strong markets typically generate net profit margins of 20-40% of gross revenue. Margins below 10% are thin and may not justify the operational complexity compared to long-term rental. Margins below zero mean the STR does not cover its fixed costs and requires cash subsidies to hold. Compare STR profitability against long-term rental income for the same property.

How is STR profitability different from cash-on-cash return?

This calculator shows total income statement profitability - gross revenue minus all operating costs. Cash-on-cash return measures the return on your down payment investment specifically. A property can show positive net profit (income exceeds costs) but a low cash-on-cash return if the down payment was large. Use this calculator first to validate the income model, then use the cash-on-cash calculator to evaluate the investment return on your equity.

What occupancy rate should I use for planning?

Urban markets average 60-75% annual occupancy for well-managed listings. Seasonal resort markets may average 50-65% annually despite peak months above 85%. Use AirDNA market data for your specific submarket, property type, and size. Do not use a single national average - occupancy varies by zip code, bedroom count, and amenities more than by city alone.

Should I include mortgage principal in annual property expenses?

For cash flow purposes, yes - your full mortgage payment (principal plus interest) is a real cash outflow. For profit-and-loss analysis, some investors show only the interest portion as an expense (since principal reduces debt, not profit). This calculator treats the full mortgage payment as an expense because it reflects actual cash required to hold the property.

How does a maintenance reserve differ from CapEx?

The maintenance reserve (set as a percentage of revenue here) covers routine, recurring costs: consumables, linens, minor repairs, appliance servicing. CapEx (capital expenditure) covers large, infrequent replacements: roof, HVAC, water heater, structural repairs. A CapEx reserve is typically set at 1-2% of property value per year and should be modeled separately from the revenue-based maintenance line shown here.

Short-Term Rental Profit Calculator

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