This calculator gives estimates for education and planning. It is not investment, tax or legal advice; for decisions about your own situation, talk to a qualified financial professional.
Is a short-term rental worth it?
Renting a home by the night on Airbnb, Vrbo or similar platforms can earn more than a long-term lease, but revenue swings with the seasons and costs are much higher: cleaning between every stay, furnishing, utilities, supplies and platform fees. A realistic projection uses conservative occupancy and includes every cost.
The calculation
- Nights booked = nights available × occupancy rate.
- Stays = nights booked ÷ average length of stay.
- Gross revenue = nights booked × nightly rate + stays × cleaning fee charged.
- Variable costs = platform and management fees (a percentage of revenue) + stays × cleaning cost.
- Fixed costs = 12 × monthly costs + yearly costs.
- Net operating income = gross revenue − variable costs − fixed costs.
The calculator also gives the net yield on the property value and the break-even occupancy, the occupancy at which revenue just covers costs.
Example
At $180 a night and 65% occupancy, a home available all year is booked about 237 nights, in 79 stays of 3 nights. With a $90 cleaning fee per stay, gross revenue is about $49,800. After a 15% platform fee, $80 of cleaning per stay, $450 a month of utilities and supplies and $3,000 a year of property tax and maintenance, net operating income is about $27,600, a 6.9% yield on a $400,000 property, before mortgage payments and income tax. Break-even occupancy is about 15%.
Costs people forget
- furnishing and replacing linens, towels and small appliances;
- higher insurance premiums for short-term rentals;
- software, smart locks and listing photography;
- permits, registration and occupancy taxes;
- vacant nights between bookings and in the off-season.
Rules and taxes in the US
Many cities require a permit or registration, limit the number of nights, or only allow rentals of a primary residence. Homeowners associations may ban them. Occupancy taxes are often collected by the platform but not always. Rental income is generally taxable; if you rent your home for 14 days or fewer in a year, the income is generally tax-free. If the average stay is 7 days or less, different rules apply, for example to the deduction of losses; providing hotel-like services can also change how the income is reported. A tax professional can help.
Limits
Occupancy and rates vary by season, location, reviews and competition. Run the numbers for a bad year as well as a good one.