Short-term rentals can earn far more than a long-term lease, and lose far more when bookings slow down. Before you buy or convert a house to an Airbnb, run the full math: revenue, every cost and the break-even occupancy.
01How to estimate short-term rental revenue
Revenue = average nightly rate × nights booked + cleaning fees. Nights booked = 365 × occupancy. At $180 a night and 62% occupancy that is about 226 nights and $40,700, plus about $7,200 of cleaning fees from 75 stays of three nights: about $47,900 a year.
02Use the nightly rate without cleaning fees
Some market data tools show a nightly rate that already includes the cleaning fee, which makes markets look better than they are. One investor found a market average drop from $267 to about $175 once cleaning was removed. Always separate the two.
03The costs most new hosts forget
- Platform fee: about 3% (split model) or up to roughly 15.5% (host-only).
- Cleaning per stay, paid even when the guest pays a cleaning fee.
- Management or co-hosting: often 15–25% of revenue.
- Utilities, internet and streaming, paid by you every month.
- Supplies: linens, toiletries, coffee, replacements.
- Repairs and wear, higher than a long-term rental.
- Insurance, property tax and the mortgage.
04A worked example
Revenue about $47,900. Platform fee, cleaning and repairs about $10,200. Fixed costs including a $1,700 mortgage, utilities, supplies, insurance and taxes about $31,300. Profit about $6,400 a year, or $530 a month.
05RevPAR and break-even occupancy
RevPAR (revenue per available night) = nightly rate × occupancy, about $112 in the example. It lets you compare listings with different prices and occupancy. Break-even occupancy is the share of nights you need just to cover all costs: about 52% here. If similar listings nearby run at 55%, the margin of safety is thin.
06Check the market before you buy
- Look at real comparable listings on Airbnb and Vrbo: prices, reviews and booked nights.
- Ask the seller for booking reports and tax returns (Schedule E).
- Check your city's short-term rental rules, permits and taxes.
- Plan for seasons: a beach town in January is not the same as in July.
07Financing a short-term rental
DSCR lenders often finance short-term rentals at about 70% of the value and may use projected rental income. Run the DSCR calculator with the long-term rent too, as a fallback.
Run your numbers with the free short-term rental calculator: profit per month, RevPAR and break-even occupancy, with every step shown.
