Airbnb Income Calculator: How to Estimate Short-Term Rental Income, Cap Rate, and Cash-on-Cash Return

How do you estimate Airbnb income?

Use this formula: annual gross income equals average daily rate times occupancy rate times 365 days. The average daily rate, or ADR, is the nightly rental charge. The occupancy rate is the percentage of days you expect to be booked in a year. Occupancy is often estimated in a wide range of 40 to 85 percent, and the nightly rate can swing by season. One guide gives an example of $350 a night at peak and $150 a night off season, which is why a seasonal projection is more useful than a single average.

What expenses reduce short-term rental income?

Net operating income, or NOI, is gross income minus operating expenses. For a short-term rental, expenses include cleaning and maintenance, property management fees, utilities, insurance and property taxes, HOA or condo fees, repairs, listing and advertising fees, software subscriptions, accounting and legal fees, and payment processing fees. Do not include mortgage payments, down payments, or loan interest in NOI.

If you hire contractors for repairs or renovations, make sure you receive proper invoices — see what to include on a contractor invoice and which invoice template format to use. To track these operating costs without an accountant, read how to track business expenses without an accountant.

How do you estimate Airbnb income by season?

A single yearly average usually overstates income, so estimate each season separately. For each season, multiply the nights in the season by the occupancy rate and by the nightly rate, then add the seasons together. For example, a rental with 92 summer nights at 80 percent occupancy and a 200 dollar nightly rate earns 14,720 dollars. The same rental with 183 spring and fall nights at 60 percent and 150 dollars earns 16,470 dollars, and 90 winter nights at 40 percent and 120 dollars earns 4,320 dollars, for a yearly total of 35,510 dollars. These numbers are made up to show the math, so replace them with figures for your own area.

Where do you find occupancy and nightly rate numbers for your area?

Look at comparable listings in the same neighborhood with the same number of bedrooms, then check their calendars to see which dates are booked and what they charge in each season. Free short-term rental calculators and market data tools can give a second opinion, but treat every figure as an estimate and use the more cautious one.

What does a bad year look like for an Airbnb?

Run the same math again with lower numbers. Dropping every occupancy rate by ten points in the example above gives 12,880 dollars in summer, 13,725 dollars in spring and fall, and 3,240 dollars in winter, for 29,845 dollars, which is about 5,665 dollars less than the 35,510 dollar year. If the property still covers its costs and the mortgage in the weaker year, the deal is safer.

Do local rules and taxes change the numbers?

Yes. Short-term rental rules, permits, and lodging taxes vary by city and county, so confirm them locally before you rely on any estimate, and remember that these estimates are before income tax.

How do you calculate the cap rate on an Airbnb?

Cap rate equals net operating income divided by property value, times 100. Here is an example. A $150 nightly rate at 70 percent occupancy for 365 days gives $38,325 in gross income. After $12,000 in expenses, NOI is $26,325. On a $400,000 property, the cap rate is 6.58 percent.

How do you calculate cash-on-cash return?

Cash-on-cash return equals annual pre-tax cash flow divided by total cash invested, times 100. Annual pre-tax cash flow is gross rental income minus operating expenses minus debt service. Total cash invested includes the down payment, closing costs, renovations and repairs, furnishings, and initial supplies. One guide puts down payments at 20 to 25 percent of the purchase price, closing costs at 2 to 5 percent, and furnishing a three-bedroom home at $15,000 to $30,000.

What is a worked cash-on-cash example?

Continue with the $400,000 property. Assume a 25 percent down payment of $100,000, closing costs of $12,000, and furnishings of $20,000, for $132,000 in cash invested. Assume debt service of $18,000 a year. NOI of $26,325 minus $18,000 leaves $8,325 in annual pre-tax cash flow. Divided by $132,000, that is a cash-on-cash return of about 6.3 percent. The debt service and closing cost figures are assumptions for the example, so replace them with your own.

What is a good cash-on-cash return for an Airbnb?

The same guide calls 8 to 12 percent a good return and 12 to 20 percent or more an excellent one. It says a return below 8 percent can be acceptable in a market with strong appreciation. Treat these as one source's ranges, not guarantees.

What is the difference between an Airbnb and a long-term rental calculator?

A long-term rental usually has one fixed monthly rent. A short-term rental has a nightly rate, an occupancy rate, cleaning fees, and seasons. Use the TogoMarketing Airbnb and Short-Term Rental Income and Expense Tracker with seasonality projections for nightly bookings. Use the Rental Property Cash Flow and ROI Calculator for a single family rental with a fixed rent. Both work in Excel and Google Sheets for $4.99, with a one-time purchase and no subscription.