Short-term rentals offer higher gross yield than long-term rentals but at the cost of operational intensity, regulatory uncertainty, and revenue volatility. Understanding what actually drives returns — and what destroys them — is critical before committing six-figure capital to this asset class.

The Revenue Side — Occupancy and ADR Drive Everything

The model starts with the user's nightly rate and occupancy assumptions. Occupied nights use 365.25 days per year divided by 12 months, and turnovers use occupied nights divided by average stay length. Cleaning fees are added to gross revenue and then offset by housekeeping expense, while platform fees reduce cash flow. Use comparable local listings, booking history, and more than one occupancy case; the calculator does not verify market data, seasonality, reviews, platform ranking, or permits.

Costs Bigger Than Most Investors Expect

Build a line-by-line expense schedule before relying on a pro forma. This calculator accepts property tax, insurance, HOA, utilities, maintenance, management, platform fees, and furnishing inputs. Cleaning fees are treated as a pass-through rather than profit. Actual contracts may charge management or platform fees on different bases, and owners may need reserves for repairs, replacements, taxes, lodging taxes, permits, and insurance changes.

Regulatory and Tax Considerations

Short-term-rental rules, permits, HOA restrictions, lodging taxes, insurance requirements, and zoning vary by location and can change. Verify that the property may legally operate before closing. The base model excludes income taxes, depreciation, personal use, local lodging taxes, and tax benefits; consult current IRS guidance and a qualified tax professional for the property's facts.

Underwriting the Deal Correctly

Compare gross revenue, NOI, cash flow after mortgage payments, cap rate, cash-on-cash return, break-even occupancy, and debt-service coverage using the same expense definitions. The five-year tab is an assumption-driven scenario: it grows revenue and operating expenses at the entered rates, keeps the mortgage payment level, and reports gross property equity. It does not model sale costs, taxes, reserves, or a guaranteed appreciation rate.