What is Short Term Rental Profit?
Short term rental profit is the income you generate from renting out your property on a short-term basis through platforms like Airbnb or VRBO. These profits can be quite lucrative if managed well.
Why should you be interested? Earning extra cash, building a passive income stream, and potentially increasing your property value are compelling reasons to explore short-term rentals.
How to Calculate Short Term Rental Profit
Calculating your short term rental revenue is straightforward with this formula:
[\text{Annual Revenue} = \frac{\text{Occupancy Rate}}{100} \times \text{Daily Rate} \times 365]
Where:
- Annual Revenue is the total gross income per year ($)
- Occupancy Rate is the average year-round occupancy (%)
- Daily Rate is the amount you charge per night ($)
Calculation Examples
Example 1
Given:
- Occupancy Rate: 65%
- Average Daily Rate: $180/day
Calculation:
[\text{Annual Revenue} = \frac{65}{100} \times 180 \times 365 = 0.65 \times 180 \times 365 = 42{,}705]
Your yearly gross revenue would be $42,705.
Example 2
Given:
- Occupancy Rate: 70%
- Average Daily Rate: $200/day
Calculation:
[\text{Annual Revenue} = \frac{70}{100} \times 200 \times 365 = 0.70 \times 200 \times 365 = 51{,}100]
Your yearly gross revenue would be $51,100.
Pro Tips
- Always track monthly fixed costs and variable costs per occupancy day to calculate net profit
- Factor in platform fees (typically 3-15%), cleaning costs, and maintenance
- Research comparable listings in your area to set competitive rates
- Seasonal adjustments can significantly impact both occupancy and daily rates