Calculate Potential Profit for Airbnb Rental Property in 10 Minutes or Less

Are you thinking of buying an investment property or building a coach house in your backyard? Have you ever wondered how much you could make on Airbnb? Follow the steps below then try our Airbnb Rental Calculator to quickly estimate your potential profit.

Step 1: Calculate your annual revenue

Search Airbnb for comparable properties in your neighborhood that have key characteristics in common with your property: type of property, number of guests allowed and amenities offered. Take note of daily rates advertised at different times of the year in order to capture seasonal trends. If you are setting different daily rates on weekends versus weekdays, then note that too. Don’t worry about holidays because the Airbnb Rental Calculator is designed to capture all holidays throughout the year.

Based on your research, enter the daily rates that you expect to charge into the calculator and it will generate your potential annual revenue forecast.

Step 2: Estimate your average occupancy rate

Your occupancy rate is the percentage of nights with a guest in occupancy paying the daily rate. Many factors influence a property’s occupancy rate, including: location, location, location, review rating and pricing strategy. Airbnb has not disclosed the occupancy rate achieved by its hosts but estimates range anywhere from 55% to 65% on average.

Default occupancy rates are included in the Airbnb Rental Calculator or there’s an option to enter your own custom percentages. The data below can be used as a rough guide.

2019 average occupancy for the U.S. hospitality industry
Month	Occupancy	Season	Average
January	60%	Slow	Year	66%
February	61%	Mid	Busy	74%
March	64%	Mid	Mid	65%
April	67%	Mid	Slow	59%
May	69%	Mid
June	72%	Busy
July	75%	Busy
August	74%	Busy
September	69%	Mid
October	63%	Mid
November	61%	Mid
December	58%	Slow
Source: STR; 2020-22 data skewed due to the pandemic.

Step 3: Tally all recurring operating costs

Operating costs: Can include property taxes, insurance, utilities, internet, cable and cleaning. Some operating costs are paid monthly (e.g., internet) but others are paid less frequently (e.g., property taxes). The easiest way to convert all operating costs to a monthly basis is to figure out how much you pay during the year then divide by 12. For example, if your annual property tax bill is $6,000, then divide by 12 to calculate a monthly cost of $500.

Repairs & maintenance: A cost that often gets overlooked is repairs and maintenance. These expenses happen less frequently but they are real costs nonetheless. If you’re not sure how much you’ll spend fixing things, best practice would be to include some nominal amount in your budget. For example, you might assume that you’ll spend $1,200 per year on repairs and maintenance or $100 per month.

Management fee: Some investors hire property managers to manage their investment property. Property managers typically receive a percentage of revenue for the services they provide. This percentage can vary by season depending on guest turnover.

Mortgage costs: Lastly, if you have a mortgage or are planning to get a mortgage, be sure to include your monthly mortgage costs. Monthly interest is the cost you pay to borrow money and principal repayments represent additional money that you will invest in your property over time.

Once you complete steps 1 through 3, you should have a good idea of how much you can potentially make listing on Airbnb.

If you want to do a deeper dive, consider some of the following steps that are available through the Airbnb Rental Calculator.

Step 4: Figure out how many days in a year your property will be available for booking

Most investors will list their property on Airbnb year-round, which equates to a 100% availability rate (365 days listed divided by 365 days in year). Others might block certain weeks or months of the year for personal use. For example, if a host closes his/her property for one month each year, then his/her availability rate will be approximately 92% (11 months available to booked divided by 12 months in a year). This host will only be able to generate revenue on 92% of the nights in a year.

Step 5: Evaluate other sources of revenue

In addition to the daily rate, the most common additional charges that guests pay include cleaning and pet fees. If pets aren’t permitted at your property, then don’t factor this into your analysis. If they are, you’ll have to determine how much guests will be charged per night and estimate what percentage of your guests will have pets. These other sources of revenue can add-up so they shouldn’t be disregarded.

Step 6: Consider offering extended stay discounts

Hosts offer extended stay discounts to incentivize guests to book longer stays. For example, a host may offer 30% off the advertised daily rate for 4-week bookings. Offering extended stay discounts is more common during slow season when there is less demand for short-term rentals.

With 4 million active hosts on Airbnb receiving nearly 400 million nights booked in 2022, it’s clear that demand for short-term rentals is robust. If you are considering investing in a short-term rental property, try our easy-to-use Airbnb Rental Calculator to estimate your potential profit in under 10 minutes.

Rent Harvest Team

“Helping people make real estate decisions”