Airbnb ROI Calculator

How it works

A short-term rental is measured with the same three return layers as any rental, NOI, cap rate, and cash-on-cash, plus a multi-year total return. What changes is how the income and the expenses are built. The metric definitions are identical to the long-term rental calculator; only the inputs that feed them differ.

Income is occupancy-driven, not a fixed rent:

annual revenue = average nightly rate × occupancy rate × 365

Occupancy already accounts for the empty nights, so there is no separate vacancy line the way a long-term lease has. This single product is the biggest driver of the whole result: a property booked 65% of the year earns very differently from one booked 80%.

Net operating income (NOI) is revenue after operating expenses, but before the mortgage, the same definition used everywhere:

NOI = annual revenue − operating expenses

Operating expenses for a short-term rental are heavier and more numerous than for a long-term one:

• Property tax, insurance (short-term policies cost more than a landlord policy), and a maintenance reserve (higher, because guest turnover is hard on a unit).
• Management as a percent of revenue (short-term co-hosting commonly runs around 20%, far above a long-term manager’s 8% to 10%).
• The booking platform’s host service fee, as a percent of revenue.
• Host-paid utilities and internet (a long-term tenant usually pays these; a host does not).
• Consumable supplies and restocking.

Cleaning is not in that list, on purpose. See the next section.

Cap rate = NOI ÷ purchase price, independent of financing. Cash-on-cash = annual cash flow ÷ cash invested, where cash flow = NOI − annual debt service and cash invested = down payment + closing costs + furnishing. Furnishing a short-term rental is a real upfront cost, so it joins the cash you have at risk. Total return over the holding period adds loan paydown and appreciation: total profit = cumulative cash flow + equity at sale − cash invested, with equity at sale = appreciated value − selling costs − remaining loan balance.

Why cleaning is left out, not subtracted

This is the trap most short-term-rental calculators fall into. The cleaning fee a guest pays is collected from the guest and paid out to the cleaner. It passes through the host; it is not the host’s income and not the host’s expense.

• Counting it as revenue and as an expense is double-counting. The two cancel, but they inflate both the top line and the cost line and distort every ratio along the way.
• Counting it as an expense only, without the matching guest payment as income, understates NOI and makes the property look worse than it is.

The clean treatment, used here, is to model neither side. If your cleaning fee does not fully cover what you pay the cleaner, fold only the shortfall into the supplies or maintenance input. That keeps NOI honest.

Cap rate vs cash-on-cash, plainly

Cap rate is the property’s return ignoring your loan: NOI divided by price. Cash-on-cash is your return as the host who financed the deal: the cash left after the mortgage, divided by the cash you actually put in, including furnishing. Same building, same cap rate, two hosts with different financing get different cash-on-cash returns. Cap rate compares properties; cash-on-cash evaluates your deal on one.

Worked example

$350,000 property, 25% down, 7% over 30 years, 3% closing costs, $20,000 furnishing, $150 average nightly rate at 65% occupancy, 1.1% tax, $2,500 insurance, 1.5% maintenance, 20% management, 3% platform fee, $350/month utilities, $150/month supplies, 3% appreciation, held 5 years, 6% selling costs:

• Annual revenue = $150 × 65% × 365 = $35,587.50.
• Operating expenses = $3,850 tax + $2,500 insurance + $5,250 maintenance + $7,117.50 management (20% of revenue) + $1,067.63 platform fee (3%) + $4,200 utilities + $1,800 supplies, about $25,785. No cleaning line.
• NOI = revenue minus those expenses = $9,802.38, a cap rate of 2.80%.
• Annual debt service on the $262,500 loan = $1,746.42/month × 12 = $20,957.04, so the annual cash flow is −$11,154.67, deeply negative.
• Cash invested = $87,500 down + $10,500 closing + $20,000 furnishing = $118,000, so cash-on-cash = −$11,154.67 ÷ $118,000 = −9.45%.
• Over 5 years, even with loan paydown and 3% appreciation, the total return is about −33.45% (roughly −7.82% annualized): the operating loss is too large to overcome.

At $150 a night and 65% occupancy this short-term rental loses money, and the cash flow is the warning. What would change it is a higher nightly rate or higher occupancy, not a tweak to the expenses. Drop occupancy further and the loss only widens. That fragility is the point of the next section.

How variable and how risky

A short-term rental is more expense-heavy and far more variable than a long-term one. Two realities to plan around:

• Occupancy and nightly rate dominate. They sit at the very top of the calculation, so a modest miss on either flows straight through to cash flow. Stress-test a lower occupancy before you buy, not your optimistic case.
• Regulation and seasonality are real risks. Cities increasingly cap, permit, or outright ban short-term rentals, and a rule change can end the business model overnight. Bookings also swing with the season, so an annual average hides months that may run at a loss. Treat the output as a planning estimate under your assumptions, not a guarantee.

What this does not model

Taxes and depreciation are excluded. Revenue is treated as a single annual figure rather than month-by-month seasonality. Cleaning is modeled as a pure pass-through. Appreciation is your assumption and drives most of the total return, so read the total-return figures as a scenario.

Sources

• U.S. Small Business Administration, on running a rental business
• Standard real-estate investment definitions: NOI and capitalization rate (Appraisal Institute convention); fixed-rate amortization and compound appreciation. Cleaning-fee pass-through reflects standard host accounting, where guest-paid cleaning offsets the cleaner’s invoice.