Whitney Hansen | Money Coaching

Financial Coaching for High Earning Women

  • Whitney Hansen | Money Coaching
  • About
  • Blog
  • Resources
    • Whitney’s Recommendations
    • Join the FB Community
    • Courses
    • Free Workshops
  • Podcast
  • Work With Me
  • Contact

How I quickly run a short term rental analysis to see if it might be profitable

Let me be the first to admit, I’m no expert when it comes to running numbers for real estate properties.

I’ve been practicing running short term rental numbers for properties for the past couple of years and wanted to share how to do that, as well as some of my favorite resources to help me with that process.

There are two major factors that play a role in the success of a short term rental:

  1. Occupancy rate
  2. Marketability (uniqueness of property)

What is a short term rental?

If you are unfamiliar with short term rentals, these are homes, spare bedroom, Glamping sites, RVs, or even raw land rented as a campground. They generally are furnished and designed for short stays. Think hotel style.

While they tend to be on a short term basis, they certainly differ than long term rentals.

Which factors play the biggest role in success for a short term rental?

Predicting the occupancy rate of a property can be super tough. The occupancy rate is a fancy way of saying how often is a place rented.

This number used to be hard to come by and in all fairness, it still kind of is, but there are tools and tricks to helping you get a rough idea of an occupancy rate by using Airdna.

How to estimate occupancy rate of a short term rental?

Airdna is probably my favorite website ever for analyzing a market. I first discovered them through “Stay Here” (a show on Netflix). The show was a fixer upper style where an interior designer and business person would go into someone’s short term rental and help them make it more attractive.

In true nerd spirit, I loved the way they calculated the revenue potential for properties, but couldn’t figure out how they were getting their occupancy rate. After doing some research and lots of subreddits, I found the software they used– Airdna.

Airdna used to only available to hotels. They have since expanded/rebranded and give you a rough idea of how an area might do. Here’s a screenshot of the free version and what it looks like for my city, Boise, Idaho.

I like to take note of the rental demand (which tells you how popular a place might be), the average daily rate (even though I wouldn’t necessarily price based on that), the occupancy rate, and the revenue.

The occupancy rate (OR) is the true gem here. It tells you a rough idea of how much you might be able to plan for based on all the rentals on Airbnb and VRBO.

I then take that OR and plug it into my formulas, which you’ll see below. ☺️

How to conduct market research on a short term rental

The next step is finding similar competitors that are doing well and not well in the area. I pull up Airbnb and start looking at all the properties. When scrolling, I’m looking at the ones with a lot of reviews, SuperHost properties, and properties over 4 stars.

Specifically I look at:

  1. Reviews
  2. Pictures (obviously pictures sell)
  3. Amenities
  4. Marketing Copy
  5. Availability

I will then click on a property with a lot of reviews and read through them to see:

  • Were people were traveling through the area for something specific and stopped there? (this is helpful if you considering investing in a property outside of your area and want to see the attractions/way guests are using the property)
  • When did the property first become a rental? (estimated by looking at their earliest reviews)
  • What features did guests seem to appreciate most?
  • Any big complaints?

The next piece I look at is the calendar.

What the availability like?

This is really hard to tell if a place is super booked, or if the hosts/property owners have the calendar blocked off for personal use.

So I will save a few properties in a “Wish List” and look at this month and next month’s calendar a few times a month. This gives me a rough idea of the rental demand.

What numbers I use to calculate potential success of a short term rental?

This might be super intimidating, so please bear with me, but this is a pretend scenario of how I would decide if a property might be profitable.

First I start with some basics: how much does the property costs (this would include closing costs), how much furnishing are and how much you night charge for the nightly rate. *See pic below for info*

Then I start to get nerdy. Keep in mind this is just a sample. Most properties will have expenses unique to them and to the area (ie. snow removal, lawn maintenance, etc). I will also adjust the month rentable if the property is literally not accessible 4 months out of the year due to snow.

I look at 3 scenarios. The best, mid, and worst case. The 80%, 60% and 50% are just example occupancy rates. I would use the Airdna occupancy rate for my mid-case scenario.

A couple of points to mention from the expenses section: the customer supplies I take the total number of stays and times that by $10 to estimate how much a guest’s water, TP, snacks, and toiletries will cost. I also factor in a repairs and maintenance budget and factor in a Misc. amount because something will come up. 😂

Note: a cleaning fee of $0. This is because majority of customers will pay extra for a cleaning fee through Airbnb, so you aren’t paying a cleaner from your own pocket.

Total potential revenue is calculated by taking your nightly rate x total days rented.

This doesn’t take into consideration personal income taxes, because that is a whole other can of worms.

If the property is profitable with my worst case scenario, I will look into it more seriously.

Again these are made up numbers, so you’ll need to run and analyze them for your own area and property.

But this is how I quickly run some analysis on a short term rental property to see if it might be a good deal.

I hope this was helpful for you or at the very least, gave you some points to ponder!

«
»

Blog, Entrepreneur, Money

Looking for something?

  • Facebook
  • Instagram
  • Pinterest
  • Twitter
  • YouTube

The Money Nerds Podcast! (And got a trophy to prove it!)

8th Annual Plutus Awards Winner

Latest Posts

  • Small changes that yield big results in your finances
  • What it Takes to Build Treehouses | INTERVIEW with Django Kroner from The Canopy Crew
  • Biweekly Furniture Flip Report: $435 PROFIT
  • How I quickly run a short term rental analysis to see if it might be profitable
  • How to deal with financial jealousy
  • How to build a $250,000 woodworking business from your garage

Looking for something?

  • Blog
  • Customized Coaching
  • Free Workshops
  • Privacy Policy

* Let’s get social *

whitney_hansen_co

Whitney Hansen | Money Coach
....As I clear my Amazon cart.😂 I’m always t ....As I clear my Amazon cart.😂

I’m always trying to find a balance between buying things I need and things I want.

💵 One of the ways I prevent myself from buying stuff that doesn’t make my life better is through the “24 think about it rule.”

It’s simple.

⏱If you see something you want and haven’t currently budgeted for- wait for 24 hours.

If you still want it after that and can rearrange your budget to make it work— do it!

What rules do you use to help you minimize blowing all your money on wants?
Hey, I warned you in advance that my feed might lo Hey, I warned you in advance that my feed might look a little funky over the next couple of months.😆

We officially got started on our project @cascadedome!

True story- I didn’t expect to be able to start doing any work until the snow melted in May-ish.

We drove up to check on the snow levels Saturday, saw that our lot was free of snow and came home to start getting our tools lined up.

The next day we started:
✖️digging holes for the deck
✖️leveling out the fire pit area
✖️getting a priority plan in place

(Huge thanks to my mom for her help. Don’t know what I’d do without her!)

This has been a dream of mine for a long time, so I am especially excited to have this project under way.

I think these massive granite boulders and sloped lot scared a lot of buyers away, but it fits for our vision perfectly.
Interested in short term rentals? Then head over Interested in short term rentals?

Then head over to WhitneyHansen.com and read this post.

I’m sharing my FAVORITE resources and tools to help you quickly see what the profitability might be on a STR.

Comment below if you’d like me to create a video walking through a property analysis and giving you the highlights.
The days I make an investment purchase are some of The days I make an investment purchase are some of my favvvvorites! 🤓

In January I started a challenge to help me invest more.

Here’s how I’m doing it:

✅ Set up a savings account with Qapital and used the 52 week savings challenge and roundup rules to gamify my savings.

✅Transfer from my Qapital account to my Vanguard brokerage account when I have $250 saved.

✅Invest in an ETF (currently, I’m liking Vanguards Total Stock Market ETF for my portfolio)

That’s it! It’s been fun, I’ve been investing more, and it’s basically working on autopilot.

***NOTE: I invest based on my own risk tolerance, overall portfolio, and financial goals. This post is for educational purposes only. You’ve got to do your own research and invest based on your life.
Load More... Follow on Instagram

Disclaimer

I do, on occasion, use affiliate links. This means that I could receive a small commission if you take advantage of the products or services I recommend throughout this site. My promise to you is to only recommend products that I would use myself or am considering using myself. :) Also, I work my booty off to provide unique content. Please remember that all content on this site is copyrighted. Quote away, but always link back to this site. © 2020. WhitneyHansen.com. Whitney Hansen is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and link to Amazon.com.

Copyright © 2021 · Darling theme by Restored 316

© 2018. Whitney Hansen. All Rights Reserved.