Put a house on Airbnb and the monthly income can come to more than twice the rent. On the house below, a good year brings in $6,388 a month against a $2,400 lease. What matters is how much of each is left once the bills are paid.
What changes when a house goes from a lease to Airbnb?
A tenant pays rent, usually covers the utilities, and runs their own household. Guests pay by the night and expect the place ready for them every time. Listing the house on Airbnb adds these costs:
- Airbnb’s fee. Its help center says most hosts on its single fee pay 15.5%, taken from the nightly price and any fees you charge, the cleaning fee included.
- A co-host, if you don’t want to answer guest messages and handle check-ins yourself. This example pays one 20% of bookings.
- Cleaning and restocking after every stay. Here that’s $125 a stay, with stays averaging three nights.
- Utilities and internet, which a tenant would normally pay.
- Furniture, linens and a full kitchen, bought before the first guest arrives. This example budgets $20,000.
- Insurance that covers paying guests. This example budgets $2,400 a year, against $1,404 for a landlord policy.
One cost changes shape instead of going away. A lease loses money in the weeks between tenants. An Airbnb loses it on every night nobody books. That’s why the share of nights that get booked, which hosts call occupancy, takes the place of the empty-months line.
One $250,000 house, leased and on Airbnb
Both versions buy the house the same way: $250,000 with 20% down on a 30-year loan at 7%, and $3,000 a year in property taxes. The lease brings in $2,400 a month. The Airbnb averages $300 a night, counting the cleaning fee guests pay, and here it’s booked 70% of the year, about 256 nights.
| Lease | Airbnb, 70% booked | |
|---|---|---|
| Rent or booking income | $2,400 | $6,388 |
| Empty months (5% of rent) | −$120 | – |
| Airbnb’s fee (15.5%) | – | −$990 |
| Property manager (10%) or co-host (20%) | −$240 | −$1,278 |
| Repairs and big repairs (10%) | −$240 | −$639 |
| Cleaning and restocking | – | −$887 |
| Utilities | – | −$350 |
| Property taxes and insurance | −$367 | −$450 |
| Mortgage | −$1,331 | −$1,331 |
| Cash flow each month | +$102 | +$463 |
These are example figures, not a forecast for any market.
In a year like that, the Airbnb clears $463 a month and the lease clears $102, so the Airbnb is ahead by $361. How often you’d get a year like that is what decides it.
How often does the Airbnb have to be booked to beat the lease?
Rent arrives whether or not you have a good summer. Airbnb income moves with every booking. Here’s the same house at six booking rates, set against the lease’s $102.
| Nights a year | Cash flow | Vs. the lease | |
|---|---|---|---|
| 50% booked | 183 | −$278 | −$380 |
| 55% booked | 201 | −$92 | −$194 |
| 60% booked | 219 | +$93 | −$9 |
| 65% booked | 237 | +$278 | +$176 |
| 70% booked | 256 | +$463 | +$361 |
| 75% booked | 274 | +$649 | +$547 |
The Airbnb catches the lease at about 60% booked, roughly 220 nights a year. Below about 57%, some 210 nights, it doesn’t even cover its own costs, and you’d be paying into it every month.
A yearly average also hides the calendar. Sixty percent across a year can mean a full summer and an empty February, and the mortgage is due in both. So the number to pin down is the rate similar listings near this house book across a whole year. Be wary of estimates built from nightly asking prices rather than real bookings.
What does the extra $20,000 buy?
The lease needs $57,500 in cash to start: the down payment plus closing costs. The Airbnb needs $77,500, because the furniture comes first.
At 70% booked, the Airbnb’s extra $361 a month takes about four and a half years to earn that $20,000 back. At 65% booked it’s $176 a month, and more than nine years. Count the furniture as part of your cash and the Airbnb needs about 223 nights a year, not 220, to match the lease’s cash-on-cash return. That’s the year’s cash flow divided by the cash you put in.
There’s a way to make the Airbnb look better, and it has a catch. Do the co-host’s work yourself and the Airbnb catches the lease at about 40% booked, 147 nights a year. At 70% it would clear $1,741 a month. But $1,278 of that is the co-host’s pay: guest messages at odd hours, check-ins, reviews, restocking and chasing cleaners. That’s a part-time job, and a deal that only works when your time is free is the last of these seven rental analysis mistakes.
What can rule out the Airbnb before the numbers do?
Three checks come before any spreadsheet.
- Local rules. Many cities and homeowners associations limit short-term rentals, cap the nights a year, or require a permit. Find the rule for this address first.
- Insurance. The National Association of Insurance Commissioners warns that most homeowners and dwelling policies aren’t designed to cover accidents from short-term rentals. Ask an agent to quote a policy for paying guests at this address.
- Taxes. The IRS says that if you provide substantial services mainly for your guests’ convenience, such as regular cleaning or changing linens, you report the income on Schedule C, the form for a business, instead of Schedule E, the one for rental income (Publication 527). You may also owe self-employment tax on it. Whether a short-term rental crosses that line depends on what you provide, so ask a tax professional before you count on the after-tax number.
So which earns more?
On this house it comes down to one number. Below about 220 booked nights a year, the lease earns more, with less cash in and far less work. Above it, the Airbnb pulls ahead, but slowly enough that the furniture takes years to pay for itself.
Your house will have its own crossing point. Run the lease in the rental calculator, then raise the booking rate in the short-term rental calculator until its cash flow passes the lease’s. To find the rate where an Airbnb covers its own costs, see what occupancy an Airbnb needs to break even.