There is no published figure for a good return on a short-term rental. No agency sets one, Airbnb does not publish one, and the averages that circulate come from different cities, different years and different definitions of return.
What you can measure is how much of your return depends on being busy. Two numbers answer that: cash-on-cash return, which is yearly cash flow divided by the cash you put in, and the cap rate, which is yearly operating income divided by the price and ignores the loan.
What does a short-term rental return at full occupancy?
The default example in the short-term rental calculator is a $350,000 house at $375 a night, booked 65% of the time. It takes 20% down on a 30-year loan at 7%, plus $25,000 of furnishing, so $105,500 of cash goes in. Those are the example’s assumptions.
The one figure that is not an assumption is the platform fee. Airbnb’s help center says most hosts on its single-fee structure pay 15.5%, with the rest “typically pay 14% to 16%,” and that the whole fee comes out of the payout (Airbnb, service fees). The calculator uses 15.5%.
| Monthly | |
|---|---|
| Revenue | +$7,414 |
| Platform fee (15.5%) | −$1,149 |
| Management and co-host (20%) | −$1,483 |
| Cleaning | −$300 |
| Supplies | −$150 |
| Utilities | −$350 |
| Property tax | −$350 |
| Insurance | −$200 |
| Maintenance (5%) | −$370 |
| CapEx reserve (5%) | −$371 |
| Mortgage | −$1,863 |
| Cash flow | +$828 |
These are example figures, not a forecast for any market.
That is $9,933 a year on $105,500 of cash, a 9.4% cash-on-cash return, and a 9.2% cap rate. Note how much comes off the top before any property cost: the platform fee and the management fee together take $2,632 a month, more than the mortgage.
What happens to the return when bookings slip?
Occupancy moves the answer more than any other input, because revenue is the only line it touches and almost every cost stays where it is.
| Nights booked | Cash flow | Cash-on-cash | Cap rate | |
|---|---|---|---|---|
| 50% | −$105 | −1.2% | 6.0% | |
| 55% | +$206 | 2.3% | 7.1% | |
| 65% | +$828 | 9.4% | 9.2% | |
| 75% | +$1,449 | 16.5% | 11.4% |
Ten points of occupancy is worth about seven points of cash-on-cash return here. That is the whole shape of the thing: a short-term rental is not a slightly better rental, it is a business whose return rides on how full it stays.
Four of the costs above are a share of revenue: the platform fee at 15.5%, management at 20%, maintenance at 5% and the reserve at 5%. Together they take 45.5 cents of every dollar that comes in, so a dollar of extra revenue adds about 55 cents of cash flow. Cleaning, supplies, utilities, property tax, insurance and the mortgage do not move at all.
That is why the rows above climb so steeply. Going from 65% to 75% booked adds $1,141 of monthly revenue and $621 of monthly cash flow. One caution on the cleaning line: the calculator takes it as a monthly figure, so if you pay a cleaner per stay, raise it as occupancy rises.
The 50% row is the one to sit with. A house that loses $105 a month is not a disaster, but it is the year you fund out of pocket while you learn the market.
Is a cap rate the right measure for an Airbnb?
It works, with one caution. The cap rate here is 9.2%, which looks strong next to a long-term rental, and part of that gap is real: nightly rates on a furnished house beat a lease. Part of it is that the cap rate takes no account of the $25,000 of furnishing, because furnishing is not an operating cost.
So the cap rate flatters a short-term rental against a long-term one. Cash-on-cash does not, since the furnishing is in the cash you invested. The cap rate and cash-on-cash post sets out what each measure includes and when they disagree.
The other caution is the denominator. A cap rate is operating income over price, and the price you paid stops being the right number the moment the market moves.
What return should you ask for before you buy?
Set the question the other way round. Instead of asking what return is good, ask what occupancy the house needs to clear zero, then ask whether that figure is comfortably below what similar listings nearby actually achieve.
In this example the house breaks even a little above 50% booked. If comparable listings in that market run at 65%, there is 15 points of room. If they run at 55%, there is almost none, and a slow season takes the year.
That is a test you can apply to any deal without agreeing on a benchmark. The break-even occupancy post works through the arithmetic, and the Airbnb analysis post covers where to get a defensible nightly rate and occupancy figure in the first place before you lean on either.
Why do published Airbnb return figures disagree?
Because they are measuring different things. A gross yield divides revenue by price and counts no costs at all. A return quoted before the mortgage is a cap rate. A return quoted after it is cash-on-cash, and it depends entirely on how much you borrowed.
Then there are the costs that get left out. Furnishing and the fee hosts pay are the two most often missing, and both are large: in this example they are $25,000 up front and $1,149 a month. The Airbnb host fee post covers what Airbnb charges and what the fee is calculated on.
When you read a return figure anywhere, check which of those four it is and whether furnishing was counted. Two honest numbers for the same house can be six points apart.
Where to point the calculator first
Run your own deal at three occupancy rates, not one: the figure comparable listings achieve, that figure less ten points, and the break-even. The middle number is the one worth planning around, because a first year is rarely a typical year while reviews and a calendar build up.
Then check the two lines that the market sets rather than you: the nightly rate and the share of nights booked. Everything else on the table above, you control.