How to Calculate Short-Term Rental Profit: Costs, Fees, Vacancies

How to calculate profit from a short‑term rental — quick overview ✅

Short‑term rentals can be lucrative when you track real cash flow, not just gross bookings. The key is to include platform fees, cleaning, utilities, maintenance, taxes, and vacancies. This guide gives you a clear formula, a sample calculation, and practical ways to improve profitability. 🧾

Key metrics to collect first

• Gross revenue: average nightly rate × nights actually rented.
• Occupancy rate: share of available nights that are booked.
• Platform commissions, cleaning per stay, utilities, property management fees, taxes.
• Furniture/fixture depreciation — allocated monthly.

Simple formula for net profit (cash flow) 🧮

1. Monthly gross revenue = Average nightly rate × days in month × occupancy rate.
2. Subtract variable costs: platform fees (percentage of booking), cleaning per turnover, consumables.
3. Subtract fixed monthly costs: utilities, internet, insurance, taxes, property management (if used).
4. Add furniture/fixture depreciation: cost ÷ expected useful life in months.
5. Net cash flow = Gross revenue − (all above expenses).

Concise formula:
Net profit = Gross revenue − (Commissions + Cleaning + Utilities + Management + Taxes + Depreciation + Repair reserve)

Example calculation (for illustration only)

Use realistic ranges rather than single months: occupancy may range widely by season. Typical assumptions used for planning:

• Occupancy: can vary from low to high season.
• Platform fee: often quoted as a percent of booking.
• Cleaning: per turnaround and depends on length of stay.

Model the whole year to avoid overestimating based on peak months.

Account for vacancies and seasonality ❄️☀️

• Forecast occupancy by month and set prices for low season to reduce empty nights.
• Keep a repair and vacancy reserve equal to several weeks of income to cover unexpected gaps.
• Use a conservative annual average occupancy when calculating ROI.

Hidden costs and fees to watch for

• Platform commissions and possible payout fees.
• Cleaning and linen costs that rise with more turnovers.
• Utilities included in listings — these become fixed monthly costs.
• Local taxes and registration costs — check local regulations and include them in your model.

Financing: consider mortgage separately

• Separate operating cash flow from financing (mortgage) cash flow.
• Investors should calculate cash‑on‑cash return and net yield on invested capital.
• If using a mortgage, verify the net rental income covers payments and still leaves a positive cash flow.

How to increase profit — practical actions 🚀

• Use dynamic pricing tools to adjust rates by demand.
• Reduce cleaning costs without hurting quality (standardize, negotiate contracts).
• Improve listing photos and guest experience to increase average rate and occupancy.
• Invest in durable furniture to reduce frequency of replacements.

Monthly tracking — what to monitor

• Revenue and expenses by category.
• Occupancy and average nightly rate.
• Reserve fund balance and maintenance spending.
• Year‑on‑year performance and adjusted pricing strategy.

Quick pre‑purchase checklist for investors

• Verify local rules and limitations on short‑term rentals.
• Assess neighborhood demand and seasonality.
• Build a 12‑month occupancy and expense model.
• Calculate ROI with depreciation and taxes included.

If you'd like, we can run a profitability model for a specific property with your actual numbers. Contact BuyHome to get help selecting the right property and forecasting returns. 🏡

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