Using an Airbnb profit calculator to estimate the earning potential of a rental property is probably the best idea for prospective investors.
Table of Contents
- The Importance of Airbnb Calculators for Investors
- Before You Use an Airbnb Calculator
- Estimating Airbnb Rental Income in 3 Steps
- What Data Do Investors Work With?
- How Much Can I Make on Airbnb Calculator?
- The Benefits of Using an Airbnb Calculator
- Top 5 Cities That Guarantee the Highest Airbnb Profit
Going into the business of real estate investing with no previous knowledge about the actual location, current financial situation, or potential revenue could cost you a lot. This includes both professional and financial losses.
An Airbnb profit calculator reduces the risk of these professional and financial losses we speak of. It helps investors go well beyond the minimum research output. The tool does most—if not all—of the work for you. This includes accurately predicting potential profit and revenue on a vacation rental property. But first, you need to know your way around different real estate investment tools to use them properly, of course.
Luckily, that’s what we’re going to do today.
We will simplify the process of using an Airbnb income calculator to project your annual revenue and profit. Doing so means that you don’t need to stick to the “old-fashioned way” of calculating profit on a short term rental property.
The Importance of Airbnb Calculators for Investors
Before we break down the steps of using an Airbnb calculator, let’s take a few moments and mention what it means to investors like you.
First off, you get to formulate a short term rental strategy without any significant complications. By this, we mean unverified sources and unexpected losses (primarily financial). The critical issue seems to be calculating and evaluating the income property and the strategy you’re going with here.
At the mere mention of money, investors who just “entered the market” tend to become very nervous and may even question their decision-making skills. Understandably, they’re unsure about how to deal with investment money—even more so when they’re investing in long-term projects that will become rental vacation properties.
Enter Mashvisor’s Rental Property Calculator and its extensive list of features. With this tool, you are given a unique opportunity to determine the best possible rental strategy in your market of choice. This increases the likelihood of investing your money in a way that ensures good profit for you.
Should you use your own cash or opt for a mortgage? Which investment strategy works best in a particular market? How fast will you get a return on investment? Mashvisor gives you the answer to these questions and more like them.
Before You Use an Airbnb Calculator
Before you decide to invest in any rental property, and primarily in a city somewhere in the US market, you should do an external analysis.
What’s an external analysis?
In addition to the financial aspect of investing, you also need to take note of other concerns like legal issues. It simply means finding out the Airbnb regulations in the location you’re interested in.
We’re placing great emphasis on this because there have been lots of disgruntled and disappointed investors who overlooked this aspect. They are those who entered the business without knowing more about the target market and found themselves with legal issues. For example, listing Airbnb properties for rent is illegal in certain cities.
So, in order to avoid these issues, take the time to research the vacation rental regulations in the city you’re planning on investing in at the moment.
Better safe than sorry, right?
Let’s assume that you’ve found a favorable investment location. There’s still so much work to do. It would be best if you were a bit more thorough. With the help of our Airbnb Estimator, you can find a neighborhood that will give you a good profit. Using filters like listing price can help you narrow down your property search, too.
Even if the variables change from market to market, you should make sure that your vacation rental investment is in a profitable location.
Estimating Airbnb Rental Income in 3 Steps
Here are the steps that’ll help you with your Airbnb estimate.
1. Calculate Cash Flow
The first—and most crucial—step is determining your cash flow. In essence, this is the money that you will receive every month as an investor in the property. To get this, you’ll be taking into account all types of expenses that you will have to cover first. For this step, an Airbnb fee calculator will be helpful.
Once you’ve entered all the expenses, you will be able to estimate your gross profit. Based on the result, you can decide whether it is worth pursuing or not.
Here are the formulas that will help you in calculating your cash flow:
Number of Days Airbnb Is Booked = Days in the Month x Airbnb Occupancy Rate
Gross Rental Income = Airbnb Daily Rate x Number of Days Airbnb Is Booked
2. Use the Cap Rate Formula
The next thing you need to do is use the capitalization rate formula. The cap rate formula is especially important in determining if you will get the anticipated profit in the long run.
You may be focused on developing a solid short term rental strategy here—but you shouldn’t neglect the long-term gains that will actually keep you in the Airbnb business.
Here’s the formula you’re going to use:
Cap Rate = (Net Operating Income / Property Value) x 100
3. Conduct a Comparative Market Analysis
Also known as CMA, a comparative market analysis gives investors 99% of the data necessary for accurate profit projections. It essentially involves using an Airbnb calculator, estimating your rental income, and running rental comps.
Rental comps play a significant role here because they’re based on the three most important factors within the Airbnb rental calculator:
- Property value
- Occupancy rate
- Average daily rate
Don’t worry! We will analyze all the above parameters and explain the actual process of using our investment tool for better understanding.
What Data Do Investors Work With?
It’s time to focus on the most important part of the guide and answer the following question:
What does an Airbnb analysis provide investors with?
Airbnb Income Calculator: The Estimates
Mashvisor’s Airbnb income calculator—also known as a rental property calculator—is an investment tool that uses available Airbnb data to analyze the potential profitability of a property they’re interested in.
As for the accuracy of the data, don’t fret. It comes straight from the Airbnb website, and it’s highly accurate, which should give investors greater confidence.
Here are the estimates you’ll get by using the said calculator:
Airbnb Occupancy Rate
The occupancy rate represents the number of days your property is occupied compared to the total number of days it is listed on the platform.
If you’re considering investing in short term rental properties, you should know that their occupancy rates vary by season. This simply means that there are months in a year when your property gets booked a lot and other periods when bookings are low.
You should be able to calculate the rental income by taking into account the Airbnb occupancy rate. The higher the occupancy rate, the better the revenue your rental property will generate in a season.
Airbnb Rental Income
Estimating rental income is one of the first things investors should know. This is important since it will help determine how fast you can get your return on investment.
What investors often overlook are off-market investment opportunities. Mashvisor helps overcome this issue by analyzing any on- or off-market property. You just need to enter the exact address of your desired property and our calculator will provide an accurate estimate of potential rental income.
Related: What Is a Good Cash on Cash Return?
Airbnb Rental Expenses
You need to spend some money to make some money. That’s real estate investing 101. So, you can’t avoid spending money on your property to some extent.
Our Airbnb estimator will help you prepare for the inevitable costs, mainly:
One-Time Startup Costs
- Closing costs
- Total repair costs
- Furniture and appliances
- Property tax
- Rental income tax
- Property management
- HOA dues
- Property maintenance
- Cleaning fees
Airbnb Cash Flow
For rental properties, Airbnb cash flow is the difference between what you receive and spend in a month. It’s also one of the fundamental indicators of the profitability of your investment property. Of course, every investor wants to have a positive cash flow.
A positive cash flow will help you generate a good income and help maintain a residential vacation property.
Airbnb Cap Rate
The Airbnb cap rate is a metric that investors use to calculate profitability for a vacation rental without considering financing options. You should know that calculating the cap rate on multiple properties can be time-consuming—but you can get these estimates faster using our Airbnb calculator.
Airbnb Cash on Cash Return
Unlike the cap rate, the cash on cash return method considers financing on a purchase.
Suppose you’re considering investing in a real estate property by taking out a loan. In that case, our Airbnb calculator will give you the most accurate estimate of your cash on cash return.
By calculating this, you’ll know whether your investment venture will have a positive return or not. Knowing what kind of cash on cash return a market offers will help you make wiser investment decisions.
Running Airbnb comps means that you’ll have to conduct extensive market research on similar rental properties.
The easiest way to locate rental comps near you is by using Mashvisor. You’ll be able to see a list of similar active Airbnb rentals and how these properties perform in terms of nightly rates, occupancy rates, and the like.
Real estate investing means putting real money into the project. You undoubtedly understand that this is not easy—especially when you have limited resources and work on a tight budget.
Mashvisor’s Airbnb Estimator includes a built-in mortgage calculator that gives investors better insight into their actual financial situation. Knowing your financial status will allow you to factor in financing options accordingly. You wouldn’t want to invest both time and money in a strategy that will not generate a positive cash flow.
How Much Can I Make on Airbnb Calculator?
The answer to this question mostly depends on the location you are investing in. Of course, in order to ensure a good return on investment, you will need to conduct due diligence. Part of it is taking advantage of all the features of your Airbnb income calculator.
Suppose you succeed in establishing a strong short term rental strategy. Here is an example of a successful investment venture:
- You charge $150 per night.
- You achieve a 70% occupancy rate.
- Your cash on cash return rate is at least 10%.
If you get these three in your location, your gross income can be as much as $3,150 per month or $37,800 a year.
The Benefits of Using an Airbnb Calculator
We’ve already clarified how to use an Airbnb income calculator and how to make the most out of your investment venture. Now, it’s time to give you a few key reasons why you should use Mashvisor’s Airbnb calculator.
For one, it’s a great opportunity for beginner investors to check if Airbnb hosting is a good idea in their desired area.
Although its primary focus is on investors, this tool helps owners decide whether to convert their homes into traditional or short term rental properties.
The Airbnb profit calculator, being a professional-grade investment tool, allows property investors and managers to evaluate the property’s value and calculate the ROI.
Lastly, rental arbitrage investors can make use of this tool, as well. Using the features of the Airbnb profit calculator can help them evaluate the difference in revenue generated between short- and long-term rentals.
Top 5 Cities That Guarantee the Highest Airbnb Profit
If you’re a vacation rental investor and you want to make some serious profit on your short term rental property, you need to look for vacation rental houses in the right markets.
Real estate website Mashvisor’s latest data indicates that these are the top cities to make a good profit on a vacation rental property. This list is sorted based on cash on cash return, from the highest to the lowest:
1. Scranton PA
- Median Property Price: $192,619
- Average Price per Square Foot: $102
- Days on Market: 80
- Monthly Airbnb Rental Income: $2,522
- Airbnb Cash on Cash Return: 9.67%
- Airbnb Cap Rate: 10.31%
- Airbnb Daily Rate: $113
- Airbnb Occupancy Rate: 76%
- Walk Score: 24
2. Arlington Heights IL
- Median Property Price: $394,305
- Average Price per Square Foot: $244
- Days on Market: 40
- Monthly Airbnb Rental Income: $2,543
- Airbnb Cash on Cash Return: 7.76%
- Airbnb Cap Rate: 8.22%
- Airbnb Daily Rate: $121
- Airbnb Occupancy Rate: 78%
- Walk Score: 82
3. Raeford NC
- Median Property Price: $300,829
- Average Price per Square Foot: $153
- Days on Market: 61
- Monthly Airbnb Rental Income: $2,995
- Airbnb Cash on Cash Return: 7.76%
- Airbnb Cap Rate: 8.02%
- Airbnb Daily Rate: $122
- Airbnb Occupancy Rate: 65%
- Walk Score: 61
4. South Lyon MI
- Median Property Price: $502,374
- Average Price per Square Foot: $225
- Days on Market: 171
- Monthly Airbnb Rental Income: $2,824
- Airbnb Cash on Cash Return: 7.65%
- Airbnb Cap Rate: 7.99%
- Airbnb Daily Rate: $163
- Airbnb Occupancy Rate: 51%
- Walk Score: 75
5. Deland FL
- Median Property Price: $388,216
- Average Price per Square Foot: $210
- Days on Market: 52
- Monthly Airbnb Rental Income: $4,440
- Airbnb Cash on Cash Return: 7.61%
- Airbnb Cap Rate: 7.79%
- Airbnb Daily Rate: $149
- Airbnb Occupancy Rate: 70%
- Walk Score: 2
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.
The essential thing you should take from this guide is that using an Airbnb calculator is a time-saving strategy that provides more accurate results. This makes it a lot better than the “old-fashioned” ways of researching available rental properties. Mashvisor’s Airbnb calculator is specifically tailored for the US housing market, which is perhaps its biggest advantage.
What’s more, using an Airbnb profit calculator to estimate profitability and revenue is as easy as ABC. All you have to do is sign up for our services and all of its features are at your disposal. You can filter the ones you’re most interested in, too. Within minutes, you’ll be able to calculate the occupancy rate, rental expenses, and potential rental income—all the numbers that matter.
Mashvisor is here to answer your questions regarding real estate investing and help you make a well-calculated decision.