When it comes to making money in short-term rentals, the Airbnb profit calculator is the answer. Learn all about this outstanding tool with our guide.
Of course, every real estate investor wants to succeed in his/her short-term rentals business. However, there is a procedure for success that every Airbnb real estate investor should follow. Therefore, if you are thinking that Airbnb rentals are only about making the right decisions, you are wrong. Success also requires that you use the right tools in your business. That is exactly where the Airbnb profit calculator comes into play. So, what is an Airbnb profit calculator? What do you use it for? How do you determine how much money you can make on Airbnb using it? We are going to answer these questions and more, so keep reading!
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The Airbnb Profit Calculator: What is it?
You have probably heard of the investment property calculator that long-term rental investors use when buying rental properties. That is exactly what an Airbnb profit calculator is. It is an online tool that allows you to calculate the return on investment a property can generate on an annual basis. In short, you calculate the rental potential of a rental property you intend to invest in. Not only that but you also use it to keep up with your property’s performance after you have rented it out.
The Airbnb Profit Calculator: What does it calculate?
Investing in Airbnb rentals requires that you get involved in math. This is due to the numbers of guests you will have throughout the year. Thus, dealing with so many numbers manually gets tough over time, especially, if you have multiple Airbnb rental properties in your portfolio. Therefore, the Airbnb profit calculator is the key to handling all these numbers. Here is what you can use it for:
#1. You use the Airbnb profit calculator to calculate the cash on cash return:
The Cash on Cash Return (CoC) is a very important metric in real estate investing. It is one of the first figures you will have to deal with when buying Airbnb investment properties. This real estate metric indicates the return on the cash you have actually invested. Therefore, the first thing it takes into consideration is the Airbnb rental income you receive or expect to receive. The more you invest in cash, the more you will have in return.
#2. You use the Airbnb profit calculator to calculate the capitalization rate:
The capitalization rate is another metric used to estimate the return on investment of an investment property. You simply take your annual Airbnb rental income and divide it by the market value of the property. Sure enough, with this real estate metric, unlike the CoC, you do the calculations regardless of the financing strategy you used to fund the business. Therefore, you will have to insert all the money involved be it your own or even borrowed.
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#3. You use the Airbnb profit calculator to determine whether you are making a positive cash flow:
The whole purpose of investing in Airbnb rentals is generating a positive cash flow. A positive cash flow means that you are making a margin of profit out of your business. So, using the Airbnb profit calculator will help you determine the amount of cash flow you are making. Not only that but it also will help you detect any problems causing a negative cash flow so that you can work them out.
How Does Using the Airbnb Profit Calculator Affect Your Short-term Rentals Business?
Using the Airbnb profit calculator has a huge impact on your business investing in Airbnb rentals. It does not only affect your choice of Airbnb investment property but also the Airbnb rental income you receive. Therefore, here are the most important aspects of your investment business that get affected by this great tool:
#1. Your rental income:
Your number one purpose of investing in short-term rentals is the Airbnb rental income. This tool, however, is the answer to how much money you can make with Airbnb. You could determine your Airbnb rental income in two ways:
First, you can get an idea of a potential rental income before buying the property. This means that you should examine the rental property before buying it. The Airbnb profit calculator will help you with the numbers as well as the real estate market analysis which has a huge impact on your expected rental income.
Second, you will be able to determine how much you can charge for renting your Airbnb investment property. Of course, the amount of rent you should charge is based on the data you get after examining the rental potential of your Airbnb property. In other words, when you perform investment property analysis as well as a real estate market analysis, you will get a better understanding of the figures as well as the location of your property. Therefore, you will have a sense of what your rental property’s worth is in the real estate market.
Related: Increase Your Airbnb Rental Income in 9 Creative Ways
#2. Choosing the location:
In real estate investing, location is everything regardless of what investment strategies you work with. So, in order to determine the most profitable locations for Airbnb rentals, you must consider the Airbnb profit calculator. It will examine the property of your choice and let you know whether a location is profitable or not based on accurate real estate comps.
#3. Selling your property:
Using the Airbnb profit calculator on a regular basis is very important. In order for you to be able to keep up with the business, you must check on your property’s performance every once in a while. Using the Airbnb profit calculator, however, will save you the time and effort in doing so. In addition, it will also let you know when it is time to sell the property. Sometimes, a property’s performance goes down due to expected or unexpected circumstances. In this case, this tool will let you know when it’s time to sell the property in order to mitigate the risks of any further losses.
#4. Airbnb occupancy rate:
The Airbnb occupancy rate is very important. Of course, if you are wondering what is the average occupancy rate of Airbnb, then there is no accurate figure. The only answer we could give you though, the higher the better. For that purpose, you can insert all your data in the Airbnb profit calculator and it will give you an accurate occupancy rate that you should sustain. The results you get are based on previous Airbnb occupancy data and has a great impact on your Airbnb rental income.
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