What is an Airbnb profitability calculator?
An Airbnb profitability calculator is the same as the investment property calculator or rental property calculator. It is a tool real estate investors, in general, use to calculate the return on their investment properties. This tool, however, is especially important when buying an Airbnb rental property. An investor only needs to provide all the costs that are associated with his/her short-term rental property and the calculator will do the rest.
For this purpose, an Airbnb calculator uses past real estate analytics as well as real estate comps in order to determine future market trends for short-term rentals. Real estate investors also use it to determine the most profitable locations for Airbnb rentals.
What does an Airbnb profitability calculator tell you?
The Airbnb profitability calculator calculates the basic real estate metrics. These metrics are the soul of every investment regardless of the rental strategy. Here are the most important metrics that you should pay attention to:
Cash flow: The cash flow of a property is basically the rent minus the property expenses. The number you are left with is the money you get to keep for yourself. The cash flow is important in order to determine whether a real estate property has a rental potential or not. Therefore, if a rental property calculator is showing that the property is not generating positive cash flow, you might want to reconsider this particular property.
Capitalization rate (cap rate): It is another metric that the Airbnb profitability calculator indicates. The cap rate is the ratio you get by dividing the net operating income by the property’s market value. If you get a cap rate of 10% or higher, it is an indicator of a worthwhile investment property. However, you should keep in mind that the cap rate alone is not the ultimate way to spot an investment property with a good return on investment. You will need to figure out other metrics along with the cap rate to find the best Airbnb rental properties.
Rental income: The potential rental income is also calculated by the Airbnb profitability calculator. That is a good way to tell right away if you want to invest in a certain property. It can also help you compare different investment properties and choose the best. Keep in mind that this does not mean that the result you get is a given. The Airbnb profitability calculator only produces estimated figures based on which you can decide for yourself.
Airbnb occupancy rate: This is a very important indicator of an Airbnb rental property. This indicates the ratio of time in which the property is occupied compared to the time when it is vacant. If you have low occupancy rates, then you might want to look at the reasons causing it. Factors like location, marketing, and Airbnb guest reviews are important to keep high occupancy rates. Therefore, you need to pay special attention to them. We are going to go more in depth with the average occupancy rate of an Airbnb rental as well as the factors affecting it in the next section.
What is the average occupancy rate of Airbnb?
It is hard to give an accurate figure for this question. However, there are a few factors that determine the occupancy rate of short-term rentals. You should keep in mind that the occupancy rate will also determine how much money you can make on Airbnb. So, you will need to pay attention to the following:
First, location: The location of a property is the vital factor that determines occupancy rates. Logically, an Airbnb property on the beach is most likely to have higher occupancy rate than a property located in a rural area. Airbnb uses previous Airbnb occupancy data associated with a certain location. Based on that, it will present to you with the estimated occupancy rate for properties located in that area.
Second, the way you present your property: This step comes after you have purchased your Airbnb rental property. When listing it for renting out, you must make sure you present it in the right way. During the listing process, you will have the description section as well as the photo section. Make sure you make it appealing to Airbnb guests by taking professional photos. You should also choose the right words to make it more like an experience than just a regular stay. For example, instead of saying “The property is located on the beach”, you can say “Enjoy the wonderful view of the ocean, etc”. Believe us, this is a very effective way to increase your Airbnb occupancy rate.
Last but not least, maintaining positive guest reviews: Your Airbnb occupancy rate depends on the guest reviews. You can manage to maintain positive reviews by showing hospitality and good treatment.
How can an Airbnb profitability calculator help grow your investment business?
As we already mentioned, an Airbnb profitability calculator will calculate the most important real estate metrics for your rental property. So, when real estate investors have an estimated cash flow for their property, it will be easier for them to determine whether they will be able to grow their business and how soon.
What factors does the Airbnb rental calculator take into consideration?
You must know that there are a few factors that the calculator takes into consideration. First of all, the location of your property plays a major role in this. Your investment property’s location affects your property’s potential in terms of cap rate and occupancy rates. Another important factor is the season. There are seasons when the demand for Airbnb properties is higher than in other seasons. Amenities are another major aspect. Your properties pricing also depends on the amenities available for guests.
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