Calculating Airbnb rental estimate is essential before investing. Fortunately, the process isn’t as complicated as many investors would think.
Airbnb property investments saw a surge in popularity in the past few years. Among the many benefits they offer real estate investors, higher income potential must be the most influential.
Table of Contents
- Why Should You Invest in Airbnb?
- 6 Metrics You Need to Know to Do an Airbnb Rental Estimate
- How to Calculate Airbnb Rental Estimate
- 5 Cities With the Highest Airbnb Rental Income
Many investors are attracted by the possibility of maximizing their rental income since they are free to set their desired nightly rate. Airbnb rentals allow you to host as many guests as possible in one year, offering you lots of opportunities to make money. On the other hand, regarding long-term rental properties, a long-term tenant stays in your property for six months, one year, or more,
However, just investing in any Airbnb isn’t an assurance that you’ll make substantial profits. You must analyze your investment well to ascertain that it makes financial sense.
In this post, we’re going to look at how you can analyze your Airbnb rental estimate. Keep reading to find out which tools can help you in this process.
Why Should You Invest in Airbnb?
The past few years were unpredictable for the real estate investment scene. First came the COVID-19 pandemic, which brought many industries to their knees. The Airbnb rental industry is heavily reliant on the travel and hospitality sectors. With the world under lockdown, Airbnb investors remained confused about what the future could offer them.
Just as things were beginning to cool down and return to normal, the economy began showing signs of a major slowdown. With mortgage interest rates through the roof, many financial and economic experts predicted that we were experiencing the 2008 financial crisis all over again.
However, things are starting to stabilize now. The coming year is predicted to offer a lot of opportunities for real estate investors. It is a positive sign for people looking to invest in real estate.
Here’s why we think you should invest in Airbnb rentals in the coming year:
Recovery in the Airbnb Sector
While the effects of the pandemic were quite dire on the vacation rental industry, the slowdown wasn’t extended. The market didn’t take long before it started recovering. The recovery is expected to continue for the remainder of 2022 and well into the new year.
By mid-2023, you can expect Airbnb rentals to re-establish themselves as the more profitable rental strategy compared to long-term rentals.
Recovery in the Travel Sector
Airbnb’s profitability is directly intertwined with the travel industry. If people aren’t traveling, you won’t attract enough guests to pay your property bills and remain with sufficient profits.
According to US Travel’s updated international travel forecast, travel forecasts show that the US is expected to receive 65 million arrivals from international travel. Also, Americans spend at least $200 daily on travel alone. In April 2022, the monthly travel expenditure for Americans surpassed the April 2019 expenditure by 3%.
The above figures are a good sign that people are willing to continue traveling despite the inflation. Moreover, travel rates are expected to continue increasing. It can be the main reason why you should invest in Airbnb to host vacationers.
Rising Popularity in Remote Work
One of the effects of the pandemic was the rise in remote jobs. Companies realized they didn’t need to keep their workers in their offices.
Professionals can work from anywhere as long as they can get the work done. Workers can travel anywhere as they look for a change in the environment, helping boost their productivity.
It presented a unique opportunity for those in the Airbnb industry. As an Airbnb host, you can choose to target remote workers by offering monthly stays. Monthly stays refer to when an Airbnb guest books your short-term rental for a minimum of 28 days. Remote workers often book monthly stays.
You can choose to invest in Airbnb to host remote workers and benefit from the income consistency that such arrangements offer.
Growing Global Interest in Airbnb Industry
There’s enough proof that global interest in the Airbnb industry is growing. In the second quarter of 2022, Airbnb’s revenue exceeded Q2 2019’s revenue by 78%. Nightly bookings were also up by 24%.
The vacation rental platform counts over four million hosts all over the world. It makes Airbnb the largest short-term rental booking platform globally. Despite the predicted economic downturn, Airbnb isn’t going anywhere any time soon.
One of the reasons why Airbnb’s popularity continues to rise all over the world is the change in guest preferences. Travelers continue to choose short-term rentals over hotel rooms since they offer more space, privacy, and property types.
For example, if a traveling family wanted to book accommodation in a hotel or lodging, they would need to book multiple rooms. Airbnb, however, gives them the freedom to book a single-family property that they can keep to themselves. It can even be cheaper if they’re staying for a long period.
6 Metrics You Need to Know to Do an Airbnb Rental Estimate
Now that we’ve looked at why you need to consider investing in Airbnb rental properties, how can we actually measure how much money you’ll make from your investment?
First, you need to know that there are many factors that influence your Airbnb’s potential income. They include:
- Daily rate
- Occupancy rate
As such, investing in an Airbnb rental property isn’t a sure bet to substantial rental income. You must consider the above factors.
That said, let’s break down some crucial metrics that you should use to check your Airbnb rent estimate:
1. Rental Income
Rental income is the amount that you can expect to make from your short-term rental property every month. Estimating the potential rental income for traditional rental properties is more straightforward compared to short-term rentals.
It is because, for Airbnb rentals, you must account for all the different factors mentioned above. However, we offer a special tool that you can use to find Airbnb rental income estimates and other Airbnb data. We’ll be talking about the tool in a minute.
2. Property Expenses
In real estate investing, you must spend money to make money. Airbnb rental property expenses are particularly higher than traditional rental properties due to the level of maintenance needed.
Remember you regularly see guests checking in and out. As such, you must spend money on cleaning and other maintenance tasks.
Unless you’re a seasoned Airbnb rental investor, it can be hard to estimate short-term rental property expenses. It is because you must break down the expenses as follows:
- One-time expenses: These are usually startup expenses. They include closing costs, inspection fees, repairs, furniture, and appliances.
- Monthly expenses: These are recurring expenses such as maintenance, insurance, utilities, mortgage, property taxes, cleaning fees, and property management.
3. Cash Flow
Cash flow refers to the profits left after taking away the rental expenses from the income. It can either be positive or negative. A rental property’s cash flow must be positive for the investment to make financial sense.
4. Cap Rate
Capitalization rate (cap rate) is a metric that estimates the rate of return by dividing a rental property’s net operating income (NOI) by its market value. You then multiply the result by 100 to get the cap rate.
A profitable Airbnb rental property investment should come with a cap rate of between 5% and 8%.
5. Cash on Cash Return
Cash on cash return is another return on investment metric that shows you a property’s current and future profitability. It is calculated by dividing the property’s annual cash flow by the initial cash investment. You then multiply the result by 100 to get the property’s cash on cash return.
A reasonable cash on cash return for an Airbnb rental property should be between 8% and 12%.
Cash on cash metric is important when comparing a number of potential investment properties since you estimate the property’s net income compared to the amount of money you’ve invested out of pocket.
6. Occupancy Rate
Airbnb occupancy rate refers to the ratio of the number of nights your short-term rental is booked to the number of nights it’s made available for bookings. It is an essential Airbnb rent estimate metric since your income depends on the number of bookings you get each month.
Keep in mind that the number of nights you make your rental available for booking isn’t the total number of nights in a year. Sometimes, you might want to use the Airbnb rental yourself or for other purposes. We exclude such nights when calculating the occupancy rate.
Airbnb rentals are highly affected by seasonality. You’ll notice that you might be fully booked during summer and the high season as opposed to winter.
You’ll also need to factor in location when thinking about occupancy rate. Airbnb rental owners in cities that receive all-year-round sunny weather are more likely to experience a high occupancy rate.
Essentially, you want to aim for at least a 51% occupancy rate. It means that your Airbnb rental is occupied for the most part of the year. It will also assure you of enough income to make up for the offseason.
So, how can you get the above metrics easily?
How to Calculate Airbnb Rental Estimate
At this point, you can already tell how hard it would be trying to estimate Airbnb income manually. How can you calculate such estimates fast and accurately?
Your answer is in Mashvisor’s Airbnb calculator. Mashvisor’s online tool helps you estimate an Airbnb rental property’s return on investment. With the tool, you don’t need to worry about data accuracy and reliability. It fetches data from reliable sources, such as the Airbnb platform itself.
As we said, there are various factors that you must account for when calculating Airbnb rental estimates. Our Airbnb calculator carries out an Airbnb investment analysis based on the following criteria:
- Property location
- Property size
- Selling price
- Real estate comps
Our calculator uses the data it fetches from reliable sites to help you see how the property you’re interested in would perform as a short-term rental. You don’t need to spend a lot of time gathering data, organizing it on a spreadsheet, and calculating the return on investment metrics.
Why Choose Mashvisor Airbnb Calculator
At Mashvisor, we believe that we offer the best Airbnb calculator for investors.
Firstly, you’ll save a lot of time that you’d use going online and conducting your own research to fetch every property’s details. Our Airbnb calculator provides you with everything you need to analyze potential short-term rental property investments.
Secondly, all our property tools are embedded together. With other online real estate tools, you find that you need to fetch property details from other platforms. You must copy-paste them on the tool and then carry out your analysis. It is a tedious process that’s also prone to error.
Mashvisor provides a tool for every step of your investment journey. If you’re still not sure where to invest, you can use our heatmap tool to find profitable neighborhoods in the US housing market. You can use different filters, such as cash on cash return, occupancy rate, and rental income, to set up your search criteria.
Afterward, use the Property Finder to search for properties in up to five different cities concurrently. Once you spot a property that interests you, click on it to load the listing page, which contains every single detail about the property.
The Airbnb calculator is embedded in the listing page to help you carry out an in-depth analysis of the property. Here, you’ll find analytics already available for your use, including rental income, property expenses, and occupancy rate. The figures are calculated by our AI based on the real estate comps in the neighborhood.
What makes our investment property calculator stand out from other online real estate calculators is that it gives you reliable metrics for both long-term and short-term rental strategies. Such accuracy is essential in helping you select a strategy that matches your financial and investment goals.
What’s the Catch?
There are various free Airbnb calculators available online. Such tools only give you basic information and insights. You’ll need to dig further to find more analytics to inform your investment decision.
With Mashvisor, you must sign up for the service to access our comprehensive metrics and analytics. Still, it is a worthy investment as it gives you access to all features you need to search for and analyze potential Airbnb investment properties.
To begin using Mashvisor, sign up for a 7-day free trial now.
5 Cities With the Highest Airbnb Rental Income
Let’s now look at some cities in the US with the highest Airbnb rental income. We chose the locations below based on the following criteria:
- Median property price below $1 million
- With at least 100 Airbnb listings
- With Airbnb rental income of at least $2,000
- Airbnb cash on cash return must be above 2%
- Airbnb occupancy rate of at least 50%
Also, we obtained the data from Mashvisor’s end-October location report. Here are the top five cities with the highest Airbnb rental income, arranged in descending order:
1. Middletown, NJ
- Median Property Price: $635,865
- Average Price per Square Foot: $300
- Days on Market: 67
- Number of Airbnb Listings: 100
- Monthly Airbnb Rental Income: $5,339
- Airbnb Cash on Cash Return: 5.26%
- Airbnb Cap Rate: 5.35%
- Airbnb Daily Rate: $290
- Airbnb Occupancy Rate: 51%
- Walk Score: 28
2. Kingston, NY
- Median Property Price: $405,385
- Average Price per Square Foot: $234
- Days on Market: 76
- Number of Airbnb Listings: 213
- Monthly Airbnb Rental Income: $4,256
- Airbnb Cash on Cash Return: 5.85%
- Airbnb Cap Rate: 5.99%
- Airbnb Daily Rate: $220
- Airbnb Occupancy Rate: 51%
- Walk Score: 76
3. Brandon, FL
- Median Property Price: $423,933
- Average Price per Square Foot: $253
- Days on Market: 53
- Number of Airbnb Listings: 117
- Monthly Airbnb Rental Income: $3,830
- Airbnb Cash on Cash Return: 5.72%
- Airbnb Cap Rate: 5.84%
- Airbnb Daily Rate: $172
- Airbnb Occupancy Rate: 55%
- Walk Score: 74
4. Fairmount Heights, MD
- Median Property Price: $354,666
- Average Price per Square Foot: $261
- Days on Market: 44
- Number of Airbnb Listings: 147
- Monthly Airbnb Rental Income: $3,582
- Airbnb Cash on Cash Return: 5.54%
- Airbnb Cap Rate: 5.66%
- Airbnb Daily Rate: $136
- Airbnb Occupancy Rate: 56%
- Walk Score: 48
5. Harahan, LA
- Median Property Price: $400,414
- Average Price per Square Foot: $191
- Days on Market: 69
- Number of Airbnb Listings: 105
- Monthly Airbnb Rental Income: $3,464
- Airbnb Cash on Cash Return: 5.81%
- Airbnb Cap Rate: 5.96%
- Airbnb Daily Rate: $144
- Airbnb Occupancy Rate: 62%
- Walk Score: 55
To start searching for profitable Airbnb properties for sale in any housing market in the US, click here.
Conducting Airbnb rental estimate analysis is important before investing in Airbnb properties. The Airbnb rental industry is growing and is poised to become even more lucrative for investors.
Travelers are switching allegiance from hotel rooms and traditional lodgings as they look for more privacy and space. More people are also able to work from anywhere they want. It presents an opportunity to provide Airbnb monthly stays for remote workers.
In this digital age, you don’t need to carry out all the analyses by yourself. Mashvisor offers various tools to walk you through your investment journey.
Sign up for Mashvisor now and access your 7-day free trial.