How to calculate STR cash flow

[Chris Simpson]

Hi all

I would like to buy a cottage for a STR in northen Ontario. Since it is seasonal I am not sure how to estimate cash flow. I looked at airdna but my gut is telling me that isn't accurate. Any tips would be appreciated.

Thanks a lot

Chris

[Luke Carl]

Enemy Method Click Me 

[John Underwood]

This gets asked alot.

Just check similar properties on Vrbo and Airbnb and look at their rates and occupancy to see what you should be able to achieve. 

[Nathan Gesner]

It takes work. Data compilation is good for a general overview of a market, but it's not useful for a specific rental property. You have to put in the time to research comparable homes and crunch the numbers.

Be careful. 2020/2021 were anomalies in the world of short-term rentals and not indicative of future performance. More people used short-term rentals to avoid COVID in crowded areas (planes, hotels). We've also seen an increase in the number of short-term rentals purchased in the past two years. I may be wrong (it happens at least once per year) but I predict we'll see short-term rental performance drop in the next 1-2 years as people return to normal travel habits and Landlords scramble to stay competitive.

[Chad McMahan]

Quote from @Chris Simpson:

Hi all

I would like to buy a cottage for a STR in northen Ontario. Since it is seasonal I am not sure how to estimate cash flow. I looked at airdna but my gut is telling me that isn't accurate. Any tips would be appreciated.

Thanks a lot

Chris

Hi Chris.
I HIGHLY recommend you lean on a local cash flow specialized real estate agent, to help guide you through this.

[William Anderson]

Chris, 

I own and operate quite a few vacation rentals in my market along the Mississippi Gulf Coast.  I also help people buy houses and work with them to make the conversion.  The most difficult questions for anyone not already an owner is how much will I earn and when? If you are considering buying this as a full-time income-generating property, Chad is correct, you may want to wait a bit.  2021 was an extraordinary year and because it was, lots of people wanted to jump in.

There is nothing I would rather do than help someone get into a vacation rental and that means buying it, setting it up, and managing it for them.  But, I do not want to be on the other end of a call when the new owner calls and wants to know where the income is.  The fact is that 2022 is shaping up to be an average year.  There is more competition in my market but much of it is from people who decided to open their existing property to make a few dollars.  These will come and go over time.

Back to your original question.  Before I bought the first vacation rental, I met in person with several people who owned multiple properties.  They had no problem sharing information when they knew I was a professional and here to stay, not just in town fishing around for information.  As a result of those discussions, I have several great friends now that discuss with me regularly the status of rentals in their portfolio.

We often contact each other when for example I am booked and have a previous guest who wants to come down.  They do the same thing.  We all want to accommodate our clients.  You may want to do the same and gather some good data before making an offer.  And, I strongly suggest you find an agent who knows vacation rentals, it is a specialty business.  One more thing, keep an open mind about where to buy.  The world is your oyster, buy anywhere and get a good property manager.  I owned many properties on the Med coast in Spain and had great success.  I in manage properties for people who do not live in my area.  It's all about the money.

[Kevin Pillow]

Quote from @Nathan Gesner:

It takes work. Data compilation is good for a general overview of a market, but it's not useful for a specific rental property. You have to put in the time to research comparable homes and crunch the numbers.

Be careful. 2020/2021 were anomalies in the world of short-term rentals and not indicative of future performance. More people used short-term rentals to avoid COVID in crowded areas (planes, hotels). We've also seen an increase in the number of short-term rentals purchased in the past two years. I may be wrong (it happens at least once per year) but I predict we'll see short-term rental performance drop in the next 1-2 years as people return to normal travel habits and Landlords scramble to stay competitive.

 Do you think this is for all STRs or mainly the STRs in Non-Vacation rental markets?