How do you determine monthly revenue for a potential property?

Question

I currently own a fourplex outside of Tulsa and I am considering buying a property in Kansas City (where I grew up) as a short term rental. Of course I will crunch the numbers to make sure that it works as a normal rental but how can I estimate what my monthly revenue will be as a short term? I understand location and bed count are the two most important factors and I should find similar properties when estimating, but do you have a specific strategy when making a purchase?

Luke Carl · Answer

@Grant Doyle Check AirDNA and Mashvisor. But the real magic happens when you check the competition. Check the dates that ARE NOT booked. You can't tell how much the booked dates were booked for. Have to assume the host thinks they can get what they're asking for the dates that aren't booked. Use the current month as an indicator of occupancy rate. If it's January in a beach town.... not a good indicator of occupancy. Just obsess and study and you'll get it!

Paul Sandhu · Answer

Look at what motels your clientele would stay in. Find what they charge for a room with 2 beds and extrapolate from there.

Here a cheap motel room with 2 beds is $400/week. I charge $600/week for a 3 BR house. My renters are refinery contractors with a per diem, not vacationing people.

Jon Crosby · Answer

@Grant Doyle Below is a link to a cash flow spreadsheet I often share here that just helps get the mind thinking about everything related to STR analysis.

https://www.biggerpockets.com/...

The 2 big pieces are ADR and occupancy which drives your overall revenue and then limiting Op ex just like any other business. Just those 2 factors alone make it somewhat of an over generalization to say just beds and location make all the difference. (although, location is pretty darn important). :)

Below is a screenshot of monthly revenue in a particular market I invest in from Airdna's data. All are 3 bedrooms within 500 meters of my property. As you can see the variance is vast and wide just in that small geographic region. So you have to ask yourself the question, why is one group getting $1900/month average and another is geting $7500/month average. Sure they could be cramming 3 beds per room or something (although most regulations have a max bed count, like 2 per room +2 more), but my guess is they are providing something more then numbers can just estimate, like experience.

Anyway, my long point of this is there are many factors to your eventual revenue once you get started which include but are not limited to: Location, Beds, Reviews, Amenities, Customer Service, unique guest experience, etc. etc.. Then you have the business part which is to maximize your bottom line by systematizing processes and lower expenses wherever you can.

Best of luck to you on your new venture! Just keep an eye on regulations and don't over-leverage yourself. ;)

How do you determine monthly revenue for a potential property?

How do you determine monthly revenue for a potential property?

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