[Calc Review] Help me analyze this deal

4 Replies

Hi Michael,

I saw your question on vacation rentals and then saw this report so wanted to check it out. Are you looking at this as a Airbnb rental? 

The equity gained on this, and overall annualized return is attractive, but the ratios (1.8% cash on cash, 5.6% CAP) are pretty low. I would say too low but that is an option.

Some of the ratios / $ on your expenses seems a bit off. Repairs seem low at $25 a month, especially if it’s a short term rental. Electricity seems low if it’s a vacation rental, if long term rental it should be $0 since tenants typically pay electricity. The management fee of 3% also seems low most of the ones I’ve seen are between 8-10% but maybe higher for Airbnb rental management.,

There are little question marks next to each item in the calculator. If your unsure what to put in there just click on the ? and it will give you an explanation with a general range.  

Hope this helps! Keep analyzing deals it takes a bunch to find a winner. 

@Jonathan Bombaci

Just jumping in here real quick as I work with owners and prospective investors for AirBnb's on a daily basis.

Agree with Jonathan's 8-10% estimate on traditional property management, and I would say that market average for Vacation Rental Management is 20-35% across the board.

Depending on the services they provide, or if you go with one of the massive companies out there that sticks you with a ton of responsibilities like finding your own cleaners or the monthly Costco run for toilet paper and paper towels... I had seen rates as low as 15%.

Just be warned that as any traditional rental property can quickly become a full time job, AirBnb management can become so much more time consuming... Especially once you have 3+.

Happy to help or share my experience with anyone going down the Airbnb / VRBO route.

-Ken G. Barton

Capitalization rate (CAP %) - it's basically the annual return on the property assuming you bought it all cash. It's the return on total capital.

You can google it to get a better explanation or examples of the math. It’s a key metric that banks and investors look at when evaluating a deal