If you’re on this site, you likely enjoy looking at houses and properties, but perhaps calculating the numbers is what really does it for you. I get it, because barring a good bottle of pinot grigio and my husband’s company, there are few things I enjoy more than running calculations on a spreadsheet. That’s right people, one day I looked in the mirror and I saw a nerd. And since that’s probably a common feeling on BiggerPockets, I’ll run down calculating numbers for Airbnb to decide if a short-term investment makes sense. (And, if you’re a BiggerPockets Pro member, the Rental Property Calculator is a tool where you can actually plug in the numbers we’re about to discuss.)
There are basically three groups of numbers you need to think about when calculating for a short-term investment:
1. Rent collected
2. Upfront costs
3. Monthly costs
This blog post will cover how to estimate the rent.
Download Your FREE copy of ‘How to Rent Your House!
Renting your house is a great way to enter the world of real estate investing, but most first-timers (understandably) have a lot of questions. Fortunately, the experts at BiggerPockets have put together a complimentary guide on ‘How to Rent Your House’. All the skills, tools, and confidence you need to successfully rent your house are just a mouse-click away.
Estimating Rent for Your Short-Term Property
Start with Airbnb.com. After logging in, you’ll see a horizontal menu bar with “Host” as one of the options. Select it and scroll down to “Add a New Listing.” Your listing doesn’t have to be ready yet in order to utilize this feature. By filling out the basics (location, rooms available, number of guests it can sleep, etc.), Airbnb can calculate an estimated weekly return. Multiply that weekly number by four, and you have your estimated monthly rent.
Research this number by retuning to the Airbnb homepage and searching properties near your location. What other kind of properties come up? What is their nightly rent?
Finally, AirDNA provides short-term rental reports by city. The report covers month-to-month rental averages for different types of properties. Note on this: there’s a lot of discrepancy in these reports from month to month, which suggests the data set may still be too small to be accurate. Therefore, consider this a resource and not a bible.
You should also consider vacancy rates and seasonal variance in your calculations. Airbnb should cover the demand rate in its calculation, but you may or may not feel like hosting every night, and sometimes you just may not be able to. We base our vacancy rate off of 20 nights rented in a hot market (this is actually much lower than what we’ve experienced, but it’s better to underestimate than to overestimate). For a less hot market, you may want to bring that number further down to 10 or 15 nights per month. Seasonal variance will also affect your numbers. We can only speak from experience, but in Denver, our 1-bedroom rental near downtown saw a 30 percent decrease in interest from November through March. (You can check this by looking at AirDNA and looking at demand rates for your competitors for that time period.)
So, to estimate monthly rental rates, research your competitors and utilize Airbnb’s estimate tool.
How do you estimate your monthly Airbnb rent?
Let me know in the comments below!