How to calculate if an Airbnb property will actually be profitable

Category: Pricing & Revenue

By: Tony Russo

Posted: 2026-01-09T09:23:09.268Z

I see so many posts about revenue but rarely about actual PROFIT. Just because a property grosses $4,000/month doesn't mean it's a good investment. What metrics do you use to analyze whether a potential STR purchase will be profitable? What's a good cash-on-cash return? What expenses do most people forget to include? Looking for a real framework I can use when evaluating properties.

Reply by David Okafor:

I've looked at probably 50+ deals and bought 6 of them. The biggest thing that separates newbies from experienced investors is how thorough the expense analysis is. Everyone calculates revenue. Most people massively underestimate expenses. Here's how I actually run the numbers: Revenue: I use AirDNA (https://airdna.co) as a starting point but I haircut their projections by 40%. Seriously. AirDNA tends to be optimistic and assumes you'll hit high occupancy from month one. I assume 60% occupancy for year 1 and build up from there. Also check 5-10 comp listings and look at their actual calendars — if they have gaps, you will too. Expenses — and this is where people screw up. For a typical $350K STR property: - Mortgage + taxes + insurance: ~$2,000/month (varies hugely by market obviously) - Cleaning: this one shocks people. At $120/clean and 8 turnovers/month, that's $960/month. Cleaning is often 20-25% of gross. - Utilities: $300-400/month (guests blast the AC, leave lights on, take long showers) - Supplies and toiletries: $50/month - Software (PriceLabs + Hospitable): $45/month - Platform fees: ~3% goes to Airbnb - Maintenance reserve: budget 5% of gross minimum. Stuff breaks constantly. - CapEx reserve: another 5% for eventually replacing the HVAC, roof, water heater - Accounting/legal: $75/month averaged out The metrics I actually care about: - Cash-on-cash return: annual cash flow divided by total cash in (down payment + closing + furnishing). 15%+ is good, 20%+ is great. - Break-even occupancy: at what occupancy rate do you hit $0 profit? If it's above 50% the deal makes me nervous. Biggest expense people forget? Cleaning by a mile. Then maintenance. Then the fact that January exists. Use https://strspecialist.com/tools/cleaning-fee-calculator to model the turnover costs properly.

Reply by Michael Thompson:

The #1 metric I use: **break-even occupancy rate.** Formula: Monthly expenses ÷ (Nightly rate × 30) = break-even occupancy Example: $3,200/month expenses ÷ ($180/night × 30) = 59% break-even If I need 59% occupancy just to break even, that's too tight. Market average might be 65-70%, leaving very thin margins for bad months. **My rule: break-even should be under 45%.** That means even during terrible months (January, September for most markets), I'm still in the black. Properties where break-even is over 55% are what I call "fair weather investments" — they work great when the market is hot but collapse during downturns.