What metrics do you look for when using AirDNA?

Question

I have a subscription to AirDNA and I am a total newbie to this space.  I'm looking at one property that projects the following data:

$76K in Revenue, but Net is 48,369.  Cap rate of 5.5%, occupancy rate is 64%.

What else should I be looking at when it comes to the numbers?  What metrics do you use from this site as there is a lot of data.  Love to hear your thoughts how this tool drives your decision to acquire a property.

Bretton F Trapnell · Answer

Hello! I’m an every day Airdna user for multiple years and would have happy to help you with info to best use the service.The first thing to pay attention to is that the Annual revenue projections are just projections from airdna based on data they scrub from active listings. It doesn’t take into consideration any discounts or refunds given to guests, owner blocked dates for maintenance etc. so it does in general inflate the numbers over what the actual annual revenue will likely be. Not always but as a good rule of thumb. With that in mind it still is probably the best analytics and projections tool available, but best to use it as a supplement to other market research vs using as concrete numbers to rely on.76k in revenue isn’t a bad place to start, but it does depend on purchase price and operating expenses. Looking at many of the properties I manage and/or help clients buy, you will be at about 50% of your gross revenues in operating expenses. That is before utilities, most repair costs, mortgage payments etc. If you are looking for passive income you will normally spend 25-30% on property management services, something around 20% for cleaning services and then some for normal repairs and maintenance costs. This can be saved a lot on if you self manage / self clean, but still want to make sure you pay yourself for doing that work.

Ke Nan Wang · Answer

Here are my experience with my market. We are in St. Augustine, a small historic beach town with lots of tourists year round.

Here, we see STR can be separated into two categories. One is the commodity sector (3 star hotel or below) where you are competing to offer a little more and charge a little less. This sector should aim for over 90% occupancy rate, if not 100% in the this area. People in this category usually are willing to pay a hotel nightly rate by the number of rooms you have. I have a 3 bedroom house and it doesn't matter how nice my amenities are, my average nightly rates are fluctuating somewhere between $250 to $300 per night (that's how much my customers are willing to pay, my take home revenue is about $210 to $250). Even AirDNA is projecting 60-70% occupancy rate, we will drive our occupancy rate to near 100% to maximize revenue. Occupancy rate is king in this sector. Above everything else. If you have vacancies within 7 days, cut price until you reach your operating cost to put people in (of course use common sense).

Then the second category is the experience and luxury sector. In this sector you want to charge for a premium and 65-70% occupancy rate is fine. These places typically charge around $1000 a night. We are about to acquire one and we have friends who are in this sector. So not much personal experience here.

Another useful tool I'm using AirDNA for is to figure out who are my true competitors.

For example, say I am planning on acquiring a 4 bedroom house. AirDNA shows a total of 2000 STR in the area. When I narrow it down to 4 bedroom houses, it might only show 300 now. Then out of the 300, only 90 houses are listed on by Airbnb and VRBO, which is an indication of a more sophisticated professional management. Then if I filter out the houses with a nice pool, now you are down to 40. This is a quick way to figure out where your true competitors are. I'm gonna dive deep into study these listings. Check out their nightly rate, occupancy rate and reviews, numbers of reviews (focus on the one more than 20 reviews with an average of 4.9 stars). AirDNA will show their revenue and I can have a relative high confidence that this data is my comparable.

With that information, now I'm thinking, how's my property comparing to that one. If it's inferior, how much do I need to spend to make my look like theirs.

In the STR space COC needs to hit at least 10% to warrant a look and the goal should be 15%.

Brooklyn McCarty · Answer

COC and monthly cash flow are important to me

John McKee · Answer

@Sarah Kensinger Great feedback on the cleaning fees.   Yes this particular property doesn't pencil out.  CD investing it is! :)

Michael Porche · Answer

John! Great question! So there are a few things you want to check here.

• You need to check the comparables that AirDNA decides to use and pull from to make sure they are: 1) similar locations in proximity. 2) like the property in terms of natural amenities  (views, waterfront) and amenities you can put in yourself (hot tub, pool, etc).
• 
• 2.) Next, you need to make sure the data/comparables are: 1) pulling is good data. Meaning you want to make sure the data has reviews that are aligned with the amount of revenue it is making. Meaning if there is only 5 reviews but it says the comp made 200k.. Well, that might be telling you that AirDNA pulled bad data and you can't use that comp. 2) Next, you can check the calendar of the comps it pulls and see if there are any random blocked days or if there is any uniformity. This may also mean AirDNA is reading the blocked days that someone blocked as reservations.
• 
• 3.) I would use your own analyzer instead of airdna. To make sure you have everything accounted for in terms of expenses. Let me know if that helps

If you need an analyzer I can send one your way!

Murray Reginald · Answer

Hi BP,

I am also trying to understand metrics using AirDNA. I am currently analyzing properties and need some advice on the following:

1) Annual Revenue (AR) - I am seeing several properties with an AR being around 40K-50K is this a good AR or should look for something higher?

2) Occupancy Rate (OR) - I am seeing several properties with an OR being 50-60% OR is this a good OR or should I look for something with a higher OR?

3) CAP Rate - What is the minimum a Cap Rate should be no less than 15-20%?

4) CoC -  What is the minimum a CoC should be? No less than 20%?

John McKee · Answer

@ke nan wang.  I agree that you need 10% at a minimum especially if you are self managing.

Dave Stokley · Answer

The most important thing for me is looking very closely at the comps it’s using to project annual revenue and determining which ones are actually comps for my property. Dig into the listings: which ones have good pics, good design, dynamic pricing etc.

At the end of the day the ONLY number that matters though is annual revenue. You just gotta figure out what the most reliable projection of it is.

Sarah Kensinger · Answer

I use about every component of Airdna, all of it is great data. Especially downloading the numbers into a spreadsheet! One of my favorites is the rentalizer with the comparable properties, that gives a good feel for how the surrounding area is doing and who the competition would be. If I'm looking in a certain area the top properties show me where some of the best neighborhoods are and again who the top competition would be. Then of course you can break things down by bedroom count, and value of a property and see several years' worth of market trends. And don't forget that Airdna lumps the cleaning fees with the revenue from a property since the OTAs pay it all out to the owner in one sum.

Your numbers above make me think the property is too expensive for the gross income it might produce. A cap rate of 5.5 is pretty low in the STR space. Also use the above numbers to find your COC return, that is pretty much the most important number out of them all!

What metrics do you look for when using AirDNA?

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