How to estimate the gross potential revenue of a STR?

Question

I've read "Short Term Rental, Long Term Wealth" and the direction is to use STR-specific data companies such as AirDna, but to focus more on the aggregate area data instead of individual property data. The other thing I seem to be seeing a lot is the ENEMY method.

For the ENEMY method in particular, I can grab 5 properties with the same number of bedrooms and bathrooms for consistency. I can look at airbnb and see how many days are blocked off in the upcoming 60 days for a rough occupancy rate, but given that many people don't book that far out this doesn't feel super reliable. Average daily rate is really difficult also because it's a different price for different days. It all feels like a ton of information and it's all over the place.

I understand that STR income potential is highly variable but does anyone have a good resource to systematically go through and get some sort of a range?

David Holcombe · Answer

Another good option would be to reach out to 2-3 management companies in the area and ask them how much revenue they think they could generate for that property. They may be able to give you comp data for other nearby properties they manage. They’re the local experts and they’re incentivized to help you to get your business. Airdna is a fantastic tool but it’s limited to booking data from AirBnB, Booking.com and VRBO. It’s not able to show you direct bookings. In markets like Atlanta, where we get a lot of direct bookings for film/production stays, the numbers can look very skewed.

Kristi Miller · Answer

A good alternative to AirDNA is Pricelabs.  They have a rental market dashboard that you can create based on specific criteria (bedrooms, amenities, etc).  I use them for dynamic pricing my other STRs so I create a market dashboard each time I'm assessing a new STR purchase.

Andrew Steffens · Answer

As mentioned there are several options for what you are looking to do, that when combined with the enemy method can produce a pretty accurate picture of an income range.  There are also other things to consider like how the comps are managed, how your property will be managed, the economy etc.

I use a commercial (paid) AirDNA account which shows me the comps considered when they generate the projection.  To me this is invaluable, and I think just the generated number without comps is fairly useless.

It is important to find the comps that best reflect the subject property to get an accurate idea.  I do recommend getting a premium AirDNA account while you are shopping or working with an agent that does have one!

Brooklyn McCarty · Answer

Never just rely on one data source, always use  multiple sources and take a average of all the data. Enemy method is the most real live info you can get IMO.

Pricelabs is also a great option.

Madeline Blom · Answer

I like pricelabs, too, to identify new markets as another tool.

Collin Hays · Answer

The nifty automatic tools such as PriceLabs and airdna are grossly inaccurate.  Products with misleading names.

As others have said, the best thing you can do is just go online and check calendars and rates for like properties.  Of course, only January and February are going to give you accurate numbers, as months further away, you have no idea just yet.

I wouldn't invest in any market without full knowledge of how it performs every month of the year. My area is the Smokies, so an evaluation there is simple, because I have 19 years of firsthand knowledge.  But if I invested in Palm Springs, it would take me a year of study before I would feel comfortable actually scouting deals.

Sarah Kensinger · Answer

Airdna has very very individualized data, so I'm not sure who thought it wasn't. Seems like so many people have many ideas about that software these days, which can be hard for new people like yourself!

If you need help running numbers on a property, feel free to reach out. It sure can be hard with all the conflicting ideas! We enjoy helping people with potential revenue projections and making sure they feel comfortable with what they could be purchasing!

John Underwood · Answer

You're right.

The months that are not close to current date are likely going to keep filling in so you have to keep updating your data within maybe 2 months max at a time for it to be the most accurate.

Michael Baum · Answer

Hey @Robert Johnson. I do like the awning tool to check the basics in the area I am looking.

I certainly pull many more listings than just 5.

For example, when we bought our lake house, I pulled about 90 listings total. I looked all over the lake (Lake Coeur d'Alene which is large). I pulled listings from all over the lake. I used places that were similar but not necessarily identical.

If you have a 3/2, then some folks might look at a 2/2 as well. Even a 4/3 (like our place) if they want more room. I didn't pull any 2 bedroom places but I did pull 5 bedroom as well as 3.

Now I will say our area books our waaaay in advance. We get bookings starting the same day for the next year. July 4th week 2024 was booked that same week 2023.

AirDNA can be useful for looking at the past year to get the best idea of what do expect. I am not a huge fan of AirDNA as I find it can really skew wildly depending on the area. Our area doesn't have as many STRs as someplace like Pigeon Forge.

You can always post your deals here as well for us to take a look at. Plus you want to decide what you think a good return is. Some don't want to look at anything less than 20%. Others are OK with 10%. It all depends.

EDIT - I also want to add that our latest place we were running was a beach property here in WA. I never buy here due to the environment that is hostile to landowners but I really liked it. It is currently a running STR and doing pretty well. It isn't huge but is pretty decent and has some upside with a bit of spit and polish to fancy it up. We were looking at about 15% return on that which I thought was acceptable. Appreciation in the area isn't awesome but it was OK. In the end they pulled the listing so we never jumped. I might reach out them directly to chat.

We pulled about 75 listings on that unit to compare to see how it is doing overall vs others. Seeing as it was operating I had their actual data as well.

Bunmi Joo · Answer

Hi, I am a newbie myself at STR. But So far, I have been using  awning.com

How to estimate the gross potential revenue of a STR?

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