How accurate are STR revenue generator websites?

Question

Hello all, new investor here! I am working on rehabbing some smaller cottages in northern Michigan, the plan is to put them all on the STR market once they are complete.  It seems to me sites like AirDNA and other revenue estimators for STR's seem to be giving me what I feel is an unrealistic number, my question is how accurate are these estimators? It seems there are so many factors that may sway that number (based on exact location/amenities) that it is hard to get an accurate estimate to analyze the deals.

I have done my research and feel confident the properties will still cash flow with Long Term Rental rates in the area, but will cash flow a much higher rate if the STR rates on the estimators are accurate.

Has anyone found a better way to analyze a deal for STR?

Any suggestions to maximize the monthly income on new STR's would be appreciated!

Thank you all!

Brandon Gale · Answer

John is right about the enemy method, its the only accurate way to estimate revenue.

The blanket estimated revenue amounts on analysis websites like AirDNA can be a decent baseline, but generally include too big a pool of properties to give a very precise estimate.

The way I use the enemy method: Sign up for a pricing software that has market analysis (I use PriceLabs but most of the pricing softwares have this feature). Use their market analysis tool to sort by properties similar to yours (#bed/baths, SF, location, amenities, etc.) and look through specific listings to find ones VERY similar to yours. Create a list of properties you think are very similar to yours based on their listings and use those revenues to create your estimate.

Keep in mind if you are just starting, expect about a 20% decrease in year 1 revenue compared to comparable listings. You do get a small boost on most booking platforms right when you list, but overall it takes time to gain traction and perfect your pricing strategy. Year 2 you will get close to your potential revenue, most say year 3 is when you hit your peak revenue.

Andrew Steffens · Answer

AirDNA is a tool not an oracle.  I use it daily and find the results vary by property from very accurate to wildly inaccurate.  I use it as a starting point, maybe similar to a Zestimate.  It is important to know:

- It is a lagging indicator (Trailing 12)

- T12 performance does not equal future 12, too many variables.

- You should pay for the premium version so you can see the comps that went into their calculation to factor if you have a superior or inferior product.

- AirDNA is more accurate in areas with more comps and less variation in amenities and unique properties.

- Check results against enemy method

Best of luck!

William Beck · Answer

I used to think AirDNA was garbage, but it's better than nothing. It's good to look at a bunch of comps too that are adjacent to the subject property you do the analysis on. I feel like sometimes it will show info that's extra conservative and you'll scroll down and see a neighboring property doing 10-20k more in revenue. AND it also can pull data that's way overstated. So just always good to check but use enemy method to validate or find comps with historical financials near by. Just don't fall into the analysis paralysis trap!

Jay Seville · Answer

When I first heard of AirDNA -- years into working with STR investors -- I was skeptical and suspicious.  How could a bot know the numbers better than me on all the beaches that I work in SE NC/SC?   No way.  So I started testing it out with specific addresses and potential gross rental income and was blown away how it was exactly the gross income that the market offered.  However 20% of the time it was way off.  So it's a great tool, but you have to do your own projections too. I gave a tutorial on knowing your enemy for my location How to Comp Vacation Rental Income Projections in Coastal North Carolina

John Mason · Answer

@Aaron

https://www.youtube.com/watch?v=

OZQxp8EjSMU&list=PLN-z9iGKe2Swrqa1HFeVpp4SowJWMvBBA&index=2

Garrett Brown · Answer

Hey @Aaron Buehler welcome to the forums!Everyone hit the nail on the head with their responses. AirDNA is the most accurate of all, but it still can be off the more unique your place is. I like to take the AirDNA info, run the enemy method on Airbnb and VRBO, and see what amenities the top-performing places have. It's very smart to figure out your LTR metrics as a backup, and that should give you the confidence to try out STRs no matter your findings!

Sarah Kensinger · Answer

Airdna is the best data out there! Of course, the paid subscriptions are the best especially since they have data for the last 5 years. Be careful with the free sites since they only have true data for 3 months and then guess at the rest of the year. But Airdna gets their data straight from Airbnb and VRBO and is 95% accurate every year when they compare numbers with Airbnb. There's a reason the software is so expensive!

If you need help analyzing a property, feel free to reach out. Sometimes, especially if this is new for someone, getting another person to run numbers helps.

Ryan Osborne · Answer

I would suggest Enemy method - Same bed/baths, Amenities offered are step one, but speak to other operators that have similar properties/amenities and compare numbers with them (That is true data not estimates)

How well are you marketing and providing guest experience? Airdna says that you could be losing out on 20-30% of revenue if you are rating 4.9 or lower on OTA's.

I think you have the right idea though, make sure your investment can cash flow as a long term rental so that way you have a good back up plan.

Collin Hays · Answer

About as accurate as CarFax.  And that means not very.

John Underwood · Answer

Google and use the enemy method.

How accurate are STR revenue generator websites?

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