How do I analyze an STR deal with fluctuating seasonal rents?

Question

Hi BP fam--I'm trying to analyze my first potential STR deal. When rents and occupancy vary as seasons change, how do you average that out to enter it in the calculator?

Michael Baum · Answer

Personally we use a yearly gross/net amounts and expenses the same way.

So kinda the weighted average like @Drago Stanimirovic said.

I am less concerned with the monthly revenue and more with the overall profitability per year.

I will also say that with most seasonal rentals, off season can mean zero occupancy.

Drago Stanimirovic · Answer

Hey Nicole, great question!

When analyzing a potential short-term rental (STR), especially with fluctuating rents and occupancy due to seasonality, you can break it down like this:

• Monthly Breakdown: Look at historical data for each month. Break down your expected rents and occupancy rates per season (e.g., peak season, off-season, shoulder season).
• Weighted Average: Calculate the weighted average for the year by multiplying the expected rent by the occupancy rate for each season. Then add those up and divide by 12 to get a monthly average.

For example:

• Peak Season: $5,000 rent at 80% occupancy
• Off-Season: $2,500 rent at 50% occupancy
• Shoulder Season: $3,500 rent at 65% occupancy

Formula: Monthly Avg Rent = [(Peak Season Rent x Occupancy Rate) + (Off-Season Rent x Occupancy Rate) + (Shoulder Season Rent x Occupancy Rate)] / 12

This will give you a realistic estimate to plug into your calculator.

If you need further help with financing or running the numbers, let me know!

Best regards,

Drago

Nicole Heasley Beitenman · Answer

Jonathan! It's been a while since I've "bumped into you" here on the forums. I hope you're well.

Thanks for the solid advice. This was a property in an area my family loves to vacation in because of family ties to the area. The goal was to own a house we could use seasonally, and the rents would cover the expenses. After talking to two realtors with intimate knowledge of the area, we learned that STR rents and annual occupancy are just too low to even cover the PITI of properties in the area, let alone maintenance, supplies, lawn care, snow removal, etc. So it's on the backburner until we can easily afford the payments and maintenance on a property in that area and enjoy a little subsidy from seasonal rents.

Patricia Andriolo-Bull · Answer

I do the same as @Michael Baum.  In September I never cash flow and in a couple of months I just cover so I look at it annually.

John Underwood · Answer

Check out the "Enemy Method "

You can find videos.

Sarah Kensinger · Answer

You use an average rental income number for the year. Airdna does that automatically and provides comps as well.

Zach Rothman · Answer

So from my experience in 4 different US markets I find Revpar (the revenue for the month divided by the number of days in a month) is a more important variable than occupancy. What I would do, is get an account with Airdna, (welcome to borrow mine, DM me if needs), filter for your area, export the revenue over the past 12 months, calculate the difference between each month i.e. Jan vs. Feb, Feb vs. March etc. and then divide the difference by the first month to get the differential. At that point you know on average how revenue locally changes month by month. Use Airdna to find out how much revenue your property should gross and then use the differentials you just calculated to figure out what revenue should look like month vs month. Experiment by changing the amount in the first month until the total grossed equals your revenue estimate. did that make sense @nicole?

Brandon Gale · Answer

As others have said, it doesn't really make sense to run calculations for STR analysis on a monthly basis, just use annual revenues.

Get signed up with a pricing software and use the market analysis tool. Make a list of specific properties that are VERY similar to the property you're analyzing (similar SF, beds/bath, amenities, views, location, etc.). On the pricing software you can see the exact yearly revenue for each specific property. Average out the annual revenue of a list of similar properties and you have a very accurate estimate.

Jonathan Greene · Answer

That makes sense. I am buying an A-Frame in Black Mountain, NC for the same reason. It's for me and my kids really, but it has a history of being productive on Airbnb and isn't a huge spend vs. return. I am going to use it and prep it until Spring, then launch it, but my payments are so low, it's a no-miss. I get it.

Jonathan Greene · Answer

I want to send off a tangential option here since you are looking at your first STR. When you are operating STRs at scale, calculating these numbers makes perfect sense because you know the ebb and flow of your other listings. When you are looking at your first, my advice would be that if the fluctuations between seasons are too hard to comp in an obvious way, it might not be the best first one to try. When the calculator is more of the decision-maker than you on your first one, I think the balance is off.

How do I analyze an STR deal with fluctuating seasonal rents?

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