Actual income vs AirBnB estimate

[Daniela Bovio]

Hello,

I am running some numbers to assess whether to invest in a place for short term rental (our first one, although my husband and I already own a LTR). For those who already rent your property, have you compared the Airbnb earning estimate for your area with your actual? Do you earn significantly more or less? If the Airbnb estimate is true I would not be making any money which doesn't make sense as I know some hosts in the area who are...

Thank you!

[Jon Crosby]

@Daniela Bovio Good question! 

The problem with using tools to estimate income is 'system' or 'formula' has no idea what your STR is going to be like. It could say you can make $100k but if you provide poor service or experience you will not come near that. It could also say you will make nothing and that's because those that it's using as reference are not providing the experience that makes their STR successful in that market.

Since your revenue is going to be determined by Occupancy and Avg. Nightly/Daily Rate I would really focus on Occupancy rate first to see what the 'market' in general demands (how many days a year can you fill the place).  Then use a conservative ADR to complete the equation.  Those estimates/formulas also have ZERO idea what your operating/debt expenses are so yes, you might know some people making a lot of cash, but maybe they also put 100% down and have minimal to negative cash on cash return but do have cash flow each year still.

Also, using the Airbnb estimate is going to give you, well an Airbhb estimate...if your market is actually a highly used VRBO/HomeAway market then most of your income would flow thru that, which could be what the other 'successful' hosts in your area are using for the majority of their booking share. 

All that being said (and as somebody who actually owns a estimation tool), use those estimates really as a place to start.  Trust or (don't trust) but verify what it's telling you.  The better you can validate your occupancy and ADR the more accurate your expected gross revenue will be...but once again...don't forget about your operating expenses because there are a lot of them.  You are basically running a mini-hotel and the only thing your guest is paying for is booking, sales/TOT tax and housekeeping...you are paying the rest of it.  :)

Best of luck to you, it's a great experience once you get going! 

Also, I would be happy to look at some numbers for you if you want to direct message me.

Cheers!