Short Term Rental Expense Ratio

[Mark Grozen-Smith]

Hi BP friends,

I'm looking at acquiring a property for use as a short term rental (STR) and I want to know what the typical expense ratio is for a STR. I know the benchmark for multifamily is ~30%, but I haven't found any benchmarks for any of the typical RE metrics/financial measures.

1) What are typical STR expense ratios?

2) Where could I find benchmarks for any other financial measures for STRs?

Yes, I know it will vary, but the benchmarks are helpful to know if I'm vaguely in the right realm here. 

Thank you! 

[Joe Splitrock]

@Mark Grozen-Smith expense ratios can be generalized easier in a given market, but to say there is one national number you can assume is a gross oversimplification. I am not sure where you got 30% for multifamily, because I have seen anywhere from 35% up to 50% used. In the case of multifamily, it depends on what utilities are paid, but when you figure management, taxes, insurance, utilities and repairs; it is tough to be at 30%. Of course it also depends on market because high or low market rents will skew the percentage.

In the case of short term rentals, expenses are higher because you have all utilities, cleaning and supplies to add on top of what you would have in a multifamily. That being said, you also have higher income, which more than covers all those expenses. 

Percentages don't tell the whole story because there are so many other variables that go into return on investment and profitability of a business. 

@Brian G. I just wanted to mention that when calculating expenses, debt service is generally not included. It may be an expense to you, but it is not an expense of the property itself. Someone who paid all cash would not have that expense. Even if two people have debt, loan term and interest rate will change that expense.