How much can you really make with a vacation rental?

Lauren KayeLeave a Comment

How much can you really make with a vacation rental?

It’s important to understand how much you can really expect to make with your vacation rental.

You might be skeptical when you hear of another owner making over $100,000 a year. It’s a far cry from the $40,000 annually that you’ve been earning. Are you missing some important secret? Is that income even possible with your property or is that high-performing example an outlier?

Vacation rental results are highly variable. If you’re thinking about making a real estate investment or you’re already using your property as a short-term rental, you need to take property size, quality, and location into consideration to estimate bookings and rental income.

The hard truth is that even if you take two identical properties in the same building, one with views and one without, you could get different booking totals, nightly rates, and revenue totals.

When you think about guests and their vacations, it makes sense. Guest demands (which change all the time) drive the rental market. So something as small as a view becomes more valuable.

Because context is everything, we wanted to show just how widely performance results can vary across similarly sized properties. So we’re comparing the performance* of homes in three popular vacation destinations: Breckenridge, the Gatlinburg area, and Kissimmee.

*Performance projections are based off of Evolve’s proprietary data and competitive comparisons from various listing sites.

How Much Rental Income Do Two-Bedroom Properties Earn?

Breckenridge Condo

  • $52,840 / yr
  • 175 nights booked
  • $302 avg. nightly rate

Sevierville Cabin

  • $31,449 / yr
  • 210 nights booked
  • $150 avg. nightly rate

Kissimmee Condo

  • $25,505 / yr
  • 248 nights booked
  • $103 avg. nightly rate

Let’s start with two bedroom properties, which are more affordable to purchase but already offer very different results based on location, amenities and local attractions.

The first example is a two-bedroom, three-bath condo in Kissimmee that’s a short 10-15 minute drive to Walt Disney World. It’s expected to book 238 nights per year for an occupancy rate of about 65% at $103 per night. According to our estimate, it would generate $25,505 in rental income with price adjustments for high season and shoulder seasons.

That’s the lowest rental income total in our comparison, but it is also the most affordable property. The home’s cost is $195,000, according to Zillow. It’s considerably less than the homes in the Gatlinburg area and Breckenridge, which means you don’t need to spend as much upfront and you don’t need to earn as much rental income to cover your costs.

The two-bedroom log cabin in Sevierville home last sold for $367,000. That’s a jump in price and with a projected rental income of $31,449 per year, it also provides a bump in rental income.

Meanwhile, a slopeside two-bedroom, two-bathroom condo in Breckenridge is positioned to earn the most revenue: $52,840 per year. That sounds like a great return, but it also comes with a big price tag. Redfin estimates that the condo would sell for $784,941. It’s a significant investment and it takes more income to come close to breaking even.

You can already see the variance in rental income potential with these two-bedroom examples, and the trend continues across four- and six-bedroom homes.

How Much Rental Income Do Four-Bedroom Properties Earn?

Breckenridge House

  • $93,579 / yr
  • 127 nights booked
  • $737 avg. nightly rate

Gatlinburg House

  • $63,310 / yr
  • 209 nights booked
  • $302 avg. nightly rate

Kissimmee House

  • $37,065 / yr
  • 268 nights booked
  • $138 avg. nightly rate

Now let’s look at properties built for larger groups, which can fetch higher rates but can also come with sticker shock depending on location.

At the high end, a four-bedroom three-and-a-half bath Breckenridge cabin is expected to generate $93,579 in bookings per year. That’s a sizeable second income, but the hefty price tag may put it out of reach for the average vacation home owner. With amazing mountain views and high-end log cabin charm, the property last sold for $1.2 million.

Compare that with the four-bedroom, five-and-a-half bath Gatlinburg cabin that has a price tag of $550,000. According to our estimates, it’s projected to bring in $63,310 per year in rental revenue with 209 nights booked.

The potential may be even higher with the right marketing strategy. The Gatlinburg property listing states that the previous owners made over $70,000 with the home when they were using it for short-term rental, which just proves how variable performance can be even from owner to owner

Finally, the Kissimmee house, a four-bedroom, four-bath house just six miles from the Disney resorts, is likely to generate about $37,065 per year in rental revenue.

It might not sound like a lot when stacked up against the previous projections, but the return is great for a price that’s in the strike zone for most prospective buyers. Zillow estimates it would sell for $300,000, which we found was the max most vacation rental investors are willing to spend in our Owner Insights Report.  

How Much Rental Income Do Luxury Properties Earn?

Breckenridge Estate

  • $313,036 / yr
  • 159 nights booked
  • $1,969 avg. nightly rate

Sevierville Cabin

  • $165,400 / yr
  • 209 nights booked
  • $791 avg. nightly rate

Kissimmee House

  • $50,045 / yr
  • 218 nights booked
  • $230 avg. nightly rate

Before you think that these property examples can’t possibly apply to you, remember how variable performance can be!

The Breckenridge property is yet again the top earner with the potential to bring in a staggering $313,036 per year. However, the expansive house near the slopes at Breckenridge Ski Resort comes with a large price tag at $12.29 million. It’s likely to be booked 159 nights per year at rates around $1,969 per night.

We understand that most buyers don’t have $12 million they can sink into an investment property.

That’s why we’re comparing — the six-bedroom homes in our other markets might make more financial sense to potential buyers and owners.

In Sevierville, the luxury six-bedroom cabin offers proximity to attractions in nearby Pigeon Forge as well as seclusion on the property’s 6.3 private acres. It’s expected to make $165,400 per year, which helps to offset the $1.5 million cost.

With a more-affordable price tag of $455,000, a six-bedroom Kissimmee home can produce $50,045 per year, according to our estimate.

From over $300,000 per year to $50,000 per year, it’s a huge range. The price differentials in the properties and nightly rates further shows just how much variation there is across property locations, even when size is the same.

Consider Your Unique Property When Calculating Vacation Rental Income

You have to take the location, amenities, and property size into consideration when evaluating performance figures. Even though vacation rental can be a lucrative business, you have to be realistic about what you can make with your home and follow the real (not wishful) numbers

Even if you have a six-bedroom near Walt Disney World, one of the top vacation destinations in the country, you can’t expect to collect over $300,000 per year in rental income. And the best part is you don’t have to.

If you have a six-bedroom home in Kissimmee, you don’t need to make that much to be successful. Bringing in the average for your area, which is closer to $42,276, you’re still in a position to cover average costs and earn a little profit on top.

Download Evolve’s state-by-state rental performance reports

We’re constantly reviewing performance data for our owners. We bundle what we learn into performance reports that include key data on rental income, occupancy, average nightly rates, booking windows, vacation rental inventory, and more.

For a detailed look at performance for other property sizes in these areas, review our market performance reports:

If you want to review other destinations, you can browse through our complete list of our reports in top market areas.  

Interested in sizing up your property performance?

With more than 10,000 properties under management, Evolve Vacation Rental is a leader in short-term rental. Let our expert teams create a marketing strategy tailored to your property, with professional photos, optimized listing descriptions, and dynamic nightly rates to maximize your rental income. There’s no upfront cost and just a 10% fee for bookings we make for you.