It’s an exciting prospect, but you don’t want to jump into anything if the financials aren’t going to work.
To help, we put together a Vacation Rental Income Calculator that will allow you to factor in the revenue and expenses associated with operating a short-term rental.
If you need help determining your revenue or expenses, please refer to the instructions that you’ll find underneath the calculator – along with some helpful resources and tips.
1. How Much Can You Earn With Your Vacation Rental Home?
To calculate your income, you’ll first need to enter the nightly rate you expect to charge. This fluctuates between high season and shoulder season, but for the purposes of this calculator, take an average.
Not sure how much you can charge per night for a vacation rental in a specific area? Check out our Vacation Rental Performance Reports to get a general idea of how much you can earn in top vacation rental destinations.
If you want to get a more specific idea based on your neighborhood and amenities, browse listing sites to see how much other owners in your area charge.
Next, enter the number of nights you expect to book per month on average. If you need help determining a number, you can also look at our vacation rental performance reports to get an idea of typical occupancy rates in top vacation rental markets.
After you input the information above, the Monthly Revenue result will give you an idea of how much you’ll earn per month before any costs are factored in.
It’s helpful to run a couple of calculations to see how earnings differ when you raise or lower nightly rates and hit higher occupancy rates. This is a great exercise to understand how these factors impact your success and can help you start to build rental income goals as you get started.
2. What Are Your Vacation Rental Expenses?
Rental income is just one side of the coin. Expenses are the other side.
If the costs of ownership and property management are too high, you’re going to have a hard time making money with your vacation home. But if your costs are low, the income you earn is going to go a lot farther to help you turn a profit.
- Insurance & Property Taxes
Enter the amount you’ll have to spend per month on insurance and property taxes for your vacation home. Keep in mind that short-term rental insurance is an additional cost, and one that’s highly recommended for all owners.
- Mortgage Payments
Enter your monthly mortgage payment for your vacation home.
Factor in how much you’ll likely be paying for electricity, wifi, cable, AC and heating bills each month. It’s really important to be honest about these costs so they don’t surprise you down the line by eating into your earnings. Guests expect these amenities when they stay in a vacation rental, and you can likely recoup your costs through rental income.
- Other Expenses
Other expenses include things like HOA fees, maintenance costs, landscaping, stocking the property with toiletries and linens, and investing in furnishings and decoration. If you’re not sure what else should go here, check out this list of hidden costs that you might want to consider as you build your budget to get an idea of how much you’ll be spending.
- Management Costs
If you’re planning to manage the property on your own, expect to pay booking fees to put your vacation home on top listing sites and reach travelers. These range from:
- Airbnb – 3%
- HomeAway/VRBO pay per booking – 5%
- HomeAway/VRBO subscription – NA
- TripAdvisor/FlipKey – 3%
- Booking.com -15%
You’ll also need to factor in your time. Time is money, and the average vacation rental owner spends around nine hours each week managing their vacation rentals.
Assuming your time is worth $15 per hour, you’re spending $135 per week, $540 per month, $6,480 per year for your own time.
If you’re planning to use a property manager, know that management fees for traditional property managers range from 30% – 50%. Working with a property manager that charges 33%, you’re giving up one-third of all the rental income that you generate.
The total gives you an idea of how your expenses stack up to your projected income. Ideally, your net rental income covers your costs and a little extra.
While this is a great tool to get a ballpark of what you can expect to make with a vacation rental, there are many factors that will determine your success with vacation rental.
If you don’t see a number that you’re happy with, adjust some of the numbers you’ve entered above. See what your net rental income looks like if you switch from a property manager to doing it yourself, if you book five more nights per month, or if you charge $25 more per night.
These small adjustments add up and can make a huge difference in your annual rental income.
We know it’s a lot to consider.
At Evolve, we weigh all of these factors and help owners strike the most profitable balance by covering their marketing costs, booking their property as much as possible, and pricing their properties to maximize income.
You may not be able to change your mortgage payments or HOA fees, but you can make sure you’re earning as much rental income as possible with your vacation home at a fraction of the cost that a property manager charges.
Interested in earning as much rental income as possible, but don’t want it to turn into a full-time job? Evolve offers industry-leading vacation rental management services for an industry-low 10% booking fee. Our teams are dedicated to helping homeowners maximize their vacation rental income during every season. Click here to learn more.