# How to Calculate Short-Term Rental Income (Free STR Revenue Calculator) > Projecting Airbnb revenue is the easy part. Calculating what you'll actually keep requires modeling every expense, debt service payment, and vacancy scenario. Here's how to estimate rental income accurately — and a free calculator that does the math for you. Canonical: https://www.underwriteapp.com/blog/how-to-calculate-short-term-rental-income "This property could make $90,000 a year on Airbnb." Every STR investor has heard some version of this pitch — from a real estate agent, a market data tool, or their own back-of-napkin math. And the number is usually directionally correct. The problem is that gross revenue is the least useful number in short-term rental investing. What matters is what you keep. After cleaning costs, platform fees, insurance, property management, mortgage payments, and a dozen other line items, the gap between projected revenue and actual income is often staggering. Properties that "make" $90,000 can easily produce $5,000 in real cash flow — or lose money entirely. This guide walks you through how to calculate short-term rental income accurately, step by step. And if you want the math done for you, [Underwrite's free STR revenue calculator](/calculator) runs all of these numbers instantly. --- ## Step 1: Estimate Gross Annual Revenue The revenue formula is straightforward: ``` Gross Annual Revenue = ADR × Occupancy Rate × 365 ``` [Average daily rate (ADR)](/learn/average-daily-rate) is what you earn per booked night. [Occupancy rate](/learn/occupancy-rate) is the percentage of nights that are actually booked over a year. **Example:** A mountain cabin with a $250 ADR and 65% occupancy: $250 × 0.65 × 365 = **$59,313 gross annual revenue** That's the top-line number. Everything from here is subtraction. ### Getting ADR and Occupancy Right The single biggest source of bad STR projections is using market averages for ADR and occupancy instead of property-specific estimates. A 4-bedroom lakehouse with a private dock is not the same market as a 2-bedroom condo three miles from the water — even if they're in the same ZIP code. To project revenue accurately: - **Pull 8–12 comparable active listings** that match your property on bedroom count, location proximity to the primary demand driver, amenity profile, and property type. - **Assume lower first-year performance.** New listings without reviews typically run 10–15 points below market occupancy. Budget for 55–65% occupancy in year one, even in strong markets. - **Account for seasonality.** A beach town listing might achieve 90% occupancy in summer and 25% in winter. Annualized averages smooth this out, but your cash flow won't be smooth — you need reserves to cover low-season months. If you don't have time to pull comps manually, [run the numbers through our calculator](/calculator) and test multiple ADR and occupancy scenarios to see how sensitive your returns are to these assumptions. --- ## Step 2: Subtract Operating Expenses This is where most investors' models break. STR operating expenses are structurally different from long-term rental expenses, and they're almost always higher than investors expect. Here's what a realistic expense model looks like for an STR grossing $60,000 annually: | Expense Category | Annual Cost | % of Gross | |-----------------|------------|-----------| | Platform commissions (Airbnb/VRBO) | $2,400 | 4% | | Property management | $15,000 | 25% | | Cleaning (per-turnover, ~3/week) | $13,500 | 22.5% | | STR insurance | $3,000 | 5% | | Utilities (owner-paid) | $3,600 | 6% | | Supplies and consumables | $1,200 | 2% | | Maintenance and landscaping | $2,400 | 4% | | Furnishing replacement reserve | $4,200 | 7% | | **Total Operating Expenses** | **$45,300** | **~75%** | A 75% expense ratio is not unusual for a self-managed STR in its first few years. If you use a property manager (20–30% of revenue), the ratio climbs even higher. ### The Expenses Most Models Miss Three line items consistently catch investors off guard: 1. **Cleaning is per-stay, not monthly.** At 3 turnovers per week and $100–$200 per clean, cleaning alone can eat 15–25% of gross revenue. This is the single largest operating expense for most STRs. 2. **Furnishing replacement is ongoing.** Guests are harder on furniture, linens, and appliances than long-term tenants. Budget 7–10% of gross revenue for furniture and equipment replacement each year. 3. **STR insurance costs 2–3x standard homeowner's insurance.** A proper short-term rental policy runs $2,500–$5,000 annually, compared to $1,200–$2,000 for a standard homeowner's policy. Many investors don't discover this until after closing. --- ## Step 3: Calculate Net Operating Income (NOI) ``` NOI = Gross Revenue − Operating Expenses ``` Using the example above: $60,000 − $45,300 = **$14,700 NOI** [NOI](/learn/net-operating-income) is the property's income before debt service — it's what the property earns regardless of how you finance it. This is the number lenders care about when evaluating DSCR loans for short-term rentals. --- ## Step 4: Subtract Debt Service Unless you're paying all cash, your mortgage payment comes out of NOI. For a $400,000 property with 25% down ($100,000) and a 30-year fixed mortgage at 7.25%: - **Loan amount:** $300,000 - **Monthly payment (P&I):** ~$2,047 - **Annual debt service:** ~$24,564 Now here's the problem: $14,700 NOI − $24,564 debt service = **-$9,864 annual cash flow** This property loses nearly $10,000 a year at $60,000 gross revenue. That's not a bad property — it's a bad deal at this price point and financing structure. And it's a scenario that most revenue-only projections would never surface. ### DSCR: The Lender's Litmus Test [DSCR (Debt Service Coverage Ratio)](/learn/what-is-dscr) = NOI / Annual Debt Service In this example: $14,700 / $24,564 = **0.60 DSCR** Most DSCR lenders require 1.25 or higher. A DSCR below 1.0 means the property can't cover its own mortgage from rental income. This deal wouldn't qualify for a DSCR loan — which is itself a signal. --- ## Step 5: Calculate Your Actual Return The metric that matters most to leveraged STR investors is **cash-on-cash return:** ``` Cash-on-Cash Return = Annual Pre-Tax Cash Flow / Total Cash Invested ``` Total cash invested includes everything you put in up front: - Down payment: $100,000 - Closing costs (3%): $12,000 - Furnishing and renovation: $15,000 - **Total: $127,000** If the property above were in a stronger market generating $90,000 gross with the same expense ratio: - NOI: $90,000 x 0.25 = $22,500 - Cash flow: $22,500 - $24,564 = -$2,064 Still negative. You'd need roughly $100,000 in gross revenue — a $275 ADR at 65% occupancy or equivalent — just to break even at this price point. And that's exactly why you need to [run the full scenario in a calculator](/calculator) before making an offer. --- ## What Makes a Good STR Deal? After running hundreds of scenarios, these are the benchmarks experienced STR investors target: | Metric | Target Range | What It Means | |--------|-------------|--------------| | Cash-on-cash return | 8–15% | Your actual return on capital invested | | DSCR | 1.25+ | Comfortable debt coverage with margin | | [Break-even occupancy](/learn/break-even-occupancy) | Below 50% | Property covers all costs at half occupancy | | [Cap rate](/learn/what-is-cap-rate) | 6–10% | Unlevered return — how the property performs independent of financing | A deal that hits all four of these benchmarks is genuinely strong. A deal that misses two or more needs either a lower purchase price, better revenue assumptions backed by real comps, or a different financing structure. --- ## The Revenue Estimate Trap The most dangerous number in STR investing is someone else's revenue projection. AirDNA, Mashvisor, and other tools provide market-level revenue estimates — but these are averages across all listing types, locations, and quality levels in a given market. They don't know your specific property, your amenity package, your proximity to the demand driver, or your operational skill level. Revenue estimates are starting points for research, not inputs for financial models. The only revenue number you should trust is one built from comparable listings that match your specific property — and even then, stress-test it at 70% and 80% of your estimate to see if the deal still works. --- ## Skip the Spreadsheet You can run all of these calculations in a spreadsheet. But spreadsheets don't force you to think through every assumption, they don't flag when your DSCR is below lender thresholds, and they don't let you test scenarios instantly. [Underwrite's free STR revenue calculator](/calculator) takes nine inputs — purchase price, ADR, occupancy, operating expenses, down payment, interest rate, loan term, and furnishing budget — and outputs everything covered in this guide: gross revenue, NOI, cash flow, cash-on-cash return, cap rate, DSCR, and break-even occupancy. It's free, requires no signup, and gives you a complete financial picture in under 30 seconds. Use it before you make your next offer. --- ## Key Takeaways 1. **Gross revenue is not income.** After expenses and debt service, most STR investors keep 15–30% of gross revenue — if the deal is good. Many deals produce negative cash flow. 2. **Operating expenses are higher than you think.** STR expense ratios run 40–75% of gross revenue. Cleaning, furnishing reserves, and STR insurance are the three most commonly underestimated categories. 3. **Always model debt service.** A property with great NOI can still be a terrible deal at the wrong price or interest rate. DSCR is the quickest way to check if the financing structure works. 4. **Cash-on-cash return is the metric that matters.** It tells you what you're actually earning on the money you put in. Target 8–15% for a deal worth the effort. 5. **Test your assumptions.** Run your deal at 70% and 80% of your revenue estimate. If the deal breaks at 80%, the margin of safety isn't there.