# The Complete Guide to Short-Term Rental Operating Expenses (With Real Numbers)

> STR expense ratios run 45–60% of gross revenue — far higher than long-term rentals. Here's every cost category, realistic ranges, and what to include in your investment model.

Canonical: https://www.underwriteapp.com/blog/short-term-rental-operating-expenses


The most common reason STR investments underperform: investors model expenses the way they would for a long-term rental. They apply a 25–30% expense ratio, subtract mortgage payments, and call the rest cash flow.

But short-term rentals don't work like long-term rentals. The guest experience requires active management, frequent cleaning, consumables, and furnishing replacement cycles. STR-specific insurance is more expensive. Utilities are paid by the owner, not the tenant.

A realistic STR expense ratio is **45–60% of gross revenue** — roughly twice what most investors expect when they come from the LTR world.

This guide breaks down every expense category, explains the ranges you should expect, and walks through which costs are fixed vs. variable (a distinction that matters enormously for downside modeling).

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## Why STR Expenses Are Higher Than You Think

Three structural differences drive STR expenses above LTR levels:

**1. You pay the utilities.** In a long-term rental, the tenant pays electricity, gas, water, and internet. In an STR, you pay all of it — and consumption is unpredictable because different guests use different amounts.

**2. Turnover is constant.** A long-term rental gets cleaned once when a tenant moves out. An STR gets cleaned after every stay — potentially 2–3 times per week. Cleaning costs are the largest variable expense category.

**3. Furnishings degrade faster.** STR furniture, linens, kitchenware, and decor get harder use than residential equivalents. Expect to replace furnishings on a 3–5 year cycle. A 7–10% furnishing reserve is appropriate.

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## STR Expense Categories (Complete List)

### Fixed Expenses (Don't Change With Occupancy)

**Property Taxes**
The largest fixed expense for most investors. Property taxes are set by the municipality and don't change based on how often your STR is booked.

- Range: 0.5–2.5% of assessed value annually
- Varies enormously by state/market: Florida and Texas are higher; some mountain and rural markets are lower
- Note: some states have specific STR tax classifications that change the rate

**Insurance**
A standard homeowner's policy doesn't cover short-term rental activity. You need an STR-specific policy or a commercial endorsement.

- Range: $1,500–$5,000/year for most residential STRs
- Higher for luxury properties, waterfront, or markets with hurricane/flood exposure
- Major providers: Proper Insurance, Steadily, Allstate HostAdvantage
- Some platforms (Airbnb's AirCover) provide limited host protection, but it doesn't replace standalone STR insurance

**HOA Fees**
If applicable. **Critical note:** many HOAs prohibit short-term rental activity entirely, or require owner occupancy for a minimum number of nights. Verify before closing.

- Range: $0–$800+/month depending on property type and amenities
- Condo associations in vacation markets are high-risk; single-family HOAs vary

**Mortgage Principal + Interest**
Fixed on a fixed-rate loan. The dominant fixed cost for leveraged investors.

**Utilities (Baseline)**
Even with zero guests, you'll have baseline utility costs: preventing pipes from freezing in cold climates, keeping systems running, maintaining internet service.

- Baseline estimate: $50–$150/month when vacant

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### Variable Expenses (Scale With Bookings)

**Platform Commission**
Every booking platform takes a fee. Hosts pay this as a percentage of the booking subtotal.

- Airbnb host fee: 3% of booking value (standard; some hosts with flexible policies pay more)
- VRBO/Expedia: 5–8% depending on model
- Direct bookings: 0% commission, but you carry the booking management cost

**Cleaning**
The most significant variable cost — and the most common underwriting mistake. Many investors model cleaning as a monthly flat rate. It's actually per-stay.

- Range: $75–$350 per turnover depending on property size
- A 3-bedroom property cleaning for $150/turnover, with 3 stays/week: $23,400/year
- Cleaning costs scale with booking frequency, not occupancy percentage
- High-booking-frequency markets (beach weekenders, urban destinations) have high cleaning costs even at moderate occupancy

**Consumables and Supplies**
Paper towels, toilet paper, dish soap, laundry detergent, coffee pods, bath amenities, kitchen staples. These replenish with every stay.

- Range: $30–$150/stay or $50–$200/month depending on stay frequency
- Hosts who provide "hotel-level" amenities spend more; minimalist setups spend less

**Utilities (Variable Portion)**
The guest-driven portion of utility consumption above your baseline.

- Electricity spikes with AC usage (beach/coastal markets in summer) and heating (mountain markets in winter)
- Total utilities including baseline: $150–$500/month depending on climate, season, and guest behavior
- Budget separately for hot tubs (high electricity users): +$100–$200/month

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### Semi-Variable Expenses (Periodic But Irregular)

**Property Management**
If you use a professional property management company, their fee is typically percentage-based — so it scales with revenue. But once you hire a PM, it's effectively a fixed operational choice.

- Range: 20–35% of gross revenue (full-service, co-hosting)
- Some PMs charge flat monthly fees: less common, better for high-revenue properties
- Self-management eliminates this cost entirely but requires active time investment (1–4 hours/week for a single property)

**Routine Maintenance and Repairs**
Plumbing, HVAC, appliances, landscaping, pool service, pest control. These are periodic, not monthly, but budget for them as monthly averages.

- Landscaping: $100–$400/month depending on property size and frequency
- Pool service: $100–$250/month if applicable
- General maintenance/repairs: $100–$300/month (more for older properties)

**Furnishing Reserve**
STR furnishings — mattresses, sofas, dining sets, kitchen equipment, linens — wear out faster than residential equivalents. Set aside a monthly reserve for replacements.

- Standard reserve: 5–10% of gross revenue annually
- A property earning $72,000/year should set aside $3,600–$7,200 for furnishing replacement
- Initial furnishing cost to set up an STR: $15,000–$50,000 depending on property size and quality level

**CapEx Reserve**
Roof, HVAC, water heater, foundation — the big-ticket items that every property eventually needs.

- Standard reserve: 1–2% of property value annually
- A $400,000 property: $4,000–$8,000/year in CapEx reserve
- This is a reserve, not necessarily a current expense — but it should be in your model

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## Putting It Together: Full Expense Model Example

3-bedroom STR, $400,000 purchase price, $72,000 gross revenue, professionally managed:

| Category | Annual | % of Gross |
|----------|--------|-----------|
| Platform commission (4%) | $2,880 | 4.0% |
| Property management (25%) | $18,000 | 25.0% |
| Cleaning (2.5 stays/week × $150) | $19,500 | 27.1% |
| Insurance | $3,000 | 4.2% |
| Property taxes | $5,200 | 7.2% |
| Utilities | $4,200 | 5.8% |
| Consumables | $1,500 | 2.1% |
| Maintenance/repairs | $3,600 | 5.0% |
| Furnishing reserve (8%) | $5,760 | 8.0% |
| CapEx reserve (1.5%) | $6,000 | 8.3% |
| **Total Operating Expenses** | **$69,640** | **96.7%** |

Wait — that leaves almost nothing for NOI?

Yes. At 25% management fee plus cleaning, a property that grosses $72,000 barely covers its operating costs — before debt service.

This is not a bad deal. This is an accurate model. The $72,000 gross assumption at 65% occupancy and $150 ADR may be conservative. At 75% occupancy and $175 ADR, gross revenue jumps to $95,000 and the math changes completely. This is why sensitivity analysis matters.

It also shows why **self-managing investors have structurally better returns**: removing the 25% management fee — $18,000/year — adds roughly $1,500/month to cash flow.

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## The Right Way to Model This

Build your expense model in a spreadsheet with fixed and variable costs separated. Then run three scenarios: conservative (55% occupancy, -10% ADR), base (65% occupancy), and upside (75% occupancy, +10% ADR). See whether the deal is acceptable in all three.

Alternatively, Underwrite builds this model automatically. When you enter a property address, the expense module populates with STR-specific cost categories and market-calibrated estimates. You can adjust any line item. The output includes a sensitivity table and DSCR calculation at each scenario.

**[Run a free analysis on any property.](/signup)**