# Short-Term Rental Investing: A Beginner's Guide

> Everything you need to know before buying your first Airbnb property — from market selection to underwriting a deal.

Canonical: https://www.underwriteapp.com/blog/str-investing-beginners-guide


## What Is Short-Term Rental Investing?

Short-term rental (STR) investing means purchasing a property and renting it out for nightly or weekly stays — typically through platforms like Airbnb and Vrbo — rather than on a traditional 12-month lease.

The appeal is higher gross revenue per night compared to long-term rentals, along with the flexibility to use the property yourself when it's vacant.

## How STR Returns Differ from Long-Term Rentals

| Metric | Long-Term Rental | Short-Term Rental |
|--------|-----------------|------------------|
| Gross yield | 6–10% | 10–20%+ |
| Vacancy | Near zero (lease) | Seasonal (20–40%) |
| Operating expenses | Low (15–25%) | High (40–60%) |
| Management intensity | Low | High |

The higher gross revenue of STRs is offset by higher operating costs — cleaning fees, platform commissions, furnishing, and active management. Net operating income is what matters.

## Key Metrics to Understand

Before buying an STR, you need to understand three core metrics:

- **[what-is-cap-rate](/learn/what-is-cap-rate)** — measures return on value, independent of financing
- **[cash-on-cash-return](/learn/cash-on-cash-return)** — measures cash return on the actual cash you invested
- **Gross yield** — annual gross revenue divided by purchase price

## How to Choose a Market

Not all markets are equal. Focus on:

1. **Demand drivers** — beach, ski resort, major city, national park, or event tourism
2. **Regulatory environment** — some cities ban or heavily restrict STRs
3. **Supply growth** — markets with rising supply see compressed occupancy and ADR
4. **Seasonality** — mountain markets peak in winter; coastal markets peak in summer

## Underwriting a Deal

A sound underwriting model accounts for:

- Gross revenue (occupancy × ADR, benchmarked against comparable listings)
- Platform commissions (typically 3–15%)
- Cleaning costs (variable by booking count)
- Property management (20–35% of gross revenue if outsourced)
- Mortgage, taxes, insurance, and utilities
- Capex reserve (set aside 5–10% of revenue annually)

## Common Misconceptions

**"Airbnb data tells me what I'll earn."** Platform estimates are based on optimistic occupancy scenarios. Use a conservative 60–65% occupancy for initial underwriting.

**"Higher nightly rate = better investment."** High ADR in low-demand markets means low booking volume. Revenue = occupancy × ADR. Both matter.

**"I can self-manage remotely."** Remote STR management is feasible but requires systems: keypad locks, automated messaging, vetted cleaners, and a local handyperson on call.

## Next Steps

Run a full underwriting analysis before making any offer. Underwrite uses real market data — occupancy benchmarks, ADR comps, and expense norms — to give you a complete investment package in 15 minutes.