Running the Numbers Before You Commit Capital
Most STR investors fail because they underestimate expenses. This chapter walks through every cost category — fixed, variable, and hidden — and shows you how to build a conservative financial model that accounts for all of them.
Revenue formula: Monthly Revenue = ADR × Days × Occupancy × (1 - Platform Fee%). Always model 3 scenarios: conservative (60%), base (70%), optimistic (80%).
Fixed expenses: mortgage, insurance, HOA, utilities, software subscriptions ($50–150/month for PMS + pricing tools).
Variable expenses: cleaning ($80–200/turn), supplies ($15–30/turn), maintenance reserve (1–2% of property value/year).
Hidden costs: platform fees (3% Airbnb host fee + 14–16% guest fee), tax remittance, professional photography ($300–600).
Target minimum 15% cash-on-cash return in year 1. If the numbers don't work at 60% occupancy, pass on the deal.