The Complete Guide To Calculating Airbnb Income
Are you thinking of buying an Airbnb, but you're not sure how much you can earn from it? One of the most important steps in short-term rental due diligence is calculating how much income you think the property can earn. This will help you determine whether the cash flow is strong enough to merit an investment.
In this guide, we discuss the factors that can affect Airbnb earnings, the importance of using data analytics tools and free Airbnb calculators to calculate projected revenue, and a step-by-step guide on how to calculate Airbnb revenue using free short-term rental data tools online.
Factors That Affect Airbnb Revenue
Before we dive into how to calculate Airbnb or vacation rental revenue, it's important to understand the factors that can impact how much your short-term rental can make. These factors include:
Location:
The location of your Airbnb is one of the most important factors. A property in a popular tourist destination or in a prime location in a city will generally have higher earning potential than a property in a less desirable location. We recommend using a free market data tool to view Airbnb data about an entire market when narrowing down your search.
Property Size:
The size of your potential short-term rental investment can also impact earnings. Larger properties that can accommodate more guests can oftentimes bring in more revenue — though you shouldn’t force a high guest capacity just to earn more money. This can introduce the risk of wear and tear or parties at your property.
A good way to figure out the "sweet spot" of how many bedrooms your property should have is looking at a market data tool to see what type of properties are most common in your market. Our free Market Data tool shows you the percentage of different bedroom counts for short-term rentals in any given market and provides you with insight of how much each bedroom count earns, allowing you to figure out what bedroom count is most profitable for you.
Amenities:
Properties with amenities such as a pool, hot tub, or gym can also command a higher price per night. Another good way to gauge how much adding certain amenities can impact your projected revenue is by using a free Airbnb market data tool. The same tool we discussed above can also show you the breakdown of each amenity, how prevalent they are in each market, and how much more money you could earn with any given amenity. This helps you figure out what is most impactful to invest in for your short-term rental.
Seasonality:
Some markets experience steady demand throughout the year, while other markets see heavy fluctuations in peak season. For example, Park City, Utah sees high demand for ski season, while Bar Harbour, Maine sees high demand in the Fall for leaf-peeping. It’s important to keep this in mind when thinking through your own goals — do you want a vacation rental in a destination that sees more consistent seasonality (but may not demand as high of rates), or would you rather a short-term rental in a destination with very high seasonality (but earns very high rates during its peak season)?
Comparables:
The short-term rental market, like any other marketplace, is driven by supply and demand. While demand from travelers is still high and growing, supply in the market is an important consideration. As a result, it is important to keep a keen eye on the comparable short-term rental properties in the area you are investing in. This helps gives a full understanding of the competitive landscape and how your potential rental stacks up. Our free Airbnb calculator allows you to enter any address and we will return a free revenue estimate and show you all Airbnb comparables in the area for you to view, include, or exclude so you can refine your estimate further.
Using Short-Term Rental Data Tools To Calculate Airbnb Revenue
To accurately estimate your Airbnb revenue, it's important to use short-term rental data analytics tools that provide insights into the local Airbnb, short-term rental, and vacation rental market. One such tool is Rabbu — Rabbu is a suite of free short-term rental data tools that includes:
- Airbnb Calculator — an Airbnb calculator to project estimated revenue of any address.
- Market Data — a tool to help you conduct market research and learn more about short term rental markets.
- Properties for Sale — a database of on-market properties, as well as current short-term rentals, that are underwritten with short-term rental returns.
The above tools provide Airbnb data analytics that can help short-term rental investors understand how much they can earn. The website provides data on occupancy rates, average daily rates, revenue per available night (RevPAN), and other important metrics that can help short-term rental investors determine how much they can earn from their Airbnb. Investors can even view nearby comparable properties and conduct a free and immediate underwriting, all on Rabbu’s one platform.
How the Rabbu Airbnb Calculator Works
Rabbu has gathered the data of millions of Airbnb listings across the United States to calculate the earning potential of any address entered on its calculator. This is done using a series of algorithms and formulas that run behind the scenes weekly. These algorithms calculate the potential earnings of the address you entered based on the seasonalized performance of nearby short-term rentals (otherwise known as comparables, or “comps”). The Rabbu tool allows users to utilize filters to automatically include/exclude comps, or manually include/exclude comps, to better refine the estimate.
The data is refreshed weekly to ensure investors are equipped with the most real-time data and information available.
The revenue figures presented on Rabbu’s Airbnb calculator are gross revenue figures. This calculation is not inclusive of cleaning fees, Airbnb’s fees, other service fees, or property management fees.
Step-By-Step Guide To Calculating Airbnb Revenue Using Rabbu
Here's a step-by-step guide on how to calculate Airbnb revenue using our Airbnb calculator:
Step 1 — Navigate to the Airbnb calculator's home page:
Go to rabbu.com/airbnb-calculator to access the free Airbnb calculator.
Step 2 — Type in any address and select bedroom count:
Type in the address you’d like a revenue estimate for and tell the tool how many bedrooms are at that address.
Step 3 — Utilize filters to adjust your comparable set:
Rabbu’s Airbnb Calculator calculates your target address’ earnings potential based on the performance of nearby short-term rentals that are similar to it. To further refine your revenue projection, utilize the filters to automatically adjust your comp set.
Step 4 — Manually review your comparable set and refine:
Scroll down to review the exact properties included in your comparable set. Choose to include or exclude these properties based on how similar or dissimilar they are to the target address you entered. This will help refine your estimate and its accuracy.
Step 5 — Review your revenue estimate:
Review the revenue estimate at the top of the screen. This revenue estimate includes estimated monthly revenue, annual revenue, ADR (average daily rate), occupancy, and revenue per available night (RevPAN).
Additionally, there is a seasonality chart to show you how travel demand for this area fluctuates throughout the year.
Step 6 — Utilize the investor return calculator:
Utilize the investment calculator on the page where you can enter in purchase price. After entering in purchase price, Rabbu will automatically underwrite the property for you based on the projected monthly revenue and the purchase price entered. You may also adjust assumptions to refine the underwriting.
In Conclusion
Calculating how much an Airbnb can make is an important step in considering an Airbnb purchase. By understanding the factors that affect Airbnb earnings and using data analytics tools like Rabbu's Airbnb Calculator, short-term rental investors can estimate how much they could earn from their properties. With the right information and tools, investors can start a profitable Airbnb business and earn a steady stream of income.
