If you are on this website, you probably enjoy looking at properties and houses, but what probably does it for you is calculating the numbers. It is quite understandable because a lot of people spend their time and energy doing other things they enjoy doing rather than running calculations on spreadsheets. In this article, you will be provided with a calculation for Airbnb to help you decide whether short-term investments make sense or not.
There are primarily three set of numbers you need to put into consideration when running calculations for short-term investments. The three groups of numbers include rent collected, upfront costs, and monthly costs. This article will teach you how to calculate your rent estimate.
Short-Term Property Rent Estimation
You can start by visiting Airbnb website. When you log in, you will find a horizontal menu bar that has some options including ‘Host.’ Click on the “Host” option and move down to “Add a New Listing.” Your listing doesn’t have to be ready at the moment in order for you to take advantage of this feature.
You need to fill out the fundamentals required for the calculation; this includes the location, the number of rooms that are available, the number of guests it can accommodate, etc. Airbnb can give you a weekly estimate of your return. So to get your estimated rent for the month, you can multiply the weekly estimate by four.
Use this number and do more research by going back to the homepage of the site and search for properties close to your location. What kinds of properties are in the location? How much is their nightly rent? Also, AirDNA offers rental reports of short-term by cities. This report includes the rental averages for several kinds of properties on a monthly basis.
You should note that there are lots of discrepancies in these monthly reports; this means the numbers might be too small to be accurate. Hence, you need to only consider this as a resource and not stick firmly to it.
When running your calculations, you should also put seasonal variance and vacancy rates into consideration. The demand rate is going to be covered in the calculation by Airbnb.
Most people base their rate off of vacancy of twenty nights rented in a hot market. Even though this is lower than what they experience sometimes, underestimation is far much better than overestimation.
For a market that is less hot, you might want to consider reducing the number to fifteen nights in a month. Sometimes, some people even bring down the numbers to as low as ten nights in a month; this usually happens when the market is very slow. But you have to do what needs to be done in order to remain in business.
Your numbers can also be affected by some other factors. One of those factors that can affect your numbers is seasonal variance. Seasonal variance has a way of affecting your numbers.
Speaking from the experience of another company in Denver, they experienced a thirty percent decrease in their interest rate on their one-bedroom rentals from November through March. You can confirm this by taking a look at AirDNA and look at rates of demand for the competitors during that time frame (which is from November through to March).
So to get an estimate for your rental rates on a monthly basis, you can take advantage of this estimating tool and also research about your competitors. This will give a better idea of how your rental rates should be. You should not forget the numbers you will find online might be too small to be accurate, so you only need it as a rough estimate to arrive at your own actual rental rate estimate.
Also, this system calculates rental rents on a weekly basis. So for you to get your actual month rental rate estimate, you need to multiply the numbers of the weekly estimate by four. This will help you achieve your rental rates on a monthly basis.
So before you start the calculation, make sure you have the three fundamental things (which are the rent you have collected, the upfront costs, and the monthly costs) required for the calculation.
Note: Zilculator loads rental comps right in your property report. We partnered with Rentometer to bring you the industry-standard rent estimates.