Short-term rentals

How it makes money

Revenue is nightly rate × booked nights. It's often higher than long-term rent, but so are costs: furnishing, cleaning, utilities, platform and management fees, and lodging tax.

The numbers to watch

Monthly cash flow

Booking revenue minus every expense. Occupancy already accounts for empty nights, so no separate vacancy is taken.

Cash-on-cash return

A year of cash flow over the cash to buy, furnish and set up the property.

Lodging tax

A percentage of revenue collected. It isn't a cost when guests pay it on top of the booking.

Break-even price

The highest price that still cash-flows at your nightly rate and occupancy.

What to check before you buy

Local rules

Many cities limit or license short-term rentals. Check before you buy.

Demand

Tourism, events and seasonality set rates and occupancy.

Setup costs

Furniture, linens and photos add to the cash you need.

Management

Guest messaging, cleaning and turnovers; managers often charge 20–30%.

Risks

Seasonality

Off-season months can run at a loss.

Regulation

Rules can change after you've bought.

More active

Closer to running a small hospitality business than passive income.

Wear and tear

Frequent guests mean more maintenance.