How monthly revenue is estimated
Monthly revenue is the nightly rate times occupancy times an average 30-day month — a simplified model that works well for quick screening, though real bookings vary night to night and season to season.
Cap rate — return independent of financing
Net Operating Income (NOI) is annual revenue minus annual operating expenses, before the mortgage. Cap rate divides NOI by the purchase price, giving a return figure you can compare across properties regardless of how each is financed.
Cash-on-cash return — your actual leveraged return
Cash-on-cash return accounts for financing: it takes the actual annual cash flow (NOI minus mortgage payments) and divides it by the cash you actually put in (the down payment). This is usually the more relevant number if you're financing the purchase, since it reflects your real return on the money out of your pocket.
Common uses
- Deal screening: quickly comparing multiple listings before a deeper analysis.
- Financing decisions: seeing how a larger down payment changes cash-on-cash return.
- Expense sensitivity: checking how much cleaning or management fees eat into cash flow.
Frequently asked questions
Does this include vacancy or seasonal variation?
The occupancy percentage should already reflect your best estimate of average annual occupancy, including slow seasons — use a conservative, blended figure rather than peak-season numbers.
Should closing costs or renovation budget be included?
Not directly — this tool focuses on ongoing cash flow and return metrics. For a full investment analysis, add closing costs and any upfront renovation budget to your total cash invested when evaluating overall ROI.