How to calculate Airbnb cash-on-cash return with your own numbers

Cash-on-cash return is one year of cash flow divided by the cash you count as invested. On the ROI calculator, cash flow is operating profit after the mortgage payment you enter. Cash invested is the down payment, plus closing costs, plus furniture and setup.

The same page also shows a cap rate. That figure divides operating profit before the mortgage payment by the purchase price. Payback period is a third question: how long monthly operating profit takes to recover one upfront amount you type. It is a length of time.

The amenity ROI calculator is a fourth ratio, for one purchase and an uplift you type. It is not the property return on this page. How to decide if an Airbnb amenity is worth the cost is that estimate. The figures there are made up.

The worked figures below are a made-up example. Replace every one of them. This is a planning estimate. It is not financial, tax, legal, or pricing advice, and a guest may not book at the nightly rate.

How to estimate Airbnb ROI and break-even walks a year, a host fee, and an upfront amount with a different illustrative example. How to Calculate Short-Term Rental ROI is the shorter page on cash invested and on running a lower case as well as the case you hope for.

Cash-on-cash return

The ROI calculator uses these formulas. Booked nights are 365 times the occupancy percent. Annual revenue is the nightly rate times those nights. A host fee is outside that revenue unless the nightly rate is already the payout per night, or the variable-expense percent stands in for the fee. Airbnb host service fees explained quotes the percentages Airbnb publishes.

cash invested = purchase price × down payment percent + closing costs + furniture and setup
annual revenue = nightly rate × 365 × occupancy rate
annual operating profit = annual revenue − monthly operating costs × 12 − annual revenue × variable expense percent
annual cash flow = annual operating profit − monthly mortgage payment × 12
cash-on-cash return = annual cash flow ÷ cash invested × 100

Monthly operating costs are the cash that goes out when the calendar is empty, other than the mortgage payment. The field hint says to include property tax, insurance, utilities, and reserves, and to leave the mortgage payment out. The mortgage field says principal and interest. Income tax is not calculated. A cost you leave out is missing from the profit.

Variable expenses are a percent of nightly revenue. They are the place for a platform allowance, consumables, and any other cost you want to tie to revenue. Typing a host-fee percent there matches a host fee on nightly revenue only. A host fee on a stay that also has a cleaning fee uses a wider base. How to set an Airbnb cleaning fee is that fee. This example does not add one.

Cash-on-cash return is unavailable when cash invested is zero. The cap rate is unavailable when the purchase price is zero.

The cap rate, and the word ROI

cap rate = annual operating profit ÷ purchase price × 100

The result label is “Cap rate (before mortgage).” Operating income on the page is the annual operating profit above, before the mortgage payment. Cash-on-cash return uses the cash flow after that payment, and it divides by cash invested rather than by the purchase price.

A figure someone calls ROI can be either of those, or the amenity calculator’s first-year net divided by one purchase. Write down the profit and the price. In this guide, cash-on-cash return means the ROI calculator’s headline percent. The cap rate means the percent before the mortgage payment, on the purchase price.

Payback period

The Payback period tool divides one upfront amount by monthly operating profit. The page formula is months to break even = upfront investment ÷ monthly operating profit. The result is labeled Payback period. There is no separate mortgage field. A mortgage payment is inside monthly fixed costs only when you type it there.

booked nights per month = (365 ÷ 12) × occupancy rate
monthly operating profit = nightly rate × booked nights per month − monthly fixed costs − variable cost per booked night × booked nights per month
payback period = upfront investment ÷ monthly operating profit
profitable booked nights = upfront investment ÷ (nightly rate − variable cost per booked night)

The month is 365 ÷ 12 days, then times the occupancy percent. The ROI calculator’s year is 365 days times that same percent. The two bases match when you use the same percent. They answer different questions.

The profitable-booked-nights line leaves monthly fixed costs out. The months line includes them, because monthly operating profit subtracts those costs. When monthly operating profit is not above zero, the payback period displays as Not reachable. The nights line can still show a number.

The timeline assumes the same rate, occupancy, and costs every month. Airbnb seasonal pricing with your own numbers is a separate count for a high window and a quiet window. The window there is made up.

Say which cash the upfront amount is. Cash invested from the ROI calculator can include a down payment. A run that asks how long launch cash takes to come back can leave the down payment out. The two tools do not force the amounts to match.

A made-up example

Every amount in this section is made up. The 160 nightly rate, the 40% occupancy, the 20% variable allowance, and the 400 mortgage payment are here so the arithmetic can be checked. They are not a market rate, a typical occupancy, a recommended fee, or a forecast. The 20% is part of the illustration. It is not an Airbnb service fee.

How to calculate your Airbnb occupancy rate, ADR and RevPAR is the calendar count behind an occupancy percent, including blocked nights and nights you use yourself. The calendar there is made up. How much does it cost to start an Airbnb? Budget it with your own numbers is the quote list for furniture and setup. The total there is a made-up example.

The currency control changes the symbol and the grouping. It does not convert one currency into another. The dollar figures are what the calculators display when USD is selected.

The ROI calculator

Open the ROI calculator and replace the filled-in amounts with:

• Purchase price 240000
• Down payment 25%
• Closing costs 4000
• Furniture and setup 6000
• Nightly rate 160
• Occupancy 40%
• Monthly operating costs 1200
• Variable expenses 20% of revenue

cash invested = 240000 × 25% + 4000 + 6000 = 70000
booked nights = 365 × 40% = 146
annual revenue = 160 × 146 = 23360
annual variable costs = 23360 × 20% = 4672
annual fixed costs = 1200 × 12 = 14400
annual operating profit = 23360 − 14400 − 4672 = 4288
cap rate = 4288 ÷ 240000 × 100 = 1.7866…%

With the monthly mortgage payment left at 0:

annual cash flow = 4288 − 0 = 4288
cash-on-cash return = 4288 ÷ 70000 × 100 = 6.1257…%

With USD selected, the page shows cash invested $70,000, 146 booked nights, annual revenue $23,360, variable costs $4,672, fixed costs $14,400, operating income $4,288, mortgage payments $0, annual cash flow $4,288, and monthly cash flow $357. Cash-on-cash return displays as 6.1%. The cap rate displays as 1.8%.

Type 400 in Monthly mortgage payment and leave the other fields as they are:

annual mortgage payments = 400 × 12 = 4800
annual cash flow = 4288 − 4800 = −512
cash-on-cash return = −512 ÷ 70000 × 100 = −0.7314…%

Operating income still displays as $4,288. Mortgage payments display as $4,800. Annual cash flow displays as -$512. Monthly cash flow displays as -$43. Cash-on-cash return displays as -0.7%. The cap rate still displays as 1.8%.

Whole currency units, and one decimal place on a percentage, are display rounding. They are not part of the formula. The monthly cash-flow line rounds -$512 ÷ 12 on its own. The hand result of that division is -42.666…, and the page shows -$43.

The operating profit is the same in both runs. The cash-on-cash return moves because the mortgage payment is subtracted from cash flow and the cap rate leaves it in. A year with no positive cash flow is still the output of these assumptions. It is not a verdict on a property.

Payback period for two upfront amounts

Open Payback period. The nightly rate is 160. Expected occupancy is 40%. The variable cost per booked night is 32, which is 20% of 160, so the variable allowance matches the ROI run. That match is only for the illustration.

The first upfront amount is 70000, the cash invested above. Monthly fixed costs are 1200, the same monthly operating costs, with the mortgage payment left out.

booked nights per month = (365 ÷ 12) × 40%
monthly revenue = 160 × booked nights per month
monthly variable costs = 32 × booked nights per month
monthly operating profit = monthly revenue − 1200 − monthly variable costs
payback period = 70000 ÷ monthly operating profit
profitable booked nights = 70000 ÷ (160 − 32) = 70000 ÷ 128

The hand results use booked nights of 146 ÷ 12. Monthly revenue is 1946.666…, monthly variable costs are 389.333…, and monthly operating profit is 357.333…. Months are 70000 ÷ 357.333…, which is 195.895… months, or 16.324… years. Profitable booked nights are 546.875.

With USD selected, the page shows 12.2 booked nights per month, monthly revenue $1,947, variable costs $389, and monthly operating profit $357. The payback period displays as 16.3 years. Profitable booked nights display as 546.9.

The second run keeps the upfront amount at 70000 and types the mortgage payment into monthly fixed costs: 1200 + 400 = 1600.

monthly operating profit = 1946.666… − 1600 − 389.333… = −42.666…

Monthly operating profit displays as -$43. The payback period displays as Not reachable. Profitable booked nights still display as 546.9. The nights line divides 70000 by 128 and never sees the 1600. The months line stops because monthly operating profit is not above zero. The page says the upfront investment cannot be recovered from these assumptions.

The third run asks a narrower question: how long operating profit takes to recover the closing costs and the furniture, 4000 + 6000 = 10000. The down payment stays in the ROI cash-invested figure and is left out of this upfront amount. Monthly fixed costs go back to 1200, so the mortgage payment is out again.

payback period = 10000 ÷ 357.333… = 27.985… months
profitable booked nights = 10000 ÷ 128 = 78.125

The payback period displays as 2.3 years. Profitable booked nights display as 78.1. Monthly revenue, variable costs, and monthly operating profit display as they did in the first run: $1,947, $389, and $357.

The same 10000 with monthly fixed costs of 1600 displays as Not reachable, and profitable booked nights display as 78.1. The -$43 of monthly operating profit is the same figure as the second run.

16.3 years, 2.3 years, and Not reachable are three readings of one made-up property. They follow from which cash you asked to recover and from whether the 400 is inside monthly fixed costs. Cash-on-cash return of -0.7% is the year after that payment, on the 70000. The cap rate of 1.8% is the year before that payment, on the 240000.

What the estimate leaves out

Appreciation, income taxes, depreciation, sale costs, and a later change in an interest rate are outside both formulas, unless a monthly cash figure you typed already includes a payment you chose to count. The ROI page says the same thing next to the result.

A cleaning fee a guest pays is outside ROI revenue and outside Payback period revenue. Both formulas count the nightly rate times booked nights. Add a cleaning fee separately when you want it in the picture. How to set an Airbnb nightly price from your costs puts turnover you pay inside a nightly rate, with its own made-up example.

How to Calculate Short-Term Rental ROI asks for a lower nightly rate and occupancy, the assumptions you think are realistic, and a higher case you can explain. Change the costs as well. One illustrative run is the arithmetic of the numbers above.

Airbnb vs long-term rental: how to compare them with your own numbers sets a short-term year next to a long-term year on the same property. The figures there are a made-up example. The short-term vs long-term rental calculator shows cash-on-cash return for each column when you enter cash invested. It does not look up a market rent.