Why and When You Need a Vacation Rental Income Calculator  [+Tools to Try]

Regardless of whether you’re leaning towards offering a three-bedroom, vacation rental property or just a private room to guests seeking short-term stays, an effective pricing strategy is foundational to your success. Your revenue generated must cover all operational costs, yet give you leeway to expand and potentially acquire additional properties.

It might sound like a straightforward sum, but there’s more to it. Airbnb hosts need to develop a grasp on the true value of their vacation rental properties. Buy the wrong property in the wrong area and your venture could be doomed from the start.

To avoid setting yourself up for failure, a vacation rental income calculator can be an indispensable tool and can simplify the process of assessing the profit potential of a rental property.

What’s a Vacation Rental Income Calculator?

Put simply, a vacation rental income calculator is an online tool that uses data and analytical methods to predict the potential financial returns of a vacation rental property. The tool conducts a comprehensive analysis of an Airbnb investment.

Depending on the calculator used, it will take into account various factors such as: 

• The property’s location
• The type of property
• The property’s size and number of bedrooms
• Vacation rental websites on which it will be listed
• Monthly rental income
• Average nightly rate
• Average nights booked
• Rental expenses
• Technology used to run your business
• Purchase price
• The going rates for similar local listings

Use Cases of a Rental Income Calculator

Whether you’re new to real estate investing, already a proud homeowner, or an Airbnb host with a few years’ experience, this type of calculator can be applied for various scenarios. Here are a couple of examples of how you can use it:

• To estimate the potential or average vacation rental income you can make by renting it out on a short-term basis before you buy your first property 
• To evaluate your current rental property’s performance
• To identify lucrative markets to expand your rental property portfolio
• To figure out if it makes financial sense to start renting out a property that you already own (and, if so, if it would be smarter to rent it out as a long-term or short-term rental)

The Advantages of Using a Vacation Rental Calculator

Your vacation rental business can benefit from a calculator like this in multiple ways and not just the most obvious factor od rental income. Here are a few ways a vacation rental calculator can benefit short-term rental properties:

Time-saver

One of the biggest reasons why Airbnb hosts use this type of calculator is because of all the time that they can save.

The nature of real estate investing is that you often need to make investment decisions fast, even more so if you’re thinking about buying in a competitive market.

With a calculator in your toolkit, you’re better equipped to find a lucrative investment property before other aspiring Airbnb hosts and real estate professionals.  

Aside from saving you time when it comes to doing the math before purchasing a property, it also helps to calculate nightly rates. This exercise alone is a time-consuming activity.  

Accuracy

Not only is it faster than manual calculations, but also more accurate. While you can use spreadsheets to calculate formulas, it still requires more human intervention which increases the chance that you can make an error. 

More potential earnings

Using a calculator will help you to make a more informed decision. Depending on the tool, you’ll gain insights into the current market, cash flow, average vacation rental income, etc. All of this allowing you to price and set a more competitive nightly rate. 

Drawbacks to Keep in Mind and Plan Around

It’s important to remember that a vacation rental income calculator only gives you an estimate. Some tools might still keep in mind monthly expenses, while others will disregard expenses altogether. 

Whichever tool you use, you’ll still need to research which expenses you’ll have. Aside from the mortgage, there will be several other expenses in order to get and keep your property guest-ready. 

It’s also no replacement for a dynamic pricing solution. Dynamic pricing software uses historical data and trends to help Airbnb hosts set a nightly rate that reflects current market demand.

To maximize your earning potential and reach the numbers that the calculator estimated, you’ll need to invest in dynamic pricing software so that you can change your rate regularly to meet demand.  

Which Expenses Should You Include in Your Calculation?

Depending on the vacation rental income calculator that you use, you might be asked to share the following expenses:

• Vacation rental insurance
• Property taxes
• Monthly mortgage payment
• Utilities such as your water, electricity, Wi-Fi and cable
• Other additional expenses like cleaning fees, levies, marketing, and property management fees

For example, repair costs might not be taken into account as these aren’t regarded as typical monthly expenses.

That said, you should still ensure that you have enough cash flow to cover these types of maintenance costs as they arise. Hence, one more reason why you need a reliable rental income calculator in your toolkit. 

Where Can You Find a Vacation Rental Income Calculator?

Here are two examples of online tools that you can use to calculate your potential income:

Evolve’s Rental Income Calculator

Evolve, one of the leading names in property management, developed a rental income calculator that you can use to work out how much you could possibly earn by renting out your vacation home. As you’ll need to know details like your monthly expenses and average number of nights you expect to be booked per month, it’s more geared towards experienced hosts. 

After completing the fields, it will calculate your monthly revenue, gross revenue, and total annual income. 

Awning’s Airbnb Calculator

Awning, a one-stop shop for real estate investors that helps them to find short-term as well as long-term rentals, shares an Airbnb calculator on their website that’s free to use.

What makes this one of the best tools is that all you need to do is type in the street address of any property in the United States. This means that the property doesn’t necessarily need to be for sale at the moment, making it a nice-to-have tool for those properties that you have your eye on. 

In addition to estimating the annual revenue for that property, it can also suggest an average daily rate and the average occupancy rate you can expect. 

It will also show you nearby properties that are currently rented out on Airbnb, making it a great tool for competitor analysis too. Basically, it uses a machine learning algorithm that’s trained on historical data from Airbnbs located across the United States. 

You can also use it to answer questions about:

• How much you can potentially make via the Airbnb platform
• How to work out your average daily rate
• How to estimate your occupancy and what’s considered a good occupancy rate

Where Can You Find More Market Insights?

The average daily rate and occupancy rate are just two of the essential numbers to track. Airbnb hosts also need to keep their pulse on several other metrics to identify opportunities and areas of concern. 

In addition to using a rental income calculator, Airbnb hosts can also check out a tool like iGMS that can offer comprehensive occupancy insights. It gives you a 360-degree view of your local market. This way, you’ll be able to:

• Optimize your nightly rate
• Adjust your booking strategy
• Manage cleaning schedules and maintenance better
• Adapt to demand spikes and other market changes quickly
• Maintain optimal occupancy levels