Short-Term Rental: Launch Budget

This article was written by our expert who is surveying the short-term rental industry and constantly updating the business plan for a short-term rental.

Who wrote this content?

The Dojo Business Team

A team of financial experts, consultants, and writers

We're a team of finance experts, consultants, market analysts, and specialized writers dedicated to helping new entrepreneurs launch short-term rental businesses. We help you avoid costly mistakes by providing detailed business plans, accurate market studies, and reliable financial forecasts to maximize your chances of success from day one—specifically for the short-term rental market.

What is the average occupancy rate now?

Most well-run short-term rentals average 55%–60% occupancy, with top urban cores reaching ~67%.

These figures reflect stabilized post-pandemic demand and consistent weekend/event spikes in city markets for short-term rentals.

Resort areas may run lower off-season and much higher in peak months, so your annual rate is a blend of those swings in short-term rental demand.

Focus your short-term rental on review quality, response time, and dynamic pricing to push above 60% consistently.

Use a 60% baseline in your short-term rental pro forma unless your local data justifies higher.

What nightly rates are realistic by season?

Short-term rentals typically achieve ~$200 off-season ADR, ~$300 in shoulder, and $500+ in peak or event periods.

Urban short-term rentals are less seasonal but still surge on weekends and during conventions; resort markets can double or triple ADR in peak months.

Anchor your short-term rental pricing to local comps and layer in event calendars and minimum-stay rules to capture high-yield dates.

Reprice at least weekly and use length-of-stay discounts midweek to smooth occupancy across your short-term rental calendar.

We cover advanced pricing tactics for short-term rentals in the plan below.

You’ll find detailed market insights in our short-term rental business plan, updated every quarter.

What monthly gross revenue should I expect?

Typical short-term rentals gross $3,000–$7,000 per month, with peaks well above that in prime locations and seasons.

High-performing short-term rentals often reach $40,000–$70,000+ per year when management, reviews, and pricing are tight.

Do not annualize July or New Year’s revenue; weight your forecast by season for your short-term rental to avoid optimistic bias.

Track booking window and lead time to anticipate soft months early and adjust promotions for your short-term rental.

Plug local ADR/occupancy into a month-by-month model for the most accurate short-term rental outlook.

How much do operating expenses usually take?

Expect operating expenses to consume 40%–50% of gross income in a typical short-term rental.

This includes cleaning turns, utilities, consumables, linens, minor maintenance, insurance, software, and property management if outsourced.

Short-term rentals with frequent same-day turns run higher cleaning and laundry costs; longer stays reduce that burden.

Audit every expense line quarterly to keep your short-term rental’s expense ratio under control.

This is one of the strategies explained in our short-term rental business plan.

What are typical annual maintenance and repair costs?

Budget 1%–4% of property value per year for maintenance and repairs in a short-term rental.

As a rule of thumb, $0.90–$1.30 per square foot per year fits most short-term rentals, with higher spend for older homes and heavy guest volume.

Stock critical spares (locks, linens, small appliances) to cut downtime and emergency call-out fees in your short-term rental.

Schedule quarterly inspections and deep cleans to prevent bigger repairs in short-term rentals.

Track maintenance by category to forecast next year’s short-term rental capex and opex more accurately.

How much do platform, payment, and taxes take?

Combined platform fees, payment processing, and local taxes typically remove 18%–30% of gross revenue in a short-term rental.

Plan for ~14%–20% platform fees (host/guest combined depending on channel), ~2%–3% card processing, and 5%–15% in local STR taxes.

Use multi-channel distribution and direct bookings to dilute platform take rates in your short-term rental.

Automate tax collection and filings to avoid penalties and protect margins in your short-term rental.

We cover this exact topic in the short-term rental business plan.

What occupancy do I need to break even?

Most short-term rentals need roughly 60%–70% occupancy to cover mortgage, insurance, taxes, and fixed costs.

Cash purchases or DIY management can break even at ~50%–55% occupancy, while high-leverage properties can require ≥70%.

Calculate breakeven with your actual ADR, debt service, and expense ratio for your short-term rental—not generic averages.

Re-run the breakeven test any time your ADR or costs move by ≥5% in your short-term rental.

Get expert guidance and actionable steps inside our short-term rental business plan.

What local rules could affect profitability and risk?

• Annual night caps (e.g., 90–180 nights) that limit revenue potential for short-term rentals.
• Permit, licensing, and guest registration requirements that add cost and admin workload to short-term rentals.
• Platform data-sharing and stricter tax enforcement increasing compliance obligations for short-term rentals.
• New moratoria or caps in saturated neighborhoods that restrict supply growth for short-term rentals.
• Escalating fines for non-compliance that can erase months of profit for short-term rentals.

What ROI or cash-on-cash is common right now?

Well-managed short-term rentals typically deliver 6%–10% cash-on-cash returns, with 12%–15% achievable in strong cases.

Results above 15% usually depend on peak-season concentration, savvy pricing, and leverage—rarely sustained year-round in short-term rentals.

Underwrite with conservative ADR and 55%–60% occupancy to avoid disappointment in a short-term rental.

Reinvest early profits into upgrades that raise ADR and review scores for compounding gains in your short-term rental.

It’s a key part of what we outline in the short-term rental business plan.

How does seasonality change monthly cash flow?

Seasonality can double or triple revenue in peak months and break even or worse in the off-season for short-term rentals.

Build monthly projections using local ADR and occupancy by month, not just a flat annual average, for your short-term rental.

Offer mid-term stays (28+ nights), weekly discounts, and targeted promos to smooth dips in your short-term rental.

Align housekeeping schedules and inventory buys with the calendar to defend margins in your short-term rental.

This is one of the many elements we break down in the short-term rental business plan.

What are vacancy risks and the best ways to mitigate them?

• Adopt dynamic pricing with event calendars and competitor tracking to maintain short-term rental pace.
• Build a direct-booking funnel (email, social, SEO) to reduce platform dependency in your short-term rental.
• Switch to mid-term or corporate stays during soft months to stabilize occupancy in your short-term rental.
• Maintain cash reserves covering at least 3–6 months of fixed expenses for your short-term rental.
• Use professional photography and prompt guest communication to lift conversion and reviews in your short-term rental.

What are realistic long-term appreciation prospects?

Appreciation is highly local: some tourism-driven neighborhoods saw 20%–30% gains across the last decade, while others stagnated.

Future appreciation for short-term rentals depends on regulatory stability, infrastructure investment, and sustained tourism demand.

Do a neighborhood-level analysis of new supply, hotel pipeline, and city policy direction before you buy a short-term rental.

Model returns both with and without appreciation to see if cash flow alone justifies the short-term rental purchase.

Prioritize fundamentals—location, condition, and regulations—over speculative appreciation in short-term rentals.

Tables for quick benchmarking

Occupancy benchmarks by market type

Use these occupancy ranges to set realistic annual targets for your short-term rental.

They reflect 2024–2025 stabilization with stronger performance in top urban cores and event-driven destinations for short-term rentals.

ADR by season (example for a competitive city listing)

Price your short-term rental by season; do not copy an annual average rate.

This example illustrates common ADR steps and why dynamic rules matter in short-term rentals.

Monthly gross revenue scenarios (30 days)

Estimate short-term rental revenue as ADR × Occupancy × Days; then stress-test by season.

These examples show why both ADR and occupancy matter simultaneously in a short-term rental.

Operating expense breakdown (% of gross)

Use this short-term rental operating expense map to set targets and find savings.

Your exact mix varies with cleaning frequency, utilities, and whether management is in-house or outsourced in your short-term rental.

Fees, processing, and local taxes (share of gross)

These deductions hit before or alongside operating costs in a short-term rental.

Model them explicitly so your net figures are accurate in a short-term rental.

Breakeven occupancy example

Here is a simple breakeven map for a typical one-bedroom short-term rental.

Swap your own ADR, fixed costs, and expense ratio to get a precise target for your short-term rental.

Conclusion

This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with a qualified professional before making any investment decisions. We accept no liability for any actions taken based on the information provided.

Sources

1. Guesty – Smarter pricing for short-term rentals
2. AirDNA – Short-term rental trends & seasonality
3. Mashvisor – Airbnb occupancy benchmarks
4. Airbtics – Annual Airbnb revenue (example market)
5. Hostaway – STR fees breakdown
6. AirDNA – STR tax obligations
7. Global Vacation Rentals – Management fee ranges
8. Belong – Rental maintenance cost guides
9. Wall Street Prep – Breakeven occupancy ratio
10. Journal of Urban Economics – STRs and housing markets