Last reviewed: October 2026 · By the MortgageCompass Editorial Team · How we research
A short-term rental makes money when the income from booked nights and cleaning fees covers four things: the cost of every guest changeover, the platform and management fees, the fixed costs of owning the property, and the mortgage. Most first-time hosts get the revenue roughly right and underestimate everything else, especially how many nights they will actually book.
The calculator below works out your yearly revenue, cash flow after the mortgage, cash-on-cash return and, most importantly, the break-even occupancy: the share of nights you must book just to cover your costs. Under it you will find a worked example, the mistakes that make projections too optimistic, and the local rules in the US, UK, Canada and Australia that can stop a plan before the numbers matter.
Short-term rental profit calculator
Enter your own figures. The defaults match the worked example below.
Estimates for illustration only. Results do not include income tax, local occupancy taxes or permit fees, and real bookings vary by season. Check local rules before buying.
Worked example: a one-bedroom condo booked 60% of the time
Illustrative example. Imagine a one-bedroom condo that the owner blocks for 35 nights a year (personal use and maintenance), leaving 330 nights to rent. Guests pay an average of 180 a night plus a 75 cleaning fee, and the typical stay is three nights. The owner manages the listing personally, so there is no management fee. Here is how the default figures in the calculator work out, in any currency:
- Booked nights: 60% of 330 available nights is 198 nights, or 66 stays of three nights.
- Revenue: 198 nights at 180 is 35,640, plus 66 cleaning fees of 75 (4,950). Total: 40,590.
- Costs that rise with bookings: each changeover costs 70 for cleaning and 15 for supplies and laundry, or 5,610 a year. Platform fees (3%) and an allowance for repairs and replacing worn items (5%) add 3,247. Total: 8,857.
- Fixed costs before the mortgage: property tax and insurance (350 a month) plus utilities, internet and streaming services (250 a month) come to 7,200 a year.
- Operating profit: 40,590 minus 8,857 minus 7,200 leaves 24,533 before the mortgage.
- After the mortgage: payments of 1,400 a month (16,800 a year) leave 7,733, about 644 a month. On 60,000 of cash invested, that is a cash-on-cash return of about 12.9% before tax.
That looks healthy. Now change only one input: drop occupancy from 60% to 35%, which is a realistic figure for a quiet off-season or a new listing with no reviews. Revenue falls to about 23,600 and the same property loses about 464 a month. Nothing else changed. This is why occupancy deserves more attention than any other number in the model.
Break-even occupancy: the first number to check
Break-even occupancy tells you the share of available nights you must book before the property stops costing you money. It is calculated in three steps:
- Income per booked night = nightly rate + (cleaning fee ÷ average stay). In the example: 180 + 75 ÷ 3 = 205.
- Cost per booked night = (cleaning cost + supplies) ÷ average stay + percentage fees × income per night. In the example: 85 ÷ 3 + 8% × 205 ≈ 44.7.
- Break-even nights = yearly fixed costs including the mortgage ÷ (income per night − cost per night). In the example: 24,000 ÷ 160.3 ≈ 150 nights, or 45% occupancy.
A useful rule of thumb: if your break-even occupancy is close to the occupancy you expect, the investment has no margin for a slow season, a new competitor or a rule change. The further apart the two numbers are, the safer the plan. Longer average stays help, because cleaning and supplies are spread over more nights.
Where short-term rental projections usually go wrong
Occupancy borrowed from someone else’s listing
Estimates from booking data tools or neighbouring listings describe established hosts with years of reviews. A new listing usually starts lower. Run the calculator at your expected occupancy and again at 15 to 20 points below it.
Seasonality ignored
An annual average hides months with almost no bookings, while the mortgage, insurance and internet bills arrive every month. Make sure your savings can cover the quiet months, not just the year as a whole.
Changeover costs and the guest fee confused
The cleaning fee guests pay rarely covers the full cost of a changeover once you add laundry, consumables, restocking and your own time. Short stays multiply these costs, which is why a three-night average is far more expensive to run than a seven-night one.
Furnishing and wear left out
A furnished rental needs bedding, towels, kitchenware and furniture that wear out much faster than in a normal home. Include the initial furnishing cost in your cash invested, and keep a percentage of revenue aside for replacements.
Financing that does not allow holiday letting
Many standard residential mortgages do not allow the property to be let to paying guests, and insurance policies for a home are often invalid for commercial letting. Ask your lender and insurer before you list, and budget for a specialist holiday let or investment property mortgage if you need one. Those products often have different rates and deposit requirements, so use the payment they actually quote in the calculator.
Check the local rules before the numbers
In many popular cities, the rules decide whether a short-term rental is possible at all. A few examples show how much they vary:
New York City
Since September 2023, hosts must register with the city. Stays under 30 days are only allowed when the host lives in the home and is present, with no more than two guests.
London
An entire home can be let for short stays for up to 90 nights in a calendar year without planning permission. Beyond that, the borough’s permission is needed.
Toronto
Short-term rentals are only allowed in the host’s principal residence, which must be registered. An entire home can be rented for up to 180 nights a year, and a 6% Municipal Accommodation Tax applies.
Greater Sydney
Properties must be registered on the state register, and homes let without the host present are limited to 180 days in any 365-day period. Bookings of 21 nights or more do not count.
If a cap applies, enter it as your “nights available per year” in the calculator. A 90-night limit changes the result far more than any change in the nightly rate. Buildings and homeowners’ associations can also ban short-term letting in their own rules, so check the lease, bylaws or strata rules too.
Tax points that change the result
The calculator shows profit before income tax. How that profit is taxed depends on your country and on how you use the property:
- United States: if you also use the property yourself for more than 14 days, or more than 10% of the days it is rented (whichever is greater), the IRS treats it as a residence and limits your deductible rental expenses to your rental income. If you rent it for fewer than 15 days a year, you do not report the rental income at all.
- United Kingdom: the special furnished holiday lettings tax regime was abolished from April 2025, so holiday lets are now generally taxed in the same way as other residential lettings, including the restriction on mortgage interest relief.
- Everywhere: local occupancy or tourist taxes may have to be collected from guests, and some platforms collect them for you. Check how this works in your area before setting your prices.
Tax rules are detailed and change often. Speak to a tax adviser in your country before you rely on these figures.
Short-term or long-term let?
A short-term rental can earn more per year than a standard tenancy, but it is closer to running a small hospitality business than to being a landlord. You deal with constant changeovers, guest messages, reviews, seasonality and changing local rules. A long-term let usually earns less but is steadier and needs far less time.
A fair way to compare them is to calculate the rental yield of a normal tenancy for the same property, using our guide to how to calculate rental yield, and compare it with the short-term result above after a realistic allowance for your time or a management fee. If you are comparing several properties, the cap rate gives a quick way to rank them before financing.
Frequently asked questions
What is a good occupancy rate for a short-term rental?
There is no universal figure. It depends on the location, the season and the type of property. The more useful question is how far your expected occupancy sits above your break-even occupancy. A gap of 15 to 20 percentage points or more gives you room for a slow year.
Should I include the mortgage in the profit calculation?
Look at both figures. Operating profit before the mortgage shows how good the property is as a business and lets you compare properties fairly. Cash flow after the mortgage shows whether you will need to add money every month.
What percentage should I set aside for repairs?
Heavy use wears a furnished rental faster than a normal home. The calculator uses 5% of revenue as a starting point. Increase it for older properties, larger homes or listings that attract groups.
Is it worth hiring a management company?
It can be if you live far away or do not have time for guests and changeovers. Enter their percentage in the management fee field and check how much it raises your break-even occupancy. If the property only works when you manage it yourself, you are effectively paying yourself a wage, so count your time as well.
Sources
- IRS: Renting your vacation home (14-day and 10% rule; see IRS Publication 527 for current detail)
- GOV.UK: Abolition of the furnished holiday lettings tax regime
- GOV.UK: Short-term use of residential property in London (90-night rule)
- City of Toronto: Short-term rental operators
- NSW Department of Planning: Short-term rental accommodation framework FAQ
- NY1: New York City’s Local Law 18 on short-term rentals
This guide is for informational purposes only and is not financial, tax or legal advice. Figures in the example are illustrations. Local rules change, so confirm them with your city or council and speak to a qualified adviser before buying a property to let.