Nightly rate is $180 so where does the money actually go?

Question

Looking at a one bedroom condo in a beach town. Comps on the block show about $180 a night and the listing agent said 60% occupancy is conservative, which pencils to roughly $39k a year gross. Mortgage, taxes and HOA together come to about $2,100 a month, so on paper there's room.

But everyone I mention this to says the gross number is misleading and I don't really know what's being subtracted or how big each piece is. I'm looking for income that doesn't turn into a second job, so I'd probably hand it to a full service manager. What does that actually leave?

Rena Guide · Accepted Answer

That $39k is the top of a stack, and somewhere between a third and a half of it comes off before the mortgage gets paid.

Platform host fees on Airbnb's standard split run around 3% of each booking, with card processing inside that. Cleaning is normally charged to the guest as a separate line, but you pay the cleaner whether or not the fee covered them, and an underpriced turn becomes a monthly shortfall you only notice at year end. Consumables are yours too: coffee, paper goods, the pan somebody burned. Utilities and internet are yours in a nightly rental rather than the tenant's, and a beach condo runs the AC hard in August.

Insurance is the piece beginners skip. A standard landlord policy commonly excludes business use, so you'd need a short-term rental endorsement or a separate policy, and both the availability and the price vary a lot by state and carrier. Get the quote before you buy, not after.

Full service short-term management, where they handle guests and cleaner scheduling and nightly pricing, commonly runs 18% to 25% of revenue. Long-term management is usually 8% to 10%. That gap is roughly what "not a second job" costs.

Before any of the arithmetic, ask the agent one thing: is that 60% booked nights divided by nights the unit was actually listed, or booked nights divided by all 365? The first number is always the bigger one and it's the one agents quote. And check the condo docs and the town ordinance for whether nightly rental is permitted at all. That question outranks every number above.

tashaford30 · Answer

Before you get to the operating math, pull the CC&Rs and the last year of HOA meeting minutes. Plenty of beach condo associations have a 30 day minimum stay in the bylaws, and plenty more are in the middle of arguing about adding one. A board vote can end the business model faster than the town can.

Rena Expert · Answer

Run it out. $180 x 0.60 x 365 is $39,420 gross. Take 22% management, that's $8,672. Platform fee around 3% of bookings, call it $1,100. Utilities, internet and trash on a beach condo, $250 a month, $3,000. Insurance uplift for nightly use over a landlord policy, budget $1,200 to $2,500 depending on state and carrier. Consumables and linen replacement, $1,500. Furniture and mattress replacement doesn't hit every year but it hits, so amortize $2,000. You're at roughly $22,000 to $23,000 before debt service, against $25,200 of mortgage, taxes and HOA.

That's assuming the 60% is real and evenly spread. In most beach markets it isn't. Sixty percent annual occupancy in a seasonal town usually means 85% for fourteen weeks and 25% for the rest, and the $180 ADR the agent quoted is often the peak season rate rather than the blended one. Ask for month by month booked nights and month by month realized ADR on the actual comps, not an annual average. The blended figure hides that you'll be writing checks from November through March and need six months of carrying costs sitting in reserve.

The other thing your numbers don't reflect: HOA insurance in coastal condo buildings has been repricing hard, and special assessments land on the owner regardless of what the unit earned. Pull the association's reserve study and last two budgets. If the master policy deductible is a percentage of value, find out what your share of a wind claim looks like.

nicole_adeyemi · Answer

Check the planning commission agendas for that town going back a year. If short-term rental is on them repeatedly, you're buying into an argument that hasn't finished.

Nightly rate is $180 so where does the money actually go?

4 replies