How to Analyze a Short-Term Rental Deal, Step by Step

Step 1: Start from an address or a market

The first step is to give the analyzer a starting point, either a US address or one of our six markets, so the local defaults are close before you refine them.

Type a street address, city and state, or a ZIP code and press Look up. The tool uses the US Census geocoder to find the address, then fills in starting numbers from free public data: typical home values by ZIP code from Zillow Research, county property tax from Census American Community Survey medians, and lodging rates by county and month from the federal GSA per diem tables, which set the rate level and the busy and quiet months. The tool says it does not save the address.

If you would rather start from a market, pick Sacramento, Roseville, Antioch, Houston, Kissimmee or Lake Anna. Each preset sets a month-by-month demand pattern from our market reports, plus rough property tax and insurance defaults for the state.

Step 2: Describe the home

The home section takes two inputs, the purchase price and the number of bedrooms, and the bedroom count does more work than it seems.

For a large group home, cleaning, supplies, utilities and furnishing all grow with the number of bedrooms. When you change bedrooms, the analyzer resets those four costs to scaled starting values. If you have real quotes, type them in after you set the bedroom count, or the reset will overwrite them.

Step 3: Set the income inputs

Income comes from four inputs: the average nightly rate, occupancy for the year, the average stay in nights, and the cleaning fee you charge per stay.

The analyzer spreads your annual occupancy across the months using the busy and quiet pattern, so peak months book more nights and quiet months fewer. You can change any month's level (Peak, Busy, Steady or Quiet) if you know the local calendar better than the preset.

A few habits keep the income honest:

• Rate: use what similar homes in the same area charge across the year, not the holiday weekend price.
• Occupancy: use what comparable homes actually book. Large group homes often book fewer nights than small ones but earn more per night.
• Average stay: shorter stays mean more cleanings. A change from four nights to three adds turnovers and cost.
• Cleaning fee: this is income from guests. The cost of the cleaning itself goes in the next step.

Step 4: Add the running costs

Running costs are everything it takes to operate the home before the mortgage, and short-term rentals have more of them than long-term rentals.

Then choose who runs it. Set it to self-managed or enter a manager's fee as a percent of rent. The analyzer also shows a side-by-side of managing it yourself against hiring a manager, with a rough count of owner hours, so you can see what your time is worth in this deal. If you are weighing that choice, our guide on what a vacation rental manager does covers the work involved.

Step 5: Enter the loan and setup costs

The loan section sets the down payment, interest rate, loan term, closing costs and the cost to furnish and set up the home.

Furnishing is easy to underestimate for a group home: beds and linens for every room, a stocked kitchen for a crowd, outdoor furniture, smart locks and photography. The analyzer adds the down payment, closing costs and furnishing together as the cash to close and furnish, which is the cash you put in.

If you plan to use a DSCR loan, read our guide to DSCR loans for short-term rentals before you set these inputs. Lenders often ask for larger down payments and reserves on short-term rentals.

Step 6: Read the year-one results

The results panel gives year-one cash flow after the mortgage, cash-on-cash return, cap rate, DSCR, gross revenue, net operating income, cash to close and furnish, break-even occupancy and the cash reserve for slow months.

Read them in this order:

1. Net operating income: revenue minus running costs, before the loan.
2. Cap rate: net operating income divided by the price. It describes the home before financing.
3. DSCR: net operating income divided by the yearly mortgage payments. The tool notes when a result clears 1.25, the level many DSCR lenders use.
4. Cash flow and cash-on-cash return: what is left after the mortgage, and that amount divided by the cash you put in.
5. Break-even occupancy: the occupancy at which cash flow after the mortgage is zero.

For the difference between the two return measures, see our guide on cap rate vs. cash-on-cash return.

Step 7: Check the slow months and the reserve

The month-by-month view shows cash flow after the mortgage for each month, and the reserve tells you how much cash the slow stretch needs.

This is where many seasonal deals look different. In the Example above, the year is positive, but five months lose money: January to March and November to December. The analyzer adds up the longest losing run and shows it as the cash reserve for slow months, about $3,400 in that Example. Lenders and partners often ask for several months of payments on top of that.

Step 8: Run the stress test

The stress test reruns the whole deal at your planned occupancy and at 10 and 20 points lower, because bookings coming in below plan is the most common way a deal disappoints.

In this Example, the deal still covers the loan 10 points below plan, but at 20 points lower it needs cash from elsewhere. Ask yourself whether you could carry that for a year. A deal that only works at the best case is fragile.

Step 9: Look at the year-one tax picture with care

The tax panel gives a rough federal view of how cost segregation and bonus depreciation can create a paper loss in year one, and it is not tax advice.

It uses the land share of the price, the share of the building a cost segregation study might move to short lives, and your marginal federal tax rate. The tool's own note says the view assumes an average stay of 7 nights or less and that you materially participate. Whether a loss offsets wages or other income depends on those rules and on current law. Our guides on the short-term rental tax loophole and cost segregation explain the terms. Take the numbers to a CPA before you rely on them.

Step 10: Share it and check it

Once the inputs are real, share the scenario so a partner, lender or CPA can check the same numbers.

Every input is saved in the page link, so "Copy a link to this deal" gives a link that opens the same scenario. "Save as PDF" prints a one-page summary. Then compare a second home the same way, or try the single tools at investor tools for one number at a time.

If you want to learn about investing in large group homes with JekkyStay, see our investor page.

The bottom line

Analyze a short-term rental in order: the home, income, running costs, the loan, then the results, the slow months and a stress test. Use comparable bookings for occupancy, real quotes for costs, and count furnishing in the cash you put in. If the deal still covers the mortgage 10 to 20 points below plan and you can fund the slow-month reserve, it is worth a closer look. If it only works at the best case, keep looking.