How to Calculate Airbnb Income: A Simple Guide for New Hosts

Say you find a two bedroom cabin for sale. A cabin two streets away is charging $250 a night on Airbnb, so you do the sum most people do: $250 × 365 nights = $91,250 a year.

That number is never real. Nobody books every night, and the $250 the neighbor charges is a July price, not a January one. Once you take out the empty nights and the bills, a cabin like this brings in around $49,800 a year, and the owner keeps about $2,900 of it.

We are going to show you exactly how those numbers are worked out. Every calculation is on the page, so you can put your own figures in and get an answer for the property you are looking at.

Whether you are just starting an Airbnb business or deciding between renting short term against renting long term, this guide will help you understand how to calculate Airbnb income with 6 easy steps.

How to calculate Airbnb income

Multiply your nightly price by the number of nights you actually get booked. That gives you your income before costs. Then take away everything it costs to run the place, and what is left is your profit.

The rest of this guide breaks that into six steps and puts a worked example against each one.

The property in this guide

Every calculation below uses the same property, because the numbers only make sense if they belong to one place.

This is a worked example rather than a listing you can go and look at. The figures are the kind you would see in a market like this one, put together so you can follow the method. Your own numbers are the ones that matter.

Your own market will look different. A city apartment books steadily all year and a beach house earns almost everything in three months, so copy the method rather than the figures. If you are weighing up different towns, you would first need to understand how to choose a market to buy in.

Step 1: Work out what guests will pay you in a year

The quick sum, and why it is wrong

Most people start here. They take the $250 the neighbor charges, assume they will fill 70% of the year, and multiply.

70% of 365 nights = 255 nights booked
255 nights × $250 = $63,750

That looks careful. It is still about $14,000 too high, and here is why.

The $250 is a summer price. In a mountain town, summer is when the hiking trails are open and every cabin is full, so prices are at their highest. In February the same cabin might struggle to get $140. Using one price for the whole year prices January like July.

The better way: split the year into seasons

Work out each season on its own, then add them up.

SUMMER (June to September, 120 nights)
120 nights × 88% booked = 106 nights sold
106 nights × $260 = $27,560

SPRING AND AUTUMN (120 nights)
120 nights × 65% booked = 78 nights sold
78 nights × $185 = $14,430

WINTER (125 nights)
125 nights × 45% booked = 56 nights sold
56 nights × $140 = $7,840

TOTAL: 240 nights sold, $49,830 for the year

Round it to $49,800. That is your income before any costs come out.

Two things are worth noticing here.

Summer is 120 of the 365 nights, which is a third of the year, and it brings in $27,560 of the $49,830, which is more than half the income. So a rained-out summer cannot be made up in November. That is a real risk, and the quick sum at the top of this section hides it completely.

You are also only selling 240 nights out of 365, which is 66% of the year. Even a well run cabin has empty nights, and the quick sum assumed 255.

The three numbers you need to make this work

Your nightly price. Not what your neighbor advertises, but what similar places actually get paid. An empty calendar at $300 tells you the price is too high; nobody is paying it.

Which places count as similar. A two bedroom cabin does not compete with a five bedroom lodge, even on the same road. The set of properties genuinely like yours is called your comp set, and it is what sets your realistic price.

How your town's seasons work. Every market has busy months and dead ones. Ours are summer and winter, yours may be the opposite. There is a fuller explanation of how seasons affect vacation rental pricing, and if you want to see what a market is doing before you buy, our guide to reading market data covers where the figures come from.

Hosts also use a measure called RevPAR, which multiplies your nightly price by your occupancy so you can compare two properties fairly.

Working out those seasonal figures by hand means going through dozens of nearby listings. Revenue Estimator Pro does it from an address. It looks at the nearest 350 active listings within 15 kilometres, uses the last twelve months of data, and gives more weight to the properties most like yours. It ignores listings that are inactive and stays longer than 60 days, and the data is refreshed every day. There is also a free version you can try first.

It gives you a low, middle and high figure for each month rather than one number, which is exactly what you need for Step 5.

Step 2: Work out what it costs to run

Now take off the running costs. At 240 nights sold and an average stay of 4 nights, this cabin needs cleaning and resetting about 60 times a year. That one number drives most of the costs below.

Get your own quotes before you rely on any of this. A clean costs $90 in one town and $200 in another, and property tax rates vary hugely by state.

Three costs new hosts underestimate

Cleaning grows with the number of stays, not the number of nights.

Our cabin needs 60 cleans because guests stay 4 nights on average. At a 2 night average you would sell the same 240 nights but clean 120 times, which nearly doubles your biggest single cost i.e, Airbnb cleaning fee. This is one reason many hosts set a minimum stay.

Airbnb's fee depends on which plan you are on.

Some hosts pay a small percentage and the guest pays the rest. Others pay a single larger fee with nothing added for the guest, which is standard if you book through certain software or list on Vrbo as well. We have used 3% in the table because that is the plan this owner is on. Check how Airbnb charges hosts and use your own figure, because the difference is worth thousands of dollars a year.

Normal home insurance is not enough.

Your existing policy is written for a home you live in. The moment you take paying guests, most policies stop covering you, so you need to tell your insurer what you are doing and move to a short term rental policy. It costs more. Airbnb also includes its own cover, which is not the same as insurance and does not replace it, and the difference between AirCover and real insurance is worth understanding before something goes wrong.

One thing is missing from that table on purpose: the mortgage. Step 3 explains why.

Step 3: Work out what you actually keep

Two subtractions, in order.

First, take costs off your income

$49,830 income − $25,175 running costs = $24,655 profit before the mortgage

This is the number that describes the property itself. Anyone who bought this cabin would get roughly the same figure, whatever deal they got from their bank. Professionals call it Net Operating Income, or NOI. You will see that term used later.

It also tells you that the cabin keeps about half of what guests pay: $24,655 out of $49,830 is 49 cents in every dollar. Half of your income goes on running the place, which surprises most new hosts.

Then take off the mortgage

$272,000 borrowed over 30 years at 7% costs about $1,810 a month, so $21,720 a year.

$24,655 profit before the mortgage − $21,720 mortgage payments = $2,935 left in your pocket

So this cabin makes you about $2,900 a year in cash, or $245 a month.

That is not nothing, and it is a lot less than $91,250. If you want a fuller picture of borrowing options for a rental, our guide to financing an Airbnb property goes through them.

Step 4: Decide whether $2,900 is any good

Three simple checks. You do not need all of them, but each answers a different question.

Check 1: What would this earn if you paid cash?

$24,655 profit before mortgage ÷ $340,000 price = 7.2%

This is called the cap rate, and it ignores your mortgage on purpose so you can compare two properties fairly. Our cabin returns 7.2%, which sounds healthy on its own. Whether it is depends entirely on the town: 7.2% in a place with steady year-round visitors is a different proposition from 7.2% in a town whose tourism is shrinking.

Check 2: What is your own money earning?

You did not just pay the deposit. Count everything you spent before the first guest arrived.

$68,000 deposit + $10,000 legal fees and closing costs + $25,000 furniture, beds, kitchen, linen = $103,000 of your own money

$2,935 a year ÷ $103,000 = 2.8%

Your $103,000 is earning 2.8% a year, which is less than a savings account pays.

Nothing went wrong in the maths. The property is fine, and the mortgage simply takes most of what it earns. This is why the cap rate on its own never tells you whether to buy.

Check 3: Will a bank lend on it?

Banks that lend for short term rentals check whether the property earns enough to cover its own loan. They divide profit before the mortgage by the mortgage payments.

$24,655 ÷ $21,720 = 1.13

A result of 1.13 means the cabin earns 13% more than the loan costs. Most lenders want to see at least 1.20, and many want 1.25.

The reason is straightforward. At 1.00 the property covers its loan with nothing spare, so one bad summer or one broken boiler and you are paying the mortgage out of your own pocket. Lenders want a cushion, and 20% to 25% is the cushion they have settled on. This ratio is called DSCR, and at 1.13 our cabin would probably be turned down or offered worse terms.

Worth running early. It is the check most likely to stop a purchase that otherwise looks fine.

Step 5: Try it as a bad year and a good year

One set of numbers gives you more confidence than it should. Run three.

Here we have dropped every season by 10 percentage points of occupancy and $15 off the nightly rate for the bad year, and added the same for the good year.

Read the bottom row. A 10 point swing in occupancy is an ordinary year to year change, and it moves you from losing $5,313 to making $11,484.

Before you buy, ask yourself one question: could you cover $5,313 out of your own pocket across a bad year without having to sell? If the answer is no, this purchase is riskier than the middle column suggests.

Notice too that the running costs barely move between the three columns. Most of your bills arrive whether guests do or not, so almost all the variation is on the income side. That is why getting Step 1 right matters far more than saving money on cleaning.

Step 6: Your price should not stay the same all year

Every figure above used one price per season, which is already better than one price per year. Real demand moves faster still.

Picture a festival weekend when every cabin nearby is full. Your fixed $260 sells within minutes, at a moment when guests would happily have paid $400. You just gave away $140. Now picture a wet Wednesday in October. That same $260 is more than anyone will pay, so the night goes empty and earns you nothing, when $150 would have found a guest.

A fixed price loses money in busy weeks and loses bookings in quiet ones. Changing your price as demand changes is what dynamic pricing does, and the full revenue management guide covers how experienced hosts run it.

This catches experienced hosts too. Shane at O'Neal Vacation Rentals doubted the prices he was being shown, believing they were too high for what the market would bear. He raised them anyway, and found he kept getting bookings with no drop in occupancy. Annette at Thanks for Visiting ran one weekday price and one weekend price all year round when she started, taking no account of seasons or local events at all.

For your own forecast, this means one thing: do not build your numbers on a single flat price, because you will get the answer wrong in both directions. Work season by season as we did in Step 1, and if your quiet months are the problem, there are ways to fill the slow season that do not involve dropping your price.

Tax changes these numbers

Everything above is before tax, and tax can move your real return by a few percentage points either way.

The main thing to know is depreciation. You are allowed to deduct part of the building's value each year as if it were wearing out, even though your bank balance is going up. This often turns a profit on paper into a loss on paper, which reduces what you owe.

Whether you can use that loss against your other income, such as your salary, depends on rules about how involved you are in running the place and how long your guests typically stay. Those rules are specific and they change, so this is the point to stop reading articles and talk to an accountant who has handled short term rentals before.

Our overview of tax for short term rental hosts covers what to ask them.

Frequently Asked Questions

How much does a typical Airbnb make?

There is no useful average. A studio in a quiet town and a four bedroom house near a national park have nothing in common. The only figure worth having is one worked out for your actual address.

What is a good occupancy rate?

It depends on your market. A city flat might stay near 75% all year, while a beach house at 55% earns far more because its good months are exceptional. Never judge occupancy without looking at your nightly price alongside it.

Should I include my mortgage in running costs?

No, not when you are working out the profit the property makes or checking it against the cap rate. Include it only when you are working out the cash you personally end up with each month.

Why do lenders want a DSCR of 1.20 or more?

Because 1.00 means the property covers its loan exactly, with nothing left for a quiet month or an unexpected repair. The extra 20% is the safety margin the lender wants before taking the risk.

How much of my income will go on costs?

Around half is common, though it depends heavily on your average stay length and whether you clean and manage the place yourself. Build the list line by line as we did in Step 2 rather than guessing a percentage.

How accurate are income estimates?

Treat any single figure as the middle of a range. Estimates are built from properties near yours, and none of them is identical to yours. Work out your bad year before you rely on the expected one.

I already have a listing. Does this still apply?

Yes, and you can use real figures instead of estimates. Compare what you actually earned last year against the key numbers hosts track, and there are specific ways to improve what an existing listing earns.

Work out your bad year first. It is the only column that tells you what happens when the market has a quiet season, and it is the one almost nobody builds.

Once you own the place, the job changes from estimating to managing, and our guides to becoming a host and reading your market data pick up from there. Hosts who go on to run properties for other owners will want the property management guide.