TL;DR: Short-term rentals are still profitable – the average U.S. host earned around $2,408/month in 2025 according to AirDNA – but the easy-money era is over. Success now requires smart location choices, realistic budgeting, and treating your rental like a real business. Key pitfalls include underestimating cleaning costs, overpaying on mortgage, and skipping damage protection. STRs typically outperform long-term rentals on income, but come with higher costs, more volatility, and greater time commitment.
Globally, hosts earned over $78 billion on Airbnb alone in 2025 and figure is expected to rise.* So, the quick answer to the question “Are short-term rentals profitable?” is yes, they are.
But the ‘get rich quick’ era is over. Today’s property owners face a maturing market where high interest rates and stricter regulations make investment decisions more complex. It’s no longer the casual host’s game.
To win, you need to navigate rising guest expectations and high operational costs with a professional, strategic business model. Bad photos, neglected guests, and unmanaged damage costs all erode your margins quicker than you’d think.
In this article you’ll find out exactly how profitable short-term rentals are and what factors influence your income. You’ll also get practical guidance from John de Roulet, Director of Revenue Management at Wheelhouse, on calculating your profitability and the budgeting mistakes that catch new hosts off guard.
Are short-term rentals profitable?
The answer is a resounding yes.
“It’s still a vibrant market for those with an entrepreneurial spirit, and there’s money to be made,” says John de Roulet, Director of Revenue Management at Wheelhouse and a key player at RevProf, a groundbreaking non-profit for revenue managers. “But it’s not a ‘get rich quick’ scene anymore.”
”You’ve got to be strategic and proactive, especially with revenue management,” he explains. “If you’re not up to speed with the latest strategies, you could be missing out on maximizing your vacation rental profitability.”
According to AirDNA data, the typical U.S. short-term rental host earned about $2,408 per month in 2025. But not everyone is typical – you could earn less, or significantly more, depending on how you manage your investment and where you invest.
For inspiration, check out our guide to the best US cities for short-term rentals.
Understanding the factors influencing short-term rental income
You’re not buying a property solely for yourself or for a long-term tenant, you’re trying to start your own STR business. So, you need to understand what your guests are looking for and plan your investment carefully. Your property will quickly drain your resources if you don’t consider these influential factors right from the beginning:
Property location
Location is the most important factor to consider before you invest in a short-term rental property. It determines how often your property gets booked, how much you can charge, and how volatile your seasonal income is. And it’s the one thing you can’t fix after you buy.
“First and foremost is to have an attractive property that is in a location which is in demand for renting for a short period,” comments Jerry Thomas, rental real estate investor. The best places to buy a vacation home will offer:
- Proximity to the beach, city center, and other key attractions (for vacation rentals)
- Proximity business hubs and venues (for business travellers)
- Plenty of local events
- Rental demand
Bear in mind that many US cities have Airbnb regulations, which could have a huge impact on your profitability. It’s not just the US, either. There are also legal requirements for Airbnb in the UK and many other European cities like Barcelona.
Property type and amenities
People will willingly pay more for an apartment with nice furniture and must-have amenities like Wi-Fi, washing machine, free parking, air conditioning, and so on. A well-presented home will get better reviews too, which attracts more guests in future.
These key factors will impact how much you can charge per night:
- Property type: Luxury apartments and standalone houses command higher prices than standard flats.
- Bedroom count: The number of bedrooms impacts rental rates more significantly than square footage, though overall size remains a factor.
- Premium amenities: Features such as swimming pools, jacuzzis, and gardens enhance rental profitability.
- Scenic views: Properties offering pleasant vistas allow for higher rental charges.
- Pet policies: It’s estimated that pet-friendly listings increase rental income by 10–20%, though they also carry a higher risk of property damage.
Of course, the more luxuriously you furnish your property, the more expensive it will be to maintain. If you don’t have a good damage protection policy, you could end up out of pocket the next time a guest accidentally breaks something in your home.
Seasonal demand
Every location has its own seasonal trends, which will determine how volatile your income will be. That’s worth thinking through carefully before you invest in short-term rentals.
Coastal and ski resort properties can be incredibly lucrative in peak season, but they carry real risk. If 70% of your annual revenue depends on two or three strong months, one wet summer or a winter with low snowfall can seriously dent your yearly returns.
Urban properties and destinations with two distinct busy seasons – like a town popular with summer tourists and winter skiers – tend to offer steadier income year-round. A property with consistent 65% occupancy across twelve months is often a safer bet than one chasing 95% occupancy for eight weeks to break even.
Before you commit to a location, look at how income is distributed across the year. If your fixed costs – mortgage, utilities, maintenance – keep running through the quiet months, you need to know your property can cover them.
Are short-term rentals a good investment? How to calculate net income and ROI
A property that looks profitable on paper can tell a very different story once you factor in all your costs. Here’s how to calculate your real net income and ROI before you commit.
1. Know all revenue streams and critical expenses
Start with summarising where you get money and how you spend it. Some sources of revenue and expenses may be unexpected. Here are the main categories to track:
| Income | Expenses |
| Rental charges Cleaning fees Security deposits Damage waivers Additional fees (e.g., pet fees, parking fees) |
Utilities (gas, water, electricity) Property taxes and license Repairing property damage Replacing towels and linen Cleaning fees Property management fees STR insurance expenses Marketing costsMortgage or rent (optional) |
2. Calculate your net operating income
Calculate total monthly revenue by multiplying the nightly rate by booked nights and adding all other income sources. Then deduct your monthly expenses. The sum you get is your net operating income.
Net operating income = Total income – Total expenses
Here’s a worked example:
| Income | Amount ($) |
|---|---|
| Rental charges | 2,160 |
| Cleaning fees | 500 |
| Security deposits | 300 |
| Damage waivers | 600 |
| Additional fees | 200 |
| Total Income | $3,760 |
| Expenses | Amount ($) |
|---|---|
| Utilities (gas, water, electricity) | 250 |
| Property taxes and license | 250 |
| Repairing property damage | 100 |
| Replacing towels and linen | 50 |
| Cleaning fees | 400 |
| Property management fees | 330 |
| STR insurance expenses | 20 |
| Marketing costs | 30 |
| Total Expenses | $1,430 |
Net Operating Income Calculation
Total Income ($3,760) – Total Expenses ($1,430) = $2,330 net operating income
Have you already factored the STR license into your fees? Take a look at fines and prices.
3. Calculate your return on investment (ROI)
To calculate the return on investment, you need your annual net income and total investment amount. Divide the annual net income by the total money invested in the property (including purchase price, furnishing costs, and any renovations) and multiply by 100.
ROI = (Annual Net Income / Total Investment) × 100
For example, if you invested $200,000 in a property and earn $24,000 in annual net income, your ROI would be 12%.
Short term rentals vs. long term rentals profitability compared
New investors often ask which is more profitable: Airbnb vs renting out long-term? Short-term rentals usually come out ahead, but not without trade-offs.
Nightly rates for a short-term rental are significantly higher than monthly rent for a comparable property. Even at 65–70% occupancy, a well-priced STR will typically outperform a long-term rental on raw income. But that higher revenue comes with higher costs – more frequent cleaning, greater wear and tear, more active management – and more volatile income that can fluctuate with seasons, local events, and market conditions.
“Unless you don’t have another job, or hire someone to do the work, this is labor intensive,” warns Peggy Goodman, a landlady since 1974. “Short term renting is like running a small hotel. Everything has to be perfect or else you’ll get a bad review. Bad reviews may cause you to [lose] clients, which could result in an empty place.”
Long-term rentals, by contrast, offer stability and passive income. A reliable tenant and a fixed monthly income makes budgeting straightforward, even if the overall return is lower. For investors who don’t want to actively manage a property, that predictability has real value.
The right choice ultimately depends on your property, your market, and how hands-on you want to be.
Short term rentals vs long term rentals: Income, expenses, time, and risks
| Short term | Long term | |
|---|---|---|
| Income | Higher rates, additional charges (cleaning, pet fees, etc.) | Lower monthly rent, more stable income |
| Expenses | More expensive to maintain due to higher turnover costs, marketing and advertising expenses, property taxes, and insurance costs | Cheaper maintenance with lower turnover costs, marketing expenses, potentially lower property taxes and insurance |
| Time Commitment | More time taken by guest communications, booking management, and property maintenance | Less time taken by tenant screening, lease renewals, and maintenance |
| Risk | More volatile income, potential for guest damage, vacancy periods | More stable income, potential for longer-term tenant issues |
Find a detailed cost breakdown for short- and long-term property rentals in our guide: STRs vs LTRs in the US with ex-COO Cali Bowen.
8 budgeting mistakes to know before you invest in short-term rentals
The gap between a profitable short-term rental and a money pit often comes down to how well you’ve planned your finances before the first guest checks in. We asked John to share the budgeting mistakes he sees newcomers make most often:
1. Building an overly-optimistic budget
A common pitfall John has noticed is underestimating the fluctuations in short-term rental income. “It’s simple to spend according to your budget, but if the expected revenue doesn’t come through, you’re looking at a shortfall that could affect the profitability of vacation rentals,” he says.
Build your budget around conservative revenue estimates, not optimistic ones. If you hit your targets, great. If you don’t, you’re not scrambling to cover costs.
2. Underestimating cleaning costs
Cleaning costs catch a lot of new hosts off guard with short-term rentals. When you’re turning the property over after every booking, it’s hard work to do it alone and expenses can add up if you pay a professional cleaning service.
It’s not unusual for hosts to charge a cleaning fee on bookings, so consider if that’s something you’re open to doing. If you do, make sure it actually covers your costs and include this in your budget.
3. Not anticipating tax hikes
Local regulations can spring up and surprise you with new licensing fees, occupancy taxes, or permit requirements. Staying informed helps maintain your vacation rental profit and loss balance. Check out our article on how to get around STR restrictions for more advice.
4. Spending based on projections, not actual income
Newcomers often count on projected income before it arrives in their bank account. If bookings come in slower than expected, especially in your first year, you could find yourself with a cash flow problem fast. “Match your budget with actual income to avoid cash flow issues that can affect [your] profitability,” John advises.
5. Overpaying on rent or mortgage
Your biggest fixed cost is usually your mortgage or rent, so don’t go for anything that stretches your budget too far. “Get this wrong, and your vacation rental profitability takes a dive,” warns John. Before you commit, run the numbers at different occupancy scenarios. If the property only breaks even at 90% occupancy, the risk probably isn’t worth it.
6. Having no damage protection policy
Minor damages happen on almost every rental – a broken lamp, a stained sofa, excessive cleaning after a messy guest. Individually they’re manageable; cumulatively they can drain your profit.
John suggests, “Consider damage waivers or a damage protection plan to cover unexpected cleaning or repairs, ensuring that your vacation rental profit doesn’t take a hit.”
7. Underestimating utility costs
Short-term rental guests aren’t always conservative with heating or air-conditioning. Track your utility costs closely, look for ways to reduce consumption between stays, and make sure your nightly rate accounts for them properly.
8. Chasing a high nightly rate over occupancy
It’s tempting to set an ambitious nightly rate, but an empty calendar at $250 a night earns less than a full one at $180. “Focus on occupancy first to stabilize your vacation rental profit, then tweak your Average Daily Rate,” recommends John.
Once you’ve built up reviews, established demand, and understood your market, you’ll have the data to confidently push your rates up.
Tips on how to make money with short term rentals
Avoiding mistakes will protect your margins, but it won’t grow them. Here some of the practical strategies experienced hosts use to increase revenue, reduce idle time, and make money with Vrbo and Airbnb.
Use a flexible pricing strategy
Checking average market rates is a good starting point, but it won’t get you far on its own. The goal is to find the right balance between maximizing your nightly rate and keeping your calendar full – and that requires a strategy built around your specific property and market.
Here are some tried-and-tested approaches:
- Track the competition. Notice what similar properties in your area charge and be ready to adjust your prices to stay competitive.
- Charge for extras. You can charge extra for additional guests, pets, or early check-ins.
- Set a nightly rate floor. Know the minimum you’ll accept after costs and stick to it. When occupancy dips, protect your margins by adding value – late check-out, a welcome hamper – rather than cutting rates.
- Consider a minimum stay. Two nights is standard. It cuts turnover costs and filters out guests looking for a one-night party venue.
Finally, be sure to evaluate what your property has to offer regularly. Markets shift, new listings appear, and guest expectations evolve. A property that felt premium three years ago might need a refresh to justify the same rate today. You can also use a dynamic pricing tool to help automatically adjust your prices without manual admin.
Promote your property and try to stand out
When your create your first listing, add high-quality pictures and a detailed description. Use social media like Instagram to regularly post content and grow your target audience. Your property needs to be visible, appealing, and at least a tiny bit better than the other options in your area.
“When I started out this adventure 6 years ago, there were probably around 8 rentals in a 3-mile radius, including mine. Now there are probably more than 50,” says Ruth, an experienced Airbnb host. “I made my first listing dog-friendly and that attracted a lot of guests, as it also has a large secure garden, and no other nearby listings accepted pets.”
You can also diversify where you list. You’ll get a lot more visibility if you list on multiple popular platforms like Airbnb, Vrbo, and Google Vacation Rentals. When you’ve built up your portfolio and have some loyal guests, you might consider building a website to take direct bookings and build your brand.
Automate repetitive operations
Short-term rentals involve a lot of recurring admin – and if you’re managing it all manually, it quickly becomes a full-time job. The good news is that most of it can be automated or systematized, freeing you up to focus on the things that actually grow your business.
Here’s where to start:
- Guest communications. Set up templates for every standard touchpoint – booking confirmation, check-in instructions, mid-stay check-in, review requests. Most property management platforms can trigger these automatically.
- Cleaning and maintenance. Schedule cleans to fire automatically after every checkout. Keep a shared checklist for cleaners so nothing gets missed between stays.
- Supplies. Track what you get through and set a regular replenishment schedule. Running out of essentials between stays costs you reviews.
- Guest screening. Automate ID verification and background checks at the point of booking. It saves time and filters out risky guests before they ever get the keys.
- Finances. Use accounting software to track income and expenses as you go. Tax season is a lot less painful when the records are already in order.
If you’d rather hand off the day-to-day entirely, a property manager can handle it for you. Just be sure you know how much Airbnb property managers charge and whether that fits into your budget.
Don’t pour too much money into designs
A well-presented space directly affect your booking rate and the nightly rate you can charge, so it’s worth making your property look great. But there’s a balance to strike.
44% of hosts list guest damage as a top-three concern, and 41% flag normal wear and tear as a close second. Damage is inevitable but that anxiety is a lot easier to manage when your interiors aren’t expensive to replace.
Opt for durable, easy-to-clean furniture and finishes that look good without costing a fortune. Save the splurge for the things guests actually notice, like a quality mattress, good lighting, a well-equipped kitchen. That brings us to our next point…
Get reliable damage protection
Furnishing your property isn’t free, so what happens when a guest accidentally (or intentionally) causes damage? On platforms like Airbnb and Vrbo, you’ll get some basic cover automatically applied to each booking, but it’s rarely enough on its own. Gaps in protection, slow payouts, and lengthy disputes can leave you out of pocket for weeks or longer.
You can’t rely on standard landlord or homeowner insurance either, as most policies aren’t designed for short-term rentals and will be void when you start hosting paying guests. You’ll need dedicated short-term rental insurance or a third-party damage protection service like Truvi.
With Truvi, you’re covered for accidental and intentional guest damage for up to $1 million, and it’s included on all bookings with our guest screening service.
Protect your short-term rental investment with Truvi
Unexpected guest damage, excessive cleaning bills, and unauthorized parties can quietly erode your margins, especially when you’re just starting out.
Truvi is designed around the realities of short-term rental hosting, like high turnover and damage that needs resolving quickly between stays. With us, you can:
- Screen guests before they arrive. Automatic verification, ID checks, and criminal background checks help you filter out risky bookings before they become costly problems.
- Protect your property against damage. Choose from five protection tiers ranging up to $1 million in cover. No deposits, no waivers, no chasing guests for reimbursement.
- Resolve incidents fast. Submit photos and a repair invoice, and Truvi’s dedicated resolutions team handles the rest – with payouts processed in days, not months.
Book a demo to see how Truvi can help protect your margins from day one.
So, are vacation rentals profitable? The verdict
Yes, but the investors seeing the strongest returns aren’t getting lucky. They’re making smart decisions before they buy, managing their costs carefully, and treating their short-term rental like a real business.
The market is mature, but not necessarily saturated. You’ll need to enter with a clear strategy; choose your location carefully, understand the market before you commit, and build your costs into your projections from day one.
If you’re still deciding whether STRs are right for you, here’s where to start:
- Run the numbers on a specific property. Use AirDNA’s revenue calculator to estimate realistic income for your target market before you invest.
- Research local regulations. Licensing requirements, permit caps, and tax obligations vary widely by location and can significantly affect your returns.
- Start lean. Keep your setup costs manageable, automate what you can, and focus on occupancy before chasing a higher nightly rate.
- Protect yourself early. Damage and unexpected costs hit hardest when you’re new. Having a protection plan in place from your first booking means one bad guest won’t derail your first year.
The short-term rental market rewards preparation. Do the groundwork now, and the returns will follow.
Protect your short-term rental investment from day one
Truvi helps hosts and property managers screen guests, protect their properties, and resolve incidents fast – so unexpected costs don’t eat into your margins.
*We said Airbnb hosts earned an estimated $78.9 billion in 2025. This figure is calculated by taking Airbnb’s 2025 Gross Booking Value of $91.3 billion and subtracting the company’s reported full-year revenue of $12.2 billion, which represents the fees and commissions retained by the platform.
