Step 1: Estimate projected Airbnb revenue
The most common mistake in STR analysis is using AirDNA market averages or Airbnb's own host estimator. Both smooth over micro-market variation and can be 20–40% off for a specific property. The right approach: pull live Airbnb search results for comparable listings — same zip code, same bedroom count, same room type — for upcoming weekends.
- ADR: P45 nightly rate across 5 search windows (3 weekends + 2 midweek) — more conservative than median, more realistic than mean
- Occupancy: 68% default (national STR average) — adjustable based on market data
- Annual gross: ADR × Occupancy × 365
- Night caps applied: SF (90 nights/yr), LA (120), DC (90), NYC (180)
STRInvest pulls this live data directly from Airbnb search results — the same data Airbnb's algorithm uses — and runs the calculation automatically when you open any Zillow, Redfin, or Realtor.com listing page.
Step 2: Calculate cap rate
Cap rate (capitalization rate) tells you what return you'd get on a property if you bought it in cash. It ignores financing — which makes it useful for comparing properties regardless of how you plan to fund them.
Cap rate formula:
Where: Annual NOI = Gross Revenue × (1 − Expense Ratio)
Use a 35% expense ratio as a baseline for STR properties. This covers: platform fees (3% Airbnb host fee), property management (if applicable, 20–25%), cleaning, supplies and maintenance, utilities, and insurance. Adjust up for older properties or markets with high management costs.
Example: A property listed at $380,000 in the Smoky Mountains. Projected gross revenue: $42,000/year. NOI: $42,000 × 0.65 = $27,300. Cap rate: ($27,300 / $380,000) × 100 = 7.2%. That's strong for the category.
Step 3: Calculate cash-on-cash return
Cash-on-cash return tells you what you're earning on the actual cash you invested — your down payment plus closing costs. Unlike cap rate, it includes your mortgage payments, so it reflects your real-world investment experience.
Cash Flow = NOI − Annual Debt Service
Total Cash Invested = Down Payment + Closing Costs + Initial Renovation
Continuing the example: 20% down on $380,000 = $76,000. Closing costs ~$8,000. Total invested: $84,000. Mortgage at 7.2% on $304,000 over 30 years = ~$20,650/year. Cash flow: $27,300 − $20,650 = $6,650/year. Cash-on-cash: ($6,650 / $84,000) × 100 = 7.9%. Above the 6% threshold most STR investors target.
Step 4: Check local STR regulations — before everything else
This is the step most investors skip until it's too late. Local regulations can render a property completely unusable as a short-term rental — or cap your income at a fraction of the projected figure.
| City | Night Cap | Permit Required | Primary Residence Only |
|---|---|---|---|
| San Francisco, CA | 90 nights/yr | Yes | Yes |
| Los Angeles, CA | 120 nights/yr | Yes | Yes |
| Washington, DC | 90 nights/yr | Yes | Yes |
| Nashville, TN | No cap (permit required) | Yes | No |
| Gatlinburg, TN | No cap | Yes | No |
| Miami, FL | Varies by zone | Yes | No |
STRInvest includes a regulations database covering 97 US cities — updated quarterly. When you open a listing, it automatically matches the property's city to the database and shows the applicable night cap, permit requirement, and primary residence rule.
Running the full analysis in under 5 minutes
Manually running cap rate + cash-on-cash + comps for every listing you look at is 30–45 minutes of work per property. The STRInvest Chrome extension automates the entire analysis in the sidebar while you browse Zillow, Redfin, or Realtor.com — live comparable data from Airbnb, all four calculations pre-computed, and the regulatory check pulled automatically from the database.
Free tier includes 3 analyses per month. Pro ($9.99/month) is unlimited analyses with CSV export — useful for running 20+ properties through the funnel before narrowing to a shortlist.