by David Rigney
Most struggling short-term rentals share the same fatal flaw: investors bought the wrong propeAirbnb deals failrty at the wrong price in the wrong location.
No amount of stylish furniture, premium amenities, or 5-star hospitality can rescue a deal that was broken from day one.
The Key Problem
Why Airbnb Deals Fail
Many first-time Airbnb investors rely on gut feelings, outdated market comps, or overly optimistic projections. They fall in love with a property’s potential without stress-testing the numbers. By the time the first mortgage payment comes due, reality hits—occupancy is lower than expected, expenses are higher than budgeted, and cash flow is negative.
This isn’t a problem you can design your way out of. You can’t Instagram your way to profitability.
What Separates Winners from Losers
Successful short-term rental investors use a repeatable, data-driven process to evaluate every deal before they commit a single dollar. They know which metrics matter, where to find reliable data, and how to model different scenarios quickly.
Here’s what that looks like in practice:
1. Start with Market Research
Before you even look at a property, understand the local short-term rental market. Use tools like AirDNA, Mashvisor, or AllTheRooms to analyze:
• Average daily rates (ADR)
• Occupancy rates by season
• Revenue per available room (RevPAR)
• Supply trends and seasonality
• Regulatory climate and restrictions
If the market fundamentals aren’t there, move on. No property will perform well in a saturated or hostile market.
2. Run Conservative Financial Models
Once you’ve identified a viable market, build a financial model for any property you’re considering. Include:
• Purchase price and renovation costs
• Monthly mortgage, insurance, taxes, and HOA fees
• Utilities, internet, cleaning, and restocking expenses
• Management fees (even if you plan to self-manage initially)
• Maintenance reserves and vacancy buffers
• Platform fees (Airbnb, VRBO, booking.com)
Use conservative estimates. Model what happens if occupancy drops 15% or cleaning costs rise 20%. A deal that only works under perfect conditions is not a good deal.
3. Calculate Key Return Metrics
You need more than a positive cash flow projection. Calculate:
• Cash-on-cash return
• Cap rate
• Break-even occupancy
• Net operating income (NOI)
• Return on investment (ROI) over 3-5 years
Compare these numbers to alternative investments and your personal return requirements. If the deal doesn’t meet your minimum thresholds, walk away.
4. Validate Assumptions with Local Data
Don’t trust national averages or platform estimates alone. Talk to local property managers, review competitor listings, and check actual booking calendars. Look for red flags:
• High inventory with low reviews
• Listings with frequent price drops
• Properties sitting on the market longer than usual
• Recent regulatory changes or permit restrictions
The goal is to confirm—or challenge—your initial assumptions before you make an offer.
5. Build in an Exit Strategy
Even the best-laid plans can fail. Before buying, ask yourself:
• Can I sell this property at a reasonable price if STR regulations change?
• Could I convert it to a long-term rental and still break even?
• Is there a strong buyer pool for this type of property?
If you’re locked into a single-use asset with no backup plan, you’re taking on unnecessary risk.
The Bottom Line
Airbnb investing isn’t about finding hidden gems or getting lucky. It’s about disciplined underwriting, market analysis, and financial planning.
Most deals fail because investors skip these steps. They buy first and ask questions later. They assume everything will work out because they want it to.
But hope is not a strategy.
If you want consistent returns from short-term rentals, you need a system. You need to evaluate properties quickly, reject bad deals confidently, and only move forward when the numbers make sense.
That’s how you avoid becoming another cautionary tale. That’s how you build a rental portfolio that actually performs.
