Vacation rental income is a function of three variables: nightly rate, occupancy percentage, and operating expenses. A property earning $200 per night at 70% occupancy grosses $51,100 per year. After platform fees (around 3% on most Airbnb bookings), cleaning fees, property management (25–35% of gross if outsourced), insurance, supplies, and mortgage — net income often runs 40–55% of gross revenue for a well-managed property.
Coastal markets (Florida Gulf Coast, Outer Banks, Southern California), mountain destinations (Smoky Mountains, Colorado ski towns), and urban gateway markets (Nashville, New Orleans, Savannah) consistently produce strong STR income. Use AirDNA or Rabbu to research occupancy and nightly rate data for any specific market before buying.
STR regulation is the most underestimated risk in vacation rental investing. Many cities — including New York, San Francisco, and Santa Monica — have effectively banned non-owner-occupied STRs. Other markets require permits that cap supply. Research your target city's current STR regulations and monitor for changes. What is legal today may be restricted by next year's council session.
Self-managing a vacation rental requires 5–15 hours per week for a single property — guest communication, cleaning coordination, supply restocking, and maintenance. Professional vacation rental management companies charge 20–35% of gross revenue but handle everything. If you live more than 30 minutes from the property, professional management is usually worth the cost.
Dan White is a licensed Virginia real estate agent at Pearson Smith Realty and founder of FreeDealCalc.com. He has been investing in Northern Virginia real estate for 20+ years.