How to Analyze a Short-Term Rental Investment: NOI, Cash-on-Cash Return, and Four Financing Scenarios

The Two Numbers That Matter

NOI (Net Operating Income): What the property earns after all operating expenses, before debt service.

Cash-on-Cash Return (CoC): What you earn as a percentage of the cash you put in. Target for STR: 8–15% depending on market and risk tolerance.

NOI: The Full Calculation

Start with projected annual gross revenue from your StrIQ (code BRENDAN10 for 10% off) comp set — use the median performer, not the top. First-year properties rarely outperform immediately.

Example: $350k 3BR, competitive market. Comp set median: $52,000/yr.

Subtract operating expenses:

• Platform fees (3–5%): $2,080
• Utilities: $3,600/yr
• Insurance (STR-specific via Wister): $2,400/yr
• Supplies restocking: $1,200/yr
• Maintenance (1–1.5% of value): $3,500–$5,250
• Capex reserve (1%): $3,500
• PMS software (Hospitable): $600/yr
• Dynamic pricing (PriceLabs): $600/yr
• Banking & financial tracking (Baselane): free

Total expenses: ~$17,500 → NOI: $34,500

Four Cash-on-Cash Scenarios

• Scenario 1 — Conventional, 20% down, 7.0%: Cash out ~$108k. Annual debt service $22,356. Net cash flow $12,144. CoC: 11.2%
• Scenario 2 — DSCR, 25% down, 8.0%: Cash out ~$125.5k. Annual debt service $23,124. Net cash flow $11,376. CoC: 9.1%
• Scenario 3 — DSCR, 20% down, 7.5%: Cash out ~$108k. Annual debt service $23,496. Net cash flow $11,004. CoC: 10.2%
• Scenario 4 — Owner financing, 10% down, 5.5%: Cash out ~$73k. Annual debt service $25,956. Net cash flow $8,544. CoC: 11.7% — lower cash flow but higher CoC because less capital deployed.

For a deeper dive on each financing path, see our guide to financing a short-term rental.

When the Numbers Don’t Work: Three Options

1. Negotiate the price down. A $15k reduction on a $350k property improves annual CoC by ~1.4 points.
2. Change the financing structure. Model all four paths before you walk away.
3. Change the property. Some deals don’t work at any price in a given market. Move on.

The Tax Layer

A property that clears 10% CoC before taxes may look different after accounting for depreciation, cost segregation, and the STR tax strategy — which can let you use rental losses to offset W-2 income. See our STR tax guide and engage a CPA before you close.

Want expert eyes on a specific deal? Our STR consulting team reviews deals, models scenarios, and helps you decide whether to proceed, renegotiate, or move on.

The Hosted Well Course walks through deal analysis step by step — 19 lessons, five weeks, free.