Calculation Methodology

Explanation

The total revenue the property generates before any expenses. Calculated from the user-entered Average Daily Rate and annual occupancy rate. This is the top-line number from which all other calculations flow.

Assumptions

Assumes 365 available nights per year. Does not account for owner-blocked nights unless the user reduces their occupancy rate to reflect this.

Source

Standard real estate investment analysis formula.

Explanation

NOI measures what the property earns after all operating expenses, excluding mortgage debt service. It is the financing-neutral measure of property performance and the foundation of cap rate and DSCR calculations.

Assumptions

Platform fees are calculated as a percentage of gross revenue. Maintenance is calculated as a percentage of purchase price (default: 1%). All expense inputs are user-controlled.

Source

CCIM Institute, National Association of Realtors real estate investment analysis standards.

Explanation

The annual pre-tax return on the actual cash invested. Annual Net Cash Flow = NOI minus Annual Debt Service. Total Cash Invested = Down Payment + Closing Costs + Startup Costs.

Assumptions

Uses pre-tax cash flow (does not model tax implications or depreciation benefits). Closing costs default to 2% of purchase price if not specified. Startup costs are a user input.

Source

Standard real estate investment analysis formula widely used by institutional and individual investors.

Explanation

A financing-neutral measure of the property's investment yield. Represents the return the property would generate if purchased entirely with cash. Useful for comparing properties regardless of financing structure.

Assumptions

Uses purchase price as the denominator (not current market value). Does not account for capital expenditures.

Source

CCIM Institute, Urban Land Institute. Standard commercial real estate valuation metric.

Explanation

The minimum occupancy rate required to cover all costs — including mortgage payments. At this occupancy, the property neither generates nor loses cash. Below this rate, the property operates at a loss.

Assumptions

Total Annual Costs includes all operating expenses plus annual mortgage payments. Uses annual ADR as the revenue rate per night.

Source

Derived from standard break-even analysis methodology applied to real estate income.

Explanation

Measures whether the property's net income covers its debt obligations. A DSCR of 1.0x means income exactly covers debt payments. Most DSCR lenders require 1.0–1.25x minimum for qualification.

Assumptions

Annual Debt Service = Monthly Mortgage Payment × 12. Mortgage payment is calculated using standard amortization formula for a fixed-rate loan.

Source

Commercial real estate lending standard. Used by DSCR lenders, Freddie Mac, and institutional real estate investors.

Explanation

Projects the total equity accumulated over 5 years through mortgage paydown and property appreciation. Appreciation rate defaults to 3% annually.

Assumptions

Uses standard amortization schedule to calculate annual principal paydown. Default appreciation rate of 3%/year (configurable). Does not account for capital improvement additions to value.

Source

Standard real estate wealth building analysis. Appreciation assumption based on historical US residential real estate appreciation averages.

Explanation

Standard amortizing mortgage payment formula. P = loan principal, r = monthly interest rate (annual rate / 12), n = number of payments (loan term in years × 12).

Assumptions

Fixed-rate mortgage. Calculates principal and interest only — property taxes and insurance are modeled separately.

Source

Standard financial mathematics. Used by all US mortgage lenders for amortized loan payment calculation.

Explanation

A quick valuation metric that compares purchase price to gross annual revenue. Lower GRM indicates better relative value. Useful for quickly screening properties but insufficient for complete analysis.

Assumptions

Uses gross revenue (not net). Does not account for vacancy, expenses, or financing.

Source

Standard real estate screening metric used by investors for rapid property comparison.

Explanation

The total capital deployed to acquire and launch the STR property. Used as the denominator in cash-on-cash return calculations.

Assumptions

Down payment is user-specified. Closing costs default to 2% of purchase price. Startup costs (furniture, supplies, photography) are user-entered.

Source

Standard investment cost basis calculation.

Explanation

Estimates the accelerated depreciation benefit from cost segregation with bonus depreciation. 5-year personal property estimated at 15% of depreciable basis; 15-year land improvements at 10%; 27.5-year structure at 75%.

Assumptions

5-yr and 15-yr asset percentages are estimates based on typical single-family residential properties. Actual percentages determined by a qualified cost segregation study. Bonus depreciation rate per current IRS schedule (40% in 2026).

Source

IRS Publication 946 (depreciation). IRS Revenue Procedure 87-57 (asset classification). Tax Cuts and Jobs Act of 2017 bonus depreciation schedule.

Explanation

Estimates the payback period and multi-year ROI for STR amenity investments. Calculates incremental revenue from ADR increases and occupancy lift, net of ongoing maintenance costs.

Assumptions

ADR increase and occupancy lift are user inputs based on comparable data or experience. Conservative, base, and optimistic scenarios modeled at 75%, 100%, and 125% of estimated impact.

Source

Proprietary model based on STR industry data on amenity impact. AirDNA amenity value research.