The Honest STR Underwriting Calculator
A short-term rental doesn’t earn one number — it earns a range. Enter a deal and this returns a conservative, expected, and optimistic case side by side, so you see cash flow after debt service and the capital reserve, cash-on-cash, and DSCR across the year you might actually have — not a single flattering figure.
Matt NunnFounder, Builders Finance
The most dangerous number in underwriting is a single one. Enter the deal below. Rather than one projection, the calculator flexes occupancy and the nightly rate to show a conservative, expected, and optimistic year — because a deal that only works in the optimistic column hasn’t penciled.
Pairs withDoes This Deal Actually Pencil?
What this assumes
- Revenue. Nightly rate × occupancy × 365, lodging only. Enter figures you have already cleaned and discounted — this screen rounds nothing down for you, and it models a stabilised year rather than a first one.
- Management. Management is a share of revenue, so the screen charges your management percentage in every case — it falls in the conservative column and rises in the optimistic one. Keep it in even if you will run the property yourself; set it to 0 only to see NOI before a management allowance, and read that as a labelled variant, not the property’s NOI.
- Cleaning. Cleaning fees guests pay are not counted as revenue, and the cleaning cost you bear, net of those fees, is inside operating expenses. That is an underwriting convention, not a bookkeeping one — in your books the two are recorded separately.
- Capital reserve. The capital reserve is its own line, below NOI: it lowers cash flow after debt service and the capital reserve and cash-on-cash, not NOI or DSCR. Routine repairs belong in operating expenses; the reserve is for replacing what wears out. Size it from your own components — the example’s figure is that property’s, not a rule.
- Operating costs do not move with revenue. Operating expenses are held at the figure you entered in all three cases. In the optimistic case that is deliberately generous — costs that move with bookings, such as platform fees, cleaning and consumables, would in practice rise with occupancy.
- Financing. A 30-year fixed, fully amortising loan, identical in all three cases. No interest-only period, no adjustable rate, no points.
- What is not here. Tax, appreciation, principal paydown, year two. This is a 15-minute screen for whether a deal deserves a full underwrite, not the underwrite.
What the results mean
- Occupancy
- The share of nights booked in the case shown. The conservative case takes ten points off what you entered; the optimistic case adds five.
- Net ADR
- The nightly lodging rate in the case shown. Conservative prices at 90% of what you entered, optimistic at 105%.
- Revenue
- Nightly rate × occupancy × 365. Lodging only — no cleaning fees, no taxes collected from guests.
- Management
- Your management percentage of the revenue in the case shown. Unlike the other operating costs it moves with revenue, so it is lower in the conservative case and higher in the optimistic one.
- NOI
- Net operating income: revenue less operating expenses and the management allowance, before debt and before the capital reserve. It is what the property earns; what you keep comes further down.
- Debt service
- Twelve months of principal and interest on the financed amount. Identical in all three cases — the loan does not care how the year goes.
- Capital reserve
- The annual capital reserve you entered, the same in all three cases. It comes off below NOI, after debt service.
- Cash flow after debt service and the capital reserve
- NOI minus annual debt service minus the capital reserve. What the property leaves you in the year, before tax.
- Cash-on-cash
- Cash flow after debt service and the capital reserve, as a share of the cash you actually put in. It answers whether your capital is being paid for its trouble, and ignores whether the loan is comfortable.
- DSCR
- NOI divided by debt service. Below 1.00 the property’s income does not cover its own loan; at exactly 1.00 it covers it with no surplus. It answers whether the debt is safe, and ignores whether the return is good.
- Cash invested
- Down payment plus closing and furnishing — the capital at risk, which is always more than the down payment.
How the cases are built. The expected column uses your inputs as entered. The conservative column drops occupancy by 10 points and the nightly rate by 10% — a plausible soft year. The optimistic column adds 5 points of occupancy and 5% on the nightly rate. Operating expenses, the capital reserve and financing — including the interest rate — hold constant across all three; management moves with revenue. Read the conservative column first: if its income does not cover its debt service, or it loses money after the capital reserve, the deal is riding on the forecast.
The Builders Finance Underwriting Method
- Source it — trace every number to real evidence, not a headline.
- Haircut it — discount for the year you’ll actually have; round revenue down, costs up.
- Record it — value, source, and haircut, in The Assumptions Ledger.
- Stress it — move the numbers that matter to their downside before you trust them.
This is a 15-minute quick-screen, not a full model — a fast read on whether a deal is worth deeper work. This screen returns two of the four dimensions weighed in Does This Deal Actually Pencil? — cash-on-cash and DSCR. The Break-Even Occupancy Calculator returns the third. Cap rate is the fourth, and it is a question about the asset rather than about your financing, so it is worked through in Cap Rate for STRs. The full method is The STR Deal Underwriting Manual.
Your numbers
Your figures stay in this browser. Nothing you type or calculate here is sent anywhere or saved, and reloading the page returns it to the example. The page itself makes the ordinary requests any page on this site makes — analytics and fonts — and none of them carries your numbers.
A letter for people who run property as a business. One idea at a time on the financial side of ownership — what changed, what it means, and what an operator should do about it. Written for short-term and long-term rental owners alike.