What's a Good ROI on a Short-Term Rental? (2026 Benchmarks)

Direct answer

A good short-term rental ROI is a cash-on-cash return of 8-12%. Under 5% is poor, 12-15% is great, and projections above 15% are rare enough that you should double-check your assumptions.

Cash-on-cash return = annual cash flow / total cash invested x 100

Contents

STR investors use "ROI" for several different metrics, and many compare numbers that don't match. This guide explains which metric to use and what a good return looks like. For a step-by-step framework for evaluating deals, see our Airbnb investment analysis guide.

Which ROI metric matters?

When someone says "I'm getting 15% ROI," they could mean any of three metrics:

Cap rate

Net operating income / purchase price

It ignores how you financed the property. It is useful for comparing properties but doesn't show what your cash earns.

Cash-on-cash return

Annual cash flow / total cash invested

Use this one. It shows what your invested cash earns each year, which makes it the best metric for comparing deals.

Total ROI

Includes appreciation, equity paydown, and tax benefits

It is more complete but harder to calculate, and it depends on guesses about future appreciation.

In the rest of this article, "ROI" means cash-on-cash return. For more on this metric, see our cash-on-cash return guide.

Cash-on-cash return benchmarks for STRs

Here's how to interpret cash-on-cash returns:

Under 5%

Poor. You can likely earn more in index funds with far less work. Reconsider the deal unless you're counting on appreciation.

5-8%

Acceptable. The return is modest, but you build equity and get the other benefits of owning real estate. This range can work in high-appreciation markets.

8-12%

Good. This is a solid STR investment. You earn a healthy return and build equity.

12-15%

Great. This return justifies the extra work an STR takes compared with passive investments.

15%+

Exceptional. These returns are rare. Double-check your assumptions, because high projected returns often come from optimistic numbers.

Why STR returns vary so much

Some investors report 20%+ returns while others struggle to break 5%. These factors explain most of the gap:

Market selection

A cabin in a popular vacation destination can return 15%+ while a city apartment in an oversaturated market struggles to reach 6%.

Regulations

Restricted STR markets (limited permits, strict rules) often have higher returns because supply is capped. A permit in a restricted area can give you an edge over competitors who can't get one.

Self-manage vs property management

Property management takes 20-25% of revenue. Self-managing adds 3-5 percentage points to your cash-on-cash return, but takes your time. Consider a co-host arrangement as a middle ground.

Financing terms

A cash buyer and a leveraged investor will see different returns on the same property. Lower interest rates and smaller down payments can raise cash-on-cash return, but more leverage also means more risk.

What affects your returns

Purchase price

Overpaying cuts your returns. A property that works at $350,000 might not work at $400,000. Run the numbers at your actual purchase price, even if you like the property.

Down payment

A larger down payment lowers the mortgage payment and raises cash flow, but it also raises the cash you invest. A smaller down payment often produces a higher cash-on-cash return because of leverage, with thinner margins and more risk.

Occupancy rate

Occupancy is easy to overestimate, and optimistic occupancy is a common way investors lose money. Use conservative estimates (55-65%) from comparable properties, not seller projections. Our Deal Analyzer calculates your break-even occupancy so you can see how much margin you have.

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Expense management

Lower cleaning, utility, and maintenance costs can add 1-2 percentage points to your return. Small savings add up across hundreds of turnovers. Check our expense breakdown for costs you may have missed.

Example: same property, different financing

Here is how down payment affects cash-on-cash return on a $400,000 property with a 7%, 30-year mortgage. With 20% down, the property produces $10,000 a year in cash flow. With 25% down, the smaller loan cuts the mortgage payment by about $1,600 a year, so cash flow rises to about $11,600:

20% down payment

Down payment$80,000

Closing costs (3%)$12,000

Total invested$92,000

Annual cash flow$10,000

Cash-on-cash10.9%

25% down payment

Down payment$100,000

Closing costs (3%)$12,000

Total invested$112,000

Annual cash flow$11,600

Cash-on-cash10.4%

The 20% down investor earns a slightly higher cash-on-cash return (10.9% vs 10.4%) and keeps $20,000 to invest elsewhere. The 25% down investor has about $1,600 more cash flow a year but more capital tied up.

Returns beyond cash flow

Cash-on-cash return leaves out three other ways real estate builds wealth:

Equity buildup

Every mortgage payment includes principal that builds your equity. On a $300,000 loan, you might pay down $5,000-7,000 in principal during year one.

Appreciation

If your $400,000 property appreciates 3% a year, that's $12,000 a year in equity. Appreciation isn't guaranteed. Some markets stay flat or decline.

Tax benefits

Depreciation can shelter income from taxes. Interest, property taxes, and operating expenses are deductible. Consult a CPA for your specific situation.

Add principal paydown, potential appreciation, and tax benefits, and a property with 8% cash-on-cash might deliver a 15-20% total return. Cash flow is what pays your bills, so don't count on appreciation you can't spend.

Frequently asked questions

What is a good ROI for a short-term rental?

Many STR investors use 8-12% cash-on-cash return as a target range, but the right hurdle rate depends on market risk, financing cost, appreciation potential, regulation, and how much work the property requires. Recheck the inputs on any projection above the low teens.

How do you calculate short-term rental ROI?

Use cash-on-cash return. Divide your annual cash flow (revenue minus all expenses and debt service) by your total cash invested (down payment, closing costs, and furnishing). For example, $10,000 annual cash flow on $92,000 invested equals a 10.9% cash-on-cash return.

What is the average Airbnb ROI?

There is no dependable national Airbnb ROI number for underwriting one property. Returns depend on purchase price, location, financing terms, regulation, operating costs, and whether you self-manage or hire a property manager.

What is the difference between cash-on-cash return and cap rate?

Cap rate divides net operating income by the total purchase price and ignores financing. Cash-on-cash return divides your actual annual cash flow by the cash you invested, accounting for mortgage payments. Cash-on-cash is more useful for comparing deals because it shows what your invested cash earns.

Is short-term rental ROI better than long-term rental ROI?

Short-term rentals can offer higher cash-on-cash returns than long-term rentals in the right markets, but they require more active management, have higher operating costs, and carry more regulatory risk. STR income also swings more with the seasons and with occupancy.

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What's a Good ROI on a Short-Term Rental?