STR Break-Even Analysis: How to Know If a Deal Makes Sense Before You Buy
Before you buy any short-term rental, you need to know your break-even occupancy rate. Here's the exact calculation and what it tells you about risk.
The most important number in any short-term rental investment isn't the projected revenue. It's the break-even occupancy rate — the minimum percentage of nights you need to book just to cover your costs. If you don't know this number before you buy, you're flying blind.
What Is Break-Even Occupancy Rate?
Break-even occupancy is the percentage of available nights that must be booked at your expected average nightly rate to cover all fixed and variable costs: mortgage or rent, utilities, platform fees, cleaning, insurance, property taxes, HOA fees, and supplies.
Break-Even Occupancy = Total Monthly Costs ÷ (Nightly Rate × Available Nights) × 100
Break-Even Calculation: Step by Step
Let's work through a real example. You're evaluating a $450,000 vacation rental. You put 25% down ($112,500), financing the rest at 7.5% over 30 years — a monthly mortgage payment of approximately $2,800. Your other monthly costs: utilities $350, insurance $250, property taxes $375, cleaning per stay averages $150 for 8 stays/month = $1,200, platform fees ~12% of revenue, supplies/maintenance $300. Total fixed + semi-variable costs (excluding platform fees): approximately $5,275/month.
Your target nightly rate based on market comps: $195. With 30 available nights per month: Break-Even = $5,275 ÷ ($195 × 30) = $5,275 ÷ $5,850 = 90.2%. A 90% break-even is dangerously high.
What's a Safe Break-Even Occupancy Rate?
- Under 50%: Excellent — strong cushion; the deal works even in bad months
- 50–65%: Good — manageable risk; achievable in most markets with decent marketing
- 65–75%: Moderate — tight but workable; requires consistent occupancy
- 75–85%: Risky — you need above-average performance to stay positive
- 85%+: Danger zone — avoid; one slow season eliminates your profit
How to Lower Your Break-Even Occupancy
- Negotiate a lower purchase price: A $30,000 price reduction at 25% down cuts your mortgage payment by ~$105/month
- Increase your nightly rate: A $20 ADR increase on a 20-night average booking month cuts break-even by 3–4 points
- Reduce platform fee exposure: Direct bookings eliminate the 12–15% platform fee cut
- Minimize management costs: Self-management vs. 20–25% property management can shift break-even by 15+ points
How Milo AI Calculates Break-Even in Seconds
MagicBnB is the portfolio intelligence platform for short-term rental operators. Connect your Hospitable or Hostfully PMS and bank account through Plaid to track true net profit, ADR, occupancy, and all the metrics that matter — per property, not just in aggregate. Milo, your AI Revenue & Profit Manager, answers questions about your portfolio in plain English. Use the Deal Analyzer to underwrite new acquisitions before you commit. Free plan available — 5 deal analyses included. Start at magicbnb.io.
Analyze your next STR deal before you buy — try Milo AI free on MagicBnB.
About MagicBnB
MagicBnB is a short-term rental portfolio intelligence platform. Milo AI evaluates any STR acquisition with break-even occupancy, NOI, cap rate, RevPAR, ADR, and risk assessment in seconds.
