Rental Arbitrage Profit Calculator: Calculate Your Potential Income

Last Updated: January 22, 2026

Author: Shaun Ghavami, Co-Founder at 10XBNB

Reading Time: 10 minutes

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Quick Answer: How to Calculate Rental Arbitrage Profitability

Rental arbitrage profit formula:

Monthly Profit = (ADR × Nights Booked) - Monthly Rent - Operating Expenses

Where:

• ADR (Average Daily Rate): Your average nightly rate
• Nights Booked: Occupancy rate × 30 days
• Monthly Rent: Fixed monthly lease payment
• Operating Expenses: Utilities, cleaning, platform fees, maintenance, insurance

Example calculation:

• ADR: $160
• Occupancy: 70% (21 nights/month)
• Monthly revenue: $160 × 21 = $3,360
• Monthly rent: $1,900
• Operating expenses: $900
• Monthly profit: $560

Cash-on-cash return:

ROI = (Annual Profit / Startup Investment) × 100

Example: $560/month × 12 = $6,720 annual profit ÷ $10,000 investment = 67.2% ROI

This calculator guide is part of our complete rental arbitrage guide. For related topics, see our startup costs breakdown and best markets analysis.

Introduction

Calculating rental arbitrage profitability is essential before investing in your first property. Understanding the numbers helps you choose the right markets, set realistic expectations, and make informed decisions about scaling.

This comprehensive calculator guide includes formulas, real-world examples, sensitivity analysis, and common calculation mistakes. You’ll learn exactly how to calculate your potential income, ROI, and break-even point—and how to use these calculations to make better business decisions.

Key takeaway: Accurate profit calculations prevent costly mistakes. According to 10XBNB’s 2026 Student Success Survey, operators who calculated profitability before starting had 34% higher success rates than those who didn’t.

Profit Calculation Formula

Basic Profit Formula

Monthly Profit = Monthly Revenue – Monthly Expenses

Where:

• Monthly Revenue = ADR × Nights Booked
• Monthly Expenses = Rent + Operating Expenses

Detailed Formula Breakdown

Step 1: Calculate Monthly Revenue

Monthly Revenue = ADR × (Occupancy Rate × 30 days)

Step 2: Calculate Monthly Expenses

Monthly Expenses = Rent + Utilities + Cleaning + Platform Fees + Maintenance + Insurance

Step 3: Calculate Monthly Profit

Monthly Profit = Monthly Revenue - Monthly Expenses

Step 4: Calculate Annual Profit

Annual Profit = Monthly Profit × 12

Step 5: Calculate Cash-on-Cash Return

ROI = (Annual Profit / Startup Investment) × 100

Example Calculation: Nashville, TN

Inputs:

• ADR: $210
• Occupancy: 65% (19.5 nights/month)
• Monthly rent: $1,900
• Utilities: $200
• Cleaning: $500 (19.5 nights × $25.64 average)
• Platform fees: $273 (8% of $3,409 revenue)
• Maintenance: $250
• Insurance: $150
• Startup investment: $10,000

Calculations:

1. Monthly revenue: $210 × 19.5 = $4,095
2. Monthly expenses: $1,900 + $200 + $500 + $273 + $250 + $150 = $3,273
3. Monthly profit: $4,095 – $3,273 = $822
4. Annual profit: $822 × 12 = $9,864
5. ROI: ($9,864 / $10,000) × 100 = 98.6%

Interactive Calculator (Embedded Tool)

Note: For a fully interactive calculator, embed a JavaScript calculator tool on your website. Below is the calculation framework you can use.

Calculator Inputs

Property Details:

• Number of bedrooms: [Input]
• Property location: [Input]
• Monthly rent: [Input]

Revenue Assumptions:

• Average Daily Rate (ADR): [Input]
• Occupancy rate: [Input] (%)

Expense Assumptions:

• Utilities: [Input] ($/month)
• Cleaning cost per turnover: [Input] ($)
• Platform fees: [Input] (%)
• Maintenance reserve: [Input] ($/month)
• Insurance: [Input] ($/month)

Investment:

• Startup investment: [Input] ($)

Calculator Outputs

Monthly Metrics:

• Monthly revenue: [Calculated]
• Monthly expenses: [Calculated]
• Monthly profit: [Calculated]

Annual Metrics:

• Annual revenue: [Calculated]
• Annual expenses: [Calculated]
• Annual profit: [Calculated]

Return Metrics:

• Cash-on-cash return: [Calculated] (%)
• Payback period: [Calculated] (months)
• Break-even occupancy: [Calculated] (%)

Input Variables Explained

ADR (Average Daily Rate)

What it is: Your average nightly rate across all bookings.

How to find it:

• Use AirDNA market data
• Analyze competitor listings in your market
• Check historical booking data (if available)

Typical ranges:

• Budget markets: $100-$150/night
• Mid-tier markets: $150-$250/night
• Premium markets: $250-$400+/night

Factors affecting ADR:

• Property location and neighborhood
• Property size and amenities
• Seasonality and demand
• Competition and market saturation
• Listing optimization and reviews

Occupancy Rate

What it is: Percentage of nights booked per month.

How to calculate:

Occupancy Rate = (Nights Booked / 30) × 100

Typical ranges:

• Strong markets: 65-75% average
• Moderate markets: 55-65% average
• Challenging markets: 45-55% average

Factors affecting occupancy:

• Market demand and tourism
• Seasonality (peak vs. off-peak)
• Listing optimization and reviews
• Pricing strategy
• Competition level

According to 10XBNB’s 2026 Student Success Survey:

• Hybrid markets: 85% average occupancy
• STR-only markets: 62% average occupancy
• Regulated markets: 58% average occupancy

Monthly Rent

What it is: Fixed monthly lease payment to landlord.

Typical ranges:

• 1-bedroom: $1,200-$1,800/month
• 2-bedroom: $1,500-$2,500/month
• 3-bedroom: $2,000-$3,500/month

Negotiation tips:

• Some landlords accept slightly higher rent for STR approval
• Longer lease terms (18-24 months) may reduce rent
• Professional presentation increases approval rates

Operating Expenses

Utilities:

• Electricity: $100-$200/month
• Water/sewer: $50-$100/month
• Internet: $50-$100/month
• Total: $150-$300/month

Cleaning:

• Cost per turnover: $100-$150
• Frequency: Based on occupancy
• Monthly: $400-$800 (varies by bookings)

Platform Fees:

• Airbnb: 3% host fee
• Vrbo: 8% commission
• Booking.com: 15% commission
• Average: 8-10% of revenue

Maintenance:

• Budget: 5-10% of monthly revenue
• Typical: $200-$400/month

Insurance:

• STR insurance: $100-$200/month
• Typical: $150/month

Total Operating Expenses:

• Typical range: $800-$1,200/month (varies by property size and occupancy)

Real-World Profit Examples by Market

Example 1: Nashville, TN (Hybrid Market)

Property: 2-bedroom apartment
Market Type: Hybrid (STR + medium-term rentals)

Inputs:

• ADR: $210
• Occupancy: 65% (19.5 nights/month)
• Monthly rent: $1,900
• Utilities: $200
• Cleaning: $500
• Platform fees: $273 (8%)
• Maintenance: $250
• Insurance: $150

Calculations:

• Monthly revenue: $4,095
• Monthly expenses: $3,273
• Monthly profit: $822
• Annual profit: $9,864
• ROI (on $10,000 investment): 98.6%

Example 2: Phoenix, AZ (Hybrid Market)

Property: 2-bedroom apartment
Market Type: Hybrid

Inputs:

• ADR: $180
• Occupancy: 60% (18 nights/month)
• Monthly rent: $1,900
• Utilities: $180
• Cleaning: $450
• Platform fees: $259 (8%)
• Maintenance: $230
• Insurance: $150

Calculations:

• Monthly revenue: $3,240
• Monthly expenses: $3,149
• Monthly profit: $91
• Annual profit: $1,092
• ROI (on $10,000 investment): 10.9%

Note: This example shows lower profitability due to lower ADR and occupancy. Market selection is critical.

Example 3: Savannah, GA (Tourism Market)

Property: 2-bedroom apartment
Market Type: STR-only (tourism-driven)

Inputs:

• ADR: $291
• Occupancy: 58% (17.4 nights/month)
• Monthly rent: $1,900
• Utilities: $200
• Cleaning: $435
• Platform fees: $295 (8%)
• Maintenance: $250
• Insurance: $150

Calculations:

• Monthly revenue: $5,063
• Monthly expenses: $3,230
• Monthly profit: $1,833
• Annual profit: $21,996
• ROI (on $10,000 investment): 220%

Note: Higher ADR compensates for lower occupancy in tourism markets.

Sensitivity Analysis: What-If Scenarios

Sensitivity analysis shows how profit changes when key variables change. This helps you understand risk and set realistic expectations.

Base Case Scenario

Assumptions:

• ADR: $160
• Occupancy: 70% (21 nights/month)
• Monthly rent: $1,900
• Operating expenses: $900

Results:

• Monthly revenue: $3,360
• Monthly profit: $560

Scenario 1: ADR Decreases 10% ($144)

New calculations:

• Monthly revenue: $3,024
• Monthly profit: $224 (60% decrease)

Impact: ADR changes have significant impact on profitability. A 10% ADR decrease reduces profit by 60% in this example.

Scenario 2: Occupancy Decreases 10% (63%)

New calculations:

• Nights booked: 18.9 (down from 21)
• Monthly revenue: $3,024
• Monthly profit: $224 (60% decrease)

Impact: Occupancy changes have similar impact to ADR changes. Both are critical variables.

Scenario 3: Rent Increases 10% ($2,090)

New calculations:

• Monthly revenue: $3,360 (unchanged)
• Monthly expenses: $2,090 + $900 = $2,990
• Monthly profit: $370 (34% decrease)

Impact: Rent increases reduce profit but have less impact than ADR or occupancy changes.

Scenario 4: Combined Negative (ADR -10% + Occupancy -10%)

New calculations:

• ADR: $144
• Occupancy: 63% (18.9 nights)
• Monthly revenue: $2,722
• Monthly expenses: $2,800
• Monthly profit: -$78 (operating at a loss)

Impact: Combined negative changes can push properties into unprofitability. Maintain operating reserves.

Key Insights from Sensitivity Analysis

1. ADR and occupancy are critical: Small changes have large profit impact
2. Maintain operating reserves: Protect against negative scenarios
3. Market selection matters: Choose markets with strong demand and stable ADR
4. Monitor key metrics: Track ADR and occupancy monthly to catch issues early

Cash-on-Cash Return Calculations

Cash-on-cash return measures annual profit as a percentage of your initial investment.

Formula

Cash-on-Cash Return = (Annual Profit / Startup Investment) × 100

Example Calculations

Example 1:

• Startup investment: $8,000
• Monthly profit: $1,200
• Annual profit: $14,400
• ROI: 180%

Example 2:

• Startup investment: $12,000
• Monthly profit: $800
• Annual profit: $9,600
• ROI: 80%

Example 3:

• Startup investment: $15,000
• Monthly profit: $600
• Annual profit: $7,200
• ROI: 48%

Target Benchmarks

Conservative target: 30-60% annual return
Moderate target: 60-120% annual return
Aggressive target: 120-180%+ annual return

According to 10XBNB’s 2026 Student Success Survey:

• Average ROI: 67% (based on $10,000 average investment and $560 average monthly profit)
• Top quartile ROI: 120%+
• Bottom quartile ROI: 30-40%

Break-Even Analysis

Break-even analysis calculates the minimum occupancy or ADR needed to cover all expenses.

Break-Even Occupancy

Formula:

Break-Even Occupancy = (Monthly Expenses / ADR) / 30 × 100

Example:

• Monthly expenses: $2,800
• ADR: $160
• Break-even nights: $2,800 / $160 = 17.5 nights
• Break-even occupancy: 58.3%

Interpretation: You need at least 58.3% occupancy to break even. Any occupancy above this generates profit.

Break-Even ADR

Formula:

Break-Even ADR = Monthly Expenses / (Occupancy Rate × 30)

Example:

• Monthly expenses: $2,800
• Occupancy: 70% (21 nights)
• Break-even ADR: $133.33

Interpretation: You need at least $133.33 ADR to break even at 70% occupancy.

Using Break-Even Analysis

Before signing a lease:

• Calculate break-even occupancy for the property’s ADR
• Verify market occupancy exceeds break-even
• Build in 10-15% margin above break-even for profit

During operations:

• Monitor actual occupancy vs. break-even
• Adjust pricing if occupancy drops below break-even
• Consider exit if consistently below break-even

Common Calculation Mistakes

Mistake 1: Underestimating Operating Expenses

Error: Only counting rent and utilities, missing cleaning, platform fees, maintenance.

Correct approach: Include all operating expenses:

• Rent
• Utilities
• Cleaning (based on actual turnover frequency)
• Platform fees (8-10% of revenue)
• Maintenance (5-10% of revenue)
• Insurance

Impact: Underestimating expenses by 20% can turn a profitable property into an unprofitable one.

Mistake 2: Overestimating Occupancy

Error: Planning for 80-90% occupancy (unrealistic).

Correct approach: Use market data:

• Industry average: 56-62% occupancy
• Hybrid markets: 65-75% average
• STR-only markets: 55-65% average
• Build in 5-10% buffer below market average for conservative planning

Impact: Overestimating occupancy by 20% can overstate profit by 40-50%.

Mistake 3: Ignoring Seasonality

Error: Using peak season ADR and occupancy for annual projections.

Correct approach: Calculate monthly projections accounting for seasonality:

• Peak season: Higher ADR and occupancy
• Off-peak season: Lower ADR and occupancy
• Annual average: Weighted average of all months

Impact: Ignoring seasonality can overstate annual profit by 20-30%.

Mistake 4: Not Accounting for Platform Fees

Error: Calculating revenue as ADR × nights without deducting platform fees.

Correct approach: Platform fees are 8-10% of revenue. Calculate:

Net Revenue = Gross Revenue × (1 - Platform Fee %)

Impact: Forgetting platform fees overstates profit by 8-10%.

Mistake 5: Using List Price Instead of Actual ADR

Error: Using listing price as ADR without accounting for discounts, promotions, or lower-demand periods.

Correct approach: Use actual historical ADR data or market averages from AirDNA.

Impact: Using list price instead of actual ADR can overstate profit by 15-25%.

Using Calculations for Decision-Making

Market Selection

Use calculations to:

• Compare profitability across markets
• Identify markets with highest ROI potential
• Avoid markets with low profit margins

Example: Compare Nashville ($822/month profit) vs. Phoenix ($91/month profit) to choose better market.

Property Selection

Use calculations to:

• Evaluate rent vs. potential revenue
• Assess if property can meet profit targets
• Negotiate better lease terms

Example: If calculations show low profit, negotiate lower rent or find different property.

Pricing Strategy

Use calculations to:

• Set ADR to meet profit targets
• Adjust pricing for seasonality
• Optimize for occupancy vs. ADR

Example: If break-even is 58% occupancy, price to achieve 65-70% occupancy for profit margin.

Scaling Decisions

Use calculations to:

• Determine if you have capital for additional properties
• Project total portfolio profitability
• Plan for operating reserves

Example: If each property generates $560/month profit, 3 properties = $1,680/month total profit.

Frequently Asked Questions

How accurate are rental arbitrage profit calculations?

Profit calculations are estimates based on assumptions (ADR, occupancy, expenses). Accuracy depends on using realistic market data. According to 10XBNB data, operators who calculated profitability before starting had 34% higher success rates. Use market data from AirDNA or similar tools for more accurate projections.

What’s a good ROI for rental arbitrage?

Target ROI depends on your goals and risk tolerance:

• Conservative: 30-60% annual return
• Moderate: 60-120% annual return
• Aggressive: 120-180%+ annual return

According to 10XBNB’s 2026 Student Success Survey, average ROI is 67%, with top performers achieving 120%+.

How do I calculate profit if I don’t know the ADR yet?

Use market data from AirDNA or analyze competitor listings in your target market. Look at similar properties (bedrooms, location, amenities) and calculate average nightly rate. Build in 10-15% buffer below market average for conservative planning.

What’s the minimum occupancy needed for profitability?

Minimum occupancy depends on your ADR and expenses. Use break-even analysis:

Break-Even Occupancy = (Monthly Expenses / ADR) / 30 × 100

Typical break-even occupancy ranges from 50-65% depending on market and property. Aim for 10-15% above break-even for profit margin.

Should I use peak season or average occupancy for calculations?

Use average occupancy across all months, accounting for seasonality. Peak season occupancy is unrealistic for annual projections. Calculate monthly projections and average them, or use market data that accounts for seasonality.

Conclusion

Accurate profit calculations are essential for rental arbitrage success. Understanding the numbers helps you choose the right markets, set realistic expectations, and make informed decisions about scaling.

Key takeaways:

• Use the profit formula: Monthly Profit = (ADR × Nights Booked) – Rent – Operating Expenses
• Account for all expenses: rent, utilities, cleaning, platform fees, maintenance, insurance
• Use realistic occupancy: 55-70% average (not 80-90%)
• Calculate break-even: Know minimum occupancy or ADR needed
• Run sensitivity analysis: Understand how changes affect profit

Ready to calculate your rental arbitrage profitability? Use the formulas and examples in this guide, or join 10XBNB for our proprietary calculator tools and market data.

Related Guides

• Complete Rental Arbitrage Guide – The ultimate guide to rental arbitrage
• Rental Arbitrage Startup Costs – Complete breakdown of startup costs
• Best Markets for Rental Arbitrage 2026 – Market analysis and selection
• Rental Arbitrage Profitability – Detailed profitability analysis

Last updated: January 22, 2026. Calculations based on 2026 market data and proprietary research from 1,247 successful 10XBNB students.