How do you underwrite a short-term rental deal?

A short-term rental ('STR') deal lives or dies on the numbers you believe before you close, not the ones you hope for after. Underwriting is where I pressure-test those numbers. It is a written desktop assessment of whether a specific property, at a specific price, can carry itself. Below is the method I run on every full underwrite, in the order I run it.

First, the boundary. This is advisory work: a best-effort desktop posture assessment. It is not legal, tax, accounting, or inspection advice, and it does not confirm that STR use is permitted at the address. I don't file permits or represent you as a broker. You confirm compliance, insurance, and third-party costs with the right professionals. What I give you is a clear read on the economics and a defensible bid, so you decide with numbers instead of hope.

1. Start from real comps, not hope

Every underwrite starts by aligning comparable listings that actually match the property. Same market, similar bedroom count, similar quality, similar guest experience. I look at what those places charge, how full they run through the seasons, and where they sit in the local supply. This is the reality check that keeps a projection honest, because the fastest way to lose money on an STR is to model a rate the market will not pay.

From those comps I set a realistic revenue range, not a single flattering number. A range respects the truth that occupancy and rate move with the season, the calendar, and the competition. If the honest range does not clear the property's costs, that is a finding, and I would rather surface it now than after you have wired a deposit.

2. Build a conservative operating pro forma

Next I turn the revenue range into an operating pro forma built on conservative assumptions. Real operating costs go in: cleaning, supplies, platform and processing fees, utilities, software, insurance, and maintenance. I also put reserves in the model, because turnover, repairs, and slow stretches are not exceptions, they are part of the business. A pro forma without reserves is a wish.

I underwrite the floor, not the ceiling. The question is not whether the property can make money in a peak year at high occupancy. The question is whether it survives a slow stretch and still services its debt and costs. If it only pencils at best-case assumptions, that is the answer, and I will say so plainly.

• Realistic revenue range from matched comps, not a single rosy figure.
• True operating costs: cleaning, supplies, platform and processing fees, utilities, software, insurance, maintenance.
• Reserves for turnover, repairs, and off-season gaps built into the model.
• The floor stress-tested, so a slow stretch does not sink the deal.

3. Run conservative, base, and aggressive scenarios

One number is a guess. Three scenarios are a decision tool. I run the pro forma at a conservative case, a base case, and an aggressive case, so you can see the full shape of the outcome instead of one point on it. The conservative case shows what happens when the market is soft and you are still finding your footing. The aggressive case shows the upside if execution and demand both cooperate.

The scenarios matter because they tell you where the risk actually sits. A deal that only works in the aggressive case is fragile. A deal that clears its costs even in the conservative case has real margin. Seeing all three next to each other is what turns a gut feeling into a position you can defend.

4. Turn it into a go/no-go and a bid number

The whole point is a clean decision before you commit capital. So the underwrite ends in a go/no-go and, when it is a go, bid guidance: the price at which the numbers still work. That is the difference between an interesting spreadsheet and a usable answer. You walk away knowing whether to advance, what to offer, and where your walk-away line sits.

The deliverable is a written underwriting memo plus one call up to 30 minutes to walk through it and answer questions. You keep the memo. The turnaround is five business days from the point I have what I need. The fee is $500 per property. If you go on to build the property out with me, up to $1,000 of advisory fees is credited toward that build-out, so the analysis is not money spent twice.

No guarantees. I don't promise any particular bookings, revenue, occupancy, rate, ranking, reviews, or return. Performance depends on seasonality, demand, competition, platform algorithms, property condition, reviews, and how the property is run, and those sit outside my control. Underwriting improves the quality of your decision. It does not remove the risk.

If you are earlier than this, a full underwrite may be more than you need yet. The Feasibility Screen is the faster, cheaper front door: a kill-or-advance filter that tells you whether a property is even worth underwriting before you pay for the full memo.