A $300,000 single-family home in a Sun Belt secondary market rents long-term for $1,850 a month. On Airbnb at a $165 average daily rate and 60% occupancy, the same home grosses $36,135 a year — 63% more than long-term rent. That spread is why short-term rental investing went mainstream.
But gross revenue is not what you deposit. Once you account for Airbnb’s platform fee, cleaning costs (which scale with occupancy), furnishing amortization, higher utilities, insurance riders, and wear-and-tear maintenance, the net operating income premium narrows to about $1,000 per year at 60% occupancy — while requiring roughly 600 hours of management work annually.
Hire a property manager at 25% of gross and Airbnb slightly underperforms long-term rental on the same property at the same occupancy.
This post walks through both strategies on the same $300K property, at two occupancy scenarios, with and without professional management. The math will tell you when STR wins, when LTR wins, and what break-even occupancy actually looks like.
The Property: Same Asset, Two Strategies
To make the comparison clean, both strategies use identical property assumptions. The only thing that changes is how the property is rented.
| Property Assumption | Value |
|---|---|
| Purchase price | $300,000 |
| Market | Sun Belt secondary market (e.g., mid-size city with some leisure demand) |
| Property type | 3BR/2BA single-family home |
| Property tax (1.0% of value) | $3,000/year |
| Long-term market rent | $1,850/month |
| Airbnb average daily rate (ADR) | $165/night |
| STR furnishing cost (one-time) | $12,000 (amortized over 5 years = $2,400/year) |
Strategy A: Long-Term Rental
Long-term rental is the baseline. A single tenant signs a 12-month lease, pays monthly rent, and you handle maintenance and management. The expense structure is predictable and well-understood.
| Item | Annual |
|---|---|
| Income | |
| Gross rent ($1,850 × 12) | $22,200 |
| Vacancy allowance (5%) | ($1,110) |
| Effective gross income | $21,090 |
| Operating Expenses | |
| Property taxes | $3,000 |
| Insurance (landlord policy) | $1,100 |
| Maintenance and repairs | $1,800 |
| Property management (8% of gross rent) | $1,776 |
| Capital reserves | $960 |
| Total operating expenses | $8,636 |
| Net Operating Income (NOI) | $12,454 |
| Cap rate | 4.15% |
Note on management fee: The 8% PM fee above assumes professional management (common for out-of-state or hands-off investors). Self-managing LTR reduces expenses by $1,776 and raises NOI to $14,230 (4.74% cap) — but at roughly 10–15 hours of work per year, this is the low-effort baseline. Compare to the STR time requirement below.
Strategy B: Short-Term Rental (Airbnb), Self-Managed
Short-term rental has a fundamentally different cost structure. The revenue scales with nights booked, but so do cleaning costs. Furnishings depreciate. Utilities run continuously. The insurance rider costs more. And platform fees come off the top before you see a dollar.
At 60% Occupancy (219 Booked Nights)
60% annual occupancy is a reasonable baseline for a well-listed STR in a Sun Belt city without major tourism anchors. Strong markets see 65–70%; suburban markets often see 50–55%.
| Item | Annual | Notes |
|---|---|---|
| Revenue | ||
| Gross booking revenue (219 nights × $165) | $36,135 | 60% of 365 days |
| Airbnb platform fee (3% of gross) | ($1,084) | Host-side fee; guest pays service fee separately |
| Net revenue | $35,051 | |
| Operating Expenses | ||
| Cleaning (55 turnovers × $140) | $7,700 | Avg 4-night stay → ~55 turnovers/year |
| Furnishing amortization ($12K ÷ 5 years) | $2,400 | Beds, linens, kitchenware, décor |
| Supplies and consumables | $1,200 | Toiletries, paper goods, coffee, etc. |
| Utilities (landlord pays for guests) | $2,400 | Electric, water, internet — guests don’t conserve |
| Property insurance (STR rider) | $1,540 | ~40% higher than standard landlord policy |
| Property taxes | $3,000 | Same as LTR |
| Maintenance (higher wear from turnover) | $2,400 | ~33% more than LTR due to guest usage |
| Capital reserves | $960 | |
| Total operating expenses | $21,600 | |
| Net Operating Income (NOI) | $13,451 | |
| Cap rate | 4.48% | |
Head-to-Head: 60% vs. 80% Occupancy
Occupancy is the variable that changes everything. Here is the full comparison at both levels. The 80% scenario uses the same $165 ADR — in practice, high occupancy often reflects either rate compression (discounting to fill nights) or a strong market where LTR rents would also be higher; this analysis holds ADR constant to isolate the occupancy effect.
STR 80% occupancy expense breakdown: Cleaning 73 turnovers × $140 = $10,220 + fixed expenses (furnishings $2,400 + supplies $1,200 + utilities $2,400 + insurance $1,540 + taxes $3,000 + maintenance $2,400 + reserves $960) = $13,900 → total $24,120. Fixed expenses are identical to the 60% scenario; only cleaning scales with turnovers.
| Metric | LTR | STR — 60% Occ. | STR — 80% Occ. |
|---|---|---|---|
| Booked nights / occupied months | ~11.4 months | 219 nights | 292 nights |
| Gross revenue | $22,200 | $36,135 | $48,180 |
| Platform fee / vacancy | ($1,110) | ($1,084) | ($1,445) |
| Net revenue | $21,090 | $35,051 | $46,735 |
| Total expenses | $8,636 | $21,600 | $24,120 |
| NOI | $12,454 | $13,451 | $22,615 |
| Cap rate | 4.15% | 4.48% | 7.54% |
| NOI premium vs. LTR | — | +$997/year | +$10,161/year |
| Mgmt hours required | ~12 hrs/year | ~600+ hrs/year | ~750+ hrs/year |
~12 hours of management per year. Predictable income. No regulatory exposure. Easy to finance.
~600 hours of management per year. Income varies monthly. Regulatory risk. Harder to finance.
STR generates $997 more NOI per year than LTR. That is $83/month — for roughly 600 hours of additional management work annually. Your effective hourly rate for the self-management premium: $1.66/hour. Most investors’ time is worth considerably more than that.
At 80% occupancy — the territory of top-performing tourist market listings — the math flips dramatically. STR generates $10,161 more NOI per year. At that level, the effort is clearly justified.
The Break-Even Occupancy
Below a certain occupancy threshold, long-term rental produces the same or higher NOI as short-term rental. Here is how to find it.
Break-Even Occupancy Formula
Where: 0.97 accounts for the 3% platform fee; cleaning cost per night = cleaning cost per turnover ÷ average stay length; STR fixed expenses = all STR expenses except cleaning.
Plugging in our numbers: LTR NOI $12,454 + STR fixed expenses $13,900, divided by ($165 × 0.97 − $140 ÷ 4 nights) = $25,354 ÷ $125.55 = 210.7 nights — 57.7% occupancy.
Rule of thumb: On a $300K property with a $165 ADR, short-term rental needs approximately 58% occupancy to match long-term rental NOI on a self-managed basis. Below 58%, LTR wins on pure cash flow. Above 58%, STR pulls ahead. In markets where 65–80% is realistic, STR has a genuine edge. In suburban markets where 50–55% is the ceiling, LTR is the better choice.
Add a Property Manager: The Math Shifts Again
Most STR investors eventually need professional management — whether from burnout, travel, or job constraints. The going rate is 20–25% of gross revenue. At that fee level, the STR premium at moderate occupancy disappears.
| Scenario | NOI | vs. LTR |
|---|---|---|
| Long-term rental (PM at 8%) | $12,454 | — (baseline) |
| STR at 60% Occupancy | ||
| Self-managed | $13,451 | +$997 |
| PM at 20% of gross ($7,227) | $13,924 | +$1,470 |
| PM at 25% of gross ($9,034) | $12,117 | −$337 |
| STR at 80% Occupancy | ||
| Self-managed | $22,615 | +$10,161 |
| PM at 20% of gross ($9,636) | $22,199 | +$9,745 |
| PM at 25% of gross ($12,045) | $20,790 | +$8,336 |
Key finding: At 60% occupancy with a 25% property manager, STR generates less NOI than long-term rental ($12,117 vs. $12,454). You get all of the regulatory risk, financing complications, and income variability of STR — and less cash flow. At 80% occupancy, STR wins even at 25% PM, but the break-even now requires maintaining 70–75% occupancy rather than 58% on a self-managed basis.
Why 20% PM is better than 25%: At 60% occupancy, the 20% manager adds $473 in NOI vs. self-managing, because the PM fee ($7,227) is slightly less than the cleaning cost it replaces ($7,700). You get your time back and marginally more cash. The 25% manager tips the scale the other way. When interviewing STR managers, the 5-percentage-point spread between 20% and 25% on a $36K gross property is $1,817/year — worth negotiating.
What the NOI Numbers Don’t Show
The comparison above captures the financial picture, but four factors that don’t show up in the NOI table matter to every investor choosing between strategies.
Management Burden
Long-term rental with professional management requires roughly 12 hours per year: reviewing financials, coordinating periodic maintenance, and handling lease renewals. Self-managing a long-term rental adds roughly 20–30 hours annually.
Self-managing an STR is a part-time job. Guest communication (check-in instructions, questions, post-stay reviews), booking management, dynamic pricing updates, coordinating cleaners between turnovers, and restocking supplies runs 10–15 hours per week. At 52 weeks, that is 520–780 hours per year. If your time is worth $50/hour, the labor cost of self-managing an STR is $26,000–$39,000 annually — which makes the $997 NOI premium at 60% occupancy look very different.
Income Volatility
Long-term rent hits your account on the first of every month. STR income fluctuates by 30–50% between peak and off-peak months. In January or February in a non-ski-market, a 60% annual-average property may see 30–35% occupancy. The mortgage payment does not fluctuate with your occupancy rate. If you use STR income for debt service, you need a 3–6 month operating reserve to cover down months without stress.
Regulation Risk
Over 150 U.S. cities have enacted restrictions on short-term rentals since 2015 — including outright bans, permit caps, primary-residence-only rules, and minimum stay requirements. New York City’s 2023 STR crackdown effectively banned most Airbnb listings overnight. Denver, Phoenix, Austin, and Nashville have all tightened STR regulations in recent years. Cities continue to act, often with little notice and no grandfather clause for existing operators.
If you buy a property that only pencils as STR and your city bans STR, you inherit a property that needs to convert to LTR at LTR economics — but with STR-grade furnishings and a higher purchase price than the LTR income supports.
Financing Complications
Conventional lenders using Fannie Mae and Freddie Mac guidelines generally require 12 months of documented STR income history before counting it toward qualifying income. Many underwrite STR properties on projected long-term rent instead. If the property only works at STR economics, you may need a DSCR loan (which typically carries a 0.25–0.75% rate premium over conventional) — or put more money down to hit the required debt service coverage ratio.
When STR Wins
Short-term rental is not universally better or worse — it wins in specific market conditions.
- High-demand tourist markets. Beach towns, ski resorts, mountain destinations, and urban cores with year-round demand (Nashville, Savannah, Scottsdale) see 70–85% annual occupancy for well-managed listings. At 80% occupancy, STR generates $10,000+ more NOI per year than LTR on the same property.
- Events-driven markets. College towns during football season, convention cities during peak conference periods, and markets adjacent to recurring events can command significantly higher ADRs during high-demand windows — which lifts annual revenue even at moderate average occupancy.
- Unique or distinctive properties. Treehouses, lakefront cabins, pool homes, and properties with strong visual appeal consistently outperform standard ADR benchmarks and achieve higher occupancy. Distinctiveness justifies STR where a generic 3/2 in a suburban subdivision does not.
- Self-managing investors who value optionality. If you can self-manage and enjoy hospitality, the NOI premium at 60%+ occupancy is real — and you retain maximum flexibility to adjust pricing, block personal-use dates, and exit the strategy on your timeline.
When LTR Wins
- Secondary and tertiary markets without tourist demand. A $300K home in a mid-sized Midwest or Southern city with no tourism infrastructure rarely achieves 60%+ Airbnb occupancy. At 50–55%, LTR produces equal or higher NOI with dramatically less work.
- Regulatory environments with active STR restrictions. If your city has a permit cap, primary-residence requirement, or pending STR legislation, the regulatory risk premium makes LTR the safer choice on a risk-adjusted basis.
- Professional management required. At 25% management fees and 60% occupancy, LTR wins. If you cannot self-manage and cannot find a 20%-or-below manager, LTR is the better risk-adjusted investment.
- Long-term buy-and-hold strategy. LTR is simpler to refinance, simpler to sell, and simpler to 1031 exchange. Depreciation deductions apply equally to both strategies, but LTR makes the tax and accounting picture less complicated over decades of ownership.
Model Both Strategies Before You Buy
The LTR vs. STR decision should be made at underwriting — not after closing. The Rental Property Tracker Pro models Schedule E income, NOI, cash-on-cash return, and DSCR across all your properties. The Deal Analyzer Pro runs the full deal stack (cap rate, DSCR, CoC, IRR, sensitivity tables) so you can compare LTR and STR scenarios side-by-side before committing.
Rental Tracker Lite — $9 Rental Tracker Pro — $29 Deal Analyzer Pro — $293 Questions to Answer Before Choosing a Strategy
What is the realistic occupancy for this specific property in this specific zip code?
Not what Airbnb’s market overview says. Not what the listing agent tells you. Pull AirDNA or Rabbu data for the exact address’s zip code, filter for comparable bedroom count and property type, and look at the median occupancy — not the top-10% performer. If the median is below 58% for a self-managed strategy, or below 70% for a professionally managed strategy, model it as LTR first.
Will you self-manage, and for how long?
The STR NOI premium at moderate occupancy is real but thin. It is only worth capturing if you self-manage efficiently. If there is any scenario where you hire a manager in the next 2–3 years (job change, new baby, burnout), underwrite the deal at 25% PM fees now. If it still works, proceed. If it only works with self-management, you are locked into a high-effort strategy with no exit unless occupancy rises significantly.
Does the property pencil if STR is banned or restricted?
Run the LTR numbers before closing. If the property generates acceptable returns as a long-term rental, the STR strategy is optionality on top of a sound deal. If the property requires STR economics to break even, regulation risk is an existential threat — not just a risk to monitor. Cities move faster on STR restrictions than landlords expect. Underwrite the floor, not the ceiling.
Frequently Asked Questions
Related Reading
- Cap Rate Calculator: The Formula, a Full Worked Example, and What It Misses — The cap rate is the core metric for comparing LTR vs. STR on the same property — and for knowing whether the purchase price is justified by the income either strategy produces.
- Cash-on-Cash Return: How to Calculate It and Why It Differs from Cap Rate — After financing, CoC return is the metric that shows what your equity earns — and where the leverage math on STR vs. LTR diverges most from cap rate comparisons.
- DSCR Calculator: What Lenders Actually Require and How Rent Projections Change the Math — DSCR matters especially for STR financing, where lenders often use LTR rental income for underwriting even when the property will operate as Airbnb.
- Rental Property Depreciation: The Tax Shelter Most Landlords Underuse — The 27.5-year depreciation schedule applies to both LTR and STR properties — but STR’s furnishings qualify for shorter 5-year schedules, creating an additional first-year deduction opportunity.
- Rental Property Expense Tracker: The Full List and How to Organize It — The seven Schedule E expense categories cover both LTR and STR deductions, but STR adds furnishing amortization, platform fees, and guest supply costs that require separate tracking.
- Landlord Insurance: What It Covers, What It Doesn't, and How to Factor It Into Your Deal — Insurance is an operating expense, not an afterthought. The ACV vs. replacement cost gap, liability coverage levels, and how to model the premium correctly in your NOI.