Passive Income Through Short-Term Rentals: The Real Math
A well-bought STR can out-earn a long-term rental two to three times over. Here's the full picture — revenue, costs, and what it takes to run one.
How the cash flow actually works
1. Revenue: occupancy × rate, honestly modeled
We underwrite from comparable listing data — seasonality, weekday gaps, and realistic occupancy, not the listing screenshot's best month.
2. Costs most first-timers miss
Cleaning turnover, supplies, utilities, platform fees, permits, and a real maintenance reserve. Expect 35–50% of gross before debt service.
3. Management: self, co-host, or full service
Full-service management costs 15–25% of revenue but makes the income genuinely passive. Self-managing pays you a second job's wage — decide which you're buying.
4. The tax layer
For qualifying owners, cost segregation and bonus depreciation may affect a tax return. See the STR Tax Strategy guide for the mechanics.
Frequently Asked Questions
Is STR income really passive?
Only if you place professional management — and note that hurts the tax angle, which requires material participation. Most of our clients self-manage year one for the tax benefit, then transition.
What returns should I underwrite to?
We look for 8%+ cash-on-cash before tax benefits in today's rate environment, with the depreciation benefit treated as upside rather than the reason the deal works.
See a real STR underwrite
A live deal with revenue, costs, and after-tax return modeled line by line.
Book an Annual Wealth ReviewKeep exploring
The STR Tax Strategy, Explained with Real Numbers
A plain-language guide to short-term rental tax planning, cost segregation, and bonus depreciation.
Buy Cash-Flowing STRs — Underwritten Before You Tour
Cash-flowing short-term rental deals with full underwriting: cash-flow, cost segregation, and tax-offset projections before you tour. Kirkland & Eastside WA.
The Investor's Handbook to Real Estate Tax Benefits
Depreciation, cost segregation, 1031 exchanges, and the STR loophole: how real estate investors legally reduce taxes — with the rules that make each work.
Your Annual Wealth Review starts with a clear plan.
Book an Annual Wealth Review with Aditya Kasturi to discuss your real estate goals, property options, and questions for your trusted advisors.