Airbnb Cap Rate Guide 2026: Formula, Worked Example and What Is Good

An Airbnb cap rate is a short-term rental property's net operating income divided by its purchase price, shown as a percentage. It tells you the unlevered annual return you would earn if you bought the property with cash, which makes it the fastest way to compare one STR against another before financing enters the picture.

The catch in 2026 is that most STR deals do not pass the cap-rate test the way they did when mortgage rates were lower. With the 30-year mortgage at 6.95% according to Freddie Mac (week of September 17, 2026) and Airbnb moving every host to a 15.5% host-only fee, a property with a mid-4% cap rate loses money after debt service. Awning manages 20,000+ vacation rental properties across all 50 states, and the investors who do well are the ones who underwrite on realistic occupancy and every expense line. This guide gives you the formula, a rebuilt worked example, a sensitivity table, and benchmarks you can use today.

Key takeaways

• Formula: cap rate = net operating income (NOI) divided by purchase price, or by all-in cost if you want a more honest figure.
• Our benchmark: we look for 6% or higher on all-in cost for a stabilized STR. This is Awning's rule of thumb, not an industry standard.
• Worked example: a $400,000 property with $66,050 of gross revenue and $46,128 of operating expenses has NOI of $19,922, a 4.98% cap rate on price, 4.55% on all-in cost.
• Leverage hurts when cap rates are low: with a 75% loan at 7%, the same property has a cash-on-cash return of about negative 2.9%.
• Context: CBRE's H1 2026 survey shows a median cap rate across commercial property of about 6.6%, and AirDNA forecasts 2026 U.S. occupancy near 57.4%.

What is an Airbnb cap rate?

The capitalization rate, or cap rate, is the annual net operating income of a property divided by its price, and for an Airbnb it answers one question: how much does this property earn each year, before mortgage payments, for every dollar I pay for it? A 6% cap rate means $6 of annual NOI for every $100 of price.

NOI (net operating income) is revenue minus all operating expenses, excluding mortgage principal and interest, income taxes and depreciation. For an STR, operating expenses include platform fees, cleaning, management, utilities, property taxes, insurance, supplies, maintenance and a reserve for replacing furniture.

Two reasons cap rate is useful: it is independent of how you finance the deal, and it lets you compare an STR to a long-term rental, an apartment building or a stock-market yield on equal footing. Two reasons it can mislead: it ignores leverage, appreciation and tax benefits, and a single year of STR revenue is far more volatile than a lease.

How do you calculate it? A worked example

To calculate an Airbnb cap rate, estimate gross revenue from occupancy and nightly rate, subtract every operating expense, and divide the NOI by the purchase price. Here is a complete example you can copy into a spreadsheet.

The property: a $400,000 three-bedroom home in a leisure market. Closing costs of $8,000 and furnishing of $30,000 bring the all-in cost to $438,000.

Step 1: Estimate gross revenue

• Average daily rate (ADR): $275
• Occupancy: 57% (about 208 booked nights)
• Nightly revenue: 208 x $275 = $57,200
• Average stay of 3.5 nights = about 59 stays; cleaning fee of $150 per stay = $8,850
• Gross booking revenue: $66,050

Step 2: Subtract every operating expense

Step 3: Divide NOI by price

• NOI = $66,050 - $46,128 = $19,922
• Cap rate on purchase price = $19,922 / $400,000 = 4.98%
• Cap rate on all-in cost = $19,922 / $438,000 = 4.55%

Use the all-in figure. Furnishing and closing costs are real capital you spent to produce that income, so dividing by price alone flatters the deal.

Run your own version with our Airbnb revenue calculator or the simpler cap rate calculator. If you want to stress-test the profit side, our Airbnb profit margin benchmarks for 2026 show what good looks like by market type.

A note on the 15.5% fee. Airbnb has moved to a single host-only service fee of 15.5% on the booking subtotal. Hostfully's tracking shows software-connected hosts migrated in April 2026, with remaining independent hosts moving in waves through October 2026, and Airbnb said on its Q2 call that about half of listings had transitioned and the rest would follow by year-end. If your revenue estimate came from a pre-2026 comp, check whether the comp's host raised prices to offset the fee. For fee background see our guide to Airbnb management fees in 2026.

What is a good cap rate for Airbnb in 2026?

A good Airbnb cap rate in 2026 is generally 6% or higher on all-in cost, and 8% or higher if the market is seasonal, regulated or dependent on a single demand driver. That is our benchmark, built from the fact that STRs carry more operating risk than long-term rentals and that borrowing costs are about 7%.

How we think about the ranges:

External context. CBRE's H1 2026 Cap Rate Survey, released in August 2026, found the median cap rate across all commercial property types held roughly steady near 6.6%, with about 60% of respondents expecting no change over the next six months and a more cautious tone around multifamily. In other words, a stabilized, lower-risk asset class is priced around the same cap rate you would need from a riskier STR. That comparison is why we set 6% as a floor rather than a target.

Market backdrop. AirDNA's July 2026 midyear outlook forecasts U.S. occupancy near 57.4% for 2026 (versus about 57.0% pre-pandemic), RevPAR growth of about 2.9%, and both demand and available-listing growth near 2.7%. Slower supply growth has helped pricing, but it has not rescued low-yield purchases. AirDNA's year-to-date leaders for RevPAR growth included San Francisco (+12.1%), Anaheim (+11.0%) and Philadelphia (+10.1%), a reminder that performance is local. Start with our top Airbnb markets roundup (linked below) to pick markets to analyze first.

Cap rate vs. cash-on-cash return vs. RevPAR

Cap rate measures return on the whole property without debt, cash-on-cash return measures annual cash flow divided by the cash you actually invested, and RevPAR measures revenue per available night. You need all three: RevPAR to screen markets, cap rate to compare properties, cash-on-cash to decide whether your financing makes sense.

RevPAR reference point. AirDNA's January 2026 U.S. review showed monthly RevPAR of $119.27 and ADR of $246.62 (up 2.1% and 3.6% year over year), with January occupancy at 48.4%. January is a seasonal low for most markets, so treat these as a single-month snapshot, not an annual average. For a step-by-step return calculation, see our guide to cash-on-cash return for Airbnb properties.

Why leverage can turn a decent cap rate negative

Negative leverage happens when the interest rate on your loan is higher than the property's cap rate, so borrowing reduces your return instead of amplifying it. In our example, the property earns a 4.98% cap rate on price, while a loan at 7% costs more than the property produces.

The example with financing:

• Loan: 75% of price = $300,000 at 7.00% for 30 years
• Annual debt service: about $23,951
• Cash flow after debt: $19,922 - $23,951 = negative $4,029
• Cash invested: $100,000 down + $38,000 closing and furnishing = $138,000
• Cash-on-cash return: about negative 2.9%
• Debt service coverage on NOI: 0.83

The break-even rule: at 75% leverage and a 7% rate, you need NOI of about $23,951, which is roughly a 6.0% cap rate on price, just to break even on cash flow. That is why we use 6% as the floor. If the market rate falls, the floor falls with it; at 6.95%, the debt service is about $23,830, nearly identical. Our overview of investment property mortgage rates tracks current pricing, and the arithmetic can change the right answer from "finance" to "put more down."

Sensitivity table: occupancy and nightly rate

Occupancy and nightly rate move the cap rate more than any other inputs, so every purchase should be tested at several combinations before you offer. The table below shows cap rate on all-in cost ($438,000) for the example property, holding fixed costs constant and letting the platform fee, management, maintenance and cleaning scale with bookings.

What the table shows: this property reaches our 6% benchmark only at roughly 65% occupancy and a $300 ADR, or 57% occupancy and a $325 ADR. At the AirDNA national forecast of about 57%, you would need either a higher rate than the market supports or a lower purchase price. That is the discipline cap-rate analysis forces on you.

Common cap rate mistakes

The most common Airbnb cap rate mistakes are using gross revenue instead of NOI, forgetting a reserve for furniture and capex, and underwriting at peak-season occupancy. Avoid these:

1. Using gross revenue. Gross revenue overstates yield badly: in our example, $66,050 of gross revenue on a $400,000 purchase looks like a 16.5% yield, while the real NOI yield is 4.98%.
2. Ignoring the 15.5% fee. Make sure your comps reflect post-fee reality.
3. Skipping management. Even if you self-manage, assign a value to your time, or at least model a 15% management cost to see the true yield.
4. Leaving out reserves. Furniture, appliances, roofs and HVAC all wear out faster with guest use.
5. Using one year of data. Check at least 12 months, plus the permit status of the address.
6. Confusing cap rate with return on equity. A 5% cap rate with 75% leverage at 7% is not a 5% return.
7. Counting appreciation as income. It can happen, but it is not NOI.
8. Forgetting channel mix. KeyData's Q1 2026 data, as reported by The Host Report, shows Airbnb at about 50% of U.S. professionally managed reservations, Vrbo at 20% and direct bookings at 23% (down from 26%). Diversified distribution protects occupancy.

If you want the property managed so the revenue assumptions in your model are achievable, Awning's team will review your numbers on a free call (details in the box below).

Frequently Asked Questions

What is a good cap rate for an Airbnb?

We look for 6% or higher on all-in cost for a stabilized short-term rental, and 8% or higher in seasonal or regulated markets. This is our rule of thumb rather than an industry standard. With borrowing costs near 7%, anything below about 6% on price tends to lose money after debt service at 75% leverage.

How do you calculate cap rate for a short-term rental?

Subtract all operating expenses (platform fees, cleaning, management, utilities, taxes, insurance, supplies, maintenance and reserves) from gross booking revenue to get NOI, then divide NOI by the purchase price or all-in cost. Do not include mortgage payments in the expenses.

Is cap rate or cash-on-cash return better for Airbnb?

Use both. Cap rate compares properties without financing, while cash-on-cash return shows what you earn on the cash you invested after debt service. A property can have an acceptable cap rate and a negative cash-on-cash return if the interest rate is higher than the cap rate.

Do Airbnb cap rates include the host service fee?

Yes. The host service fee is an operating expense, so it reduces NOI and the cap rate. Airbnb's 2026 single host-only fee is 15.5% of the booking subtotal for most hosts, so older calculations that assumed a 3% host fee overstate NOI unless prices were raised to compensate.

Is a 5% cap rate good for an Airbnb?

A 5% cap rate is thin for a short-term rental in 2026. It can work with a large down payment, low-cost debt, or a market where you expect strong appreciation, but at a 7% mortgage rate and 75% leverage, it usually produces negative cash flow.

What occupancy do I need for a 6% cap rate?

It depends on price and nightly rate. In our example property, you need roughly 65% occupancy at a $300 ADR, or a $325 ADR at 57% occupancy, to reach 6% on all-in cost. National occupancy is forecast near 57.4% for 2026, so test your market's actual comps.

Where can I find occupancy and ADR data for cap rate analysis?

AirDNA, AirROI, Rabbu and Mashvisor publish market-level data, and a property manager can provide recent comps from properties they operate. Use at least 12 months of data so seasonality does not skew the result.

Related Resources

• Top Airbnb markets

Sources

CBRE H1 2026 Cap Rate Survey (August 2026); Freddie Mac Primary Mortgage Market Survey (week of September 17, 2026); AirDNA midyear 2026 outlook (July 8, 2026) and January 2026 U.S. review (via StayFi, April 2026); Hostfully Airbnb host-fee guide (2026); Airbnb Q2 2026 earnings coverage (Rental Scale-Up, August 2026); KeyData Q1 2026 data via The Host Report. All figures are paraphrased and rounded; the worked example is illustrative and uses Awning's own assumptions.