Fixed monthly costs
Fixed costs are the bills that come due whether or not a guest books. For an invented one-unit rental they are: mortgage or rent 1,800 dollars, utilities and internet 300 dollars, insurance 150 dollars, software and subscriptions 50 dollars, and a maintenance and furnishing set-aside of 200 dollars. Fixed total: 2,500 dollars a month.
Divide yearly bills by twelve, and be honest about the set-aside. Furniture, linens and appliances wear out in a rental faster than in a home.
Contribution per booked night
A booked night brings in the nightly rate, but each stay also brings costs that happen once per stay, not once per night. Examples are the cleaner, laundry, restocked supplies and welcome items. Spread those costs over the average stay length to get a per-night cost.
Invented numbers: the cleaner charges 90 dollars a turnover, and laundry and supplies run 30 dollars, so each stay costs 120 dollars. The average stay is 3 nights, so each booked night carries 40 dollars of stay costs. At a nightly rate of 180 dollars, the contribution per booked night is 180 minus 40, which is 140 dollars.
Contribution is the money each booked night leaves behind to pay the fixed bills and then, once those are paid, to become profit.
The break-even formula
Break-even nights equal fixed monthly costs divided by contribution per booked night. Break-even occupancy equals break-even nights divided by the nights available in the month.
With our numbers: 2,500 divided by 140 is 17.86 nights. In a 30 night month, 17.86 divided by 30 is about 59.5 percent. The rental has to be booked about 18 nights of 30 before it starts to make money. If you block off nights for personal use or repairs, divide by the nights you can actually rent, not by 30.
How a cleaning fee changes it
Many hosts charge guests a cleaning fee. Suppose, as an invented figure, the guest pays 90 dollars per stay. That covers the cleaner, so the net stay cost drops from 120 to 30 dollars, or 10 dollars per night over a 3 night stay. Contribution rises to 180 minus 10, or 170 dollars.
Break-even nights are now 2,500 divided by 170, about 14.71 nights, which is about 49.0 percent occupancy. A fee that matches your real cleaning cost lowers your break-even by about 10.5 percentage points in this example. Check your market and platform rules before setting it, because a high fee can change how guests see your price.
How platform fees change it
Platforms charge fees, and the structure differs: some charge the host, some charge the guest, some split it. Your payout statement shows what you actually pay. Suppose, as an invented example, the host fee is 3 percent of the nightly rate. On 180 dollars that is 5.40 dollars a night.
Contribution with the cleaning fee in place becomes 180 minus 5.40 minus 10, or 164.60 dollars. Break-even nights are 2,500 divided by 164.60, about 15.19 nights, or 50.6 percent. In this example the fee applies to the nightly rate only. If yours also applies to cleaning fees or taxes, include it.
Average stay length matters too. If the average stay shrinks to 2 nights, the 120 dollar stay cost becomes 60 dollars a night. Contribution at 180 falls to 120 dollars. Break-even nights rise to about 20.83, or 69.4 percent. Shorter stays raise your break-even a lot.
The nightly rate needed for a monthly profit target
Now work the other way. Suppose you want 1,000 dollars of profit a month. Contribution has to cover fixed costs plus profit, so you need 3,500 dollars of contribution. Use the plain case: 40 dollars of stay cost per night, no cleaning fee collected and no platform fee.
At 50 percent occupancy of a 30 night month you book 15 nights. 3,500 divided by 15 is 233.33 contribution per night, so the rate is 233.33 plus 40, or 273.33 dollars.
At 60 percent you book 18 nights. 3,500 divided by 18 is 194.44, so the rate is 234.44 dollars.
At 70 percent you book 21 nights. 3,500 divided by 21 is 166.67, so the rate is 206.67 dollars.
If the same 3 percent platform fee applies to the rate, divide each rate by 0.97: about 281.79, 241.70 and 213.06 dollars. These rates show what each occupancy level asks of your price. Then ask whether your local market would really pay that rate and fill that many nights.
Taxes, licenses and local rules
Occupancy tax, lodging tax, business licensing and short-term rental permits differ by city and state, and sometimes by building or association. Some are collected by the platform and some are your job. Look up the rules for your location with the city, county or state, and ask a tax professional how to report the income. Any tax you collect from guests is not your revenue, so keep it out of the numbers above.
Use it as a monthly check
Each month, compare actual booked nights to your break-even nights. A free calculator for this is at /bookkeeping/short-term-rental-break-even-occupancy-calculator. If you keep your books by property, MCC Solutions LLC can help set up the categories.
Common questions
Should I use 30 nights or the nights actually available?
Use the nights you can actually rent. If you block 4 nights for repairs or personal stays, divide by 26 for that month.
Does break-even occupancy include my own pay?
Only if you add it as a cost. If your time is part of the plan, add a management or labor line to the fixed costs so the break-even reflects it.
Do taxes collected from guests count as income?
Usually they are passed along to the tax authority, not kept. Ask your tax professional how they should be recorded in your books.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.