Guide · step-by-step
ROI on coastal investment property
Gross brochure yield is not ROI. Model net monthly cash flow after all costs.
- Net cash flow
- Seasonality
- Conservative model
Compare at least conservative, base and optimistic scenarios. Include furnishing, repairs, financing and vacancy reserves in the investment and operating model.
1. Define the formula first
A simple operating return is annual rental revenue after all operating costs, divided by total capital invested. State whether financing, investor tax and capital appreciation are included; figures using different definitions are not comparable.
2. Nightly rate and occupancy
Model each month separately. Use achievable rates for comparable units, subtract discounts and allow for turnaround days, maintenance and low season. A competitor’s public calendar is not proof of a paid booking.
3. Complete cost schedule
Include management, platform fees, owner-paid cleaning, utilities, internet, insurance, building charges, local levies, accounting, routine repairs and periodic refurbishment. Add purchase tax, legal work, agency fees and initial furnishing to the acquisition cost.
4. Stress test and exit plan
Recalculate with lower occupancy and nightly rates, higher management and borrowing costs, and an adverse exchange rate. Check whether you can carry twelve months without rental income and what selling costs would apply.
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FAQ
There is no universal safe percentage. Use local monthly evidence and test at least a 20% revenue decline from the base case.