Criteria for choosing the right property for short-term rentals
Buying an apartment specifically for short-term rentals is a real-estate investment strategy that can generate excellent returns — if you choose the right location and type of property and manage it correctly. But before purchasing, there are some crucial variables to analyse that make the difference between a profitable investment and one that burns capital.
Property selection criteria
Location: it is the number-one factor. An apartment in an average-quality tourist area performs better than a luxury apartment in the outskirts. Characteristics of an ideal location: within 15 minutes' walk of the main tourist attractions, well connected by public transport, a safe neighbourhood with services (bars, supermarkets, restaurants). Type: one-bedroom apartments (2-4 beds) are the type with the best balance of purchase price, management cost and potential revenue. Studios have relatively high management costs compared with revenue; villas and two-bedroom apartments have higher revenue but more irregular demand. Property condition: always include the cost of renovation and furnishing (on average €15.000-30.000 for a standard one-bedroom apartment) in the total investment budget.
Calculating ROI before purchase
Basic formula: gross ROI = (estimated annual gross revenue) / (purchase price + renovation + furnishings) × 100. Example: apartment in Naples purchased for €120.000, renovation and furnishings €20.000 (total invested: €140.000). Estimated gross revenue: €1.200/month × 12 = €14.400 per year. Gross ROI = 14.400/140.000 = 10,3%. From gross ROI, deduct: OTA commissions (12-15%), property manager commissions (20-30%), maintenance and utilities (5-10%), flat-rate tax (21-26%). The actual net ROI will be around 4-6% — still higher than traditional renting and competitive with financial markets.
Common mistakes to avoid when purchasing
Failing to check local short-term rental regulations before purchasing (risk of buying where they are prohibited). Failing to consider condominium fees, which can be very high in some buildings. Overestimating revenue based on the best months of the year instead of calculating the annual average. Failing to include initial setup costs (furnishings, photography, platform registrations) in the ROI calculation.
How to calculate return on investment before buying
Are you considering purchasing a property for short-term rentals? YouBnb can help you estimate the potential of any property before you buy it. Request a Free Evaluation.
Content reproduced from the current YouBnB website for this preview. Figures, returns and regulatory information have not been verified or updated in this version.
