How to Value a Vacation Rental Property (2025 Guide for STR Investors)

A vacation rental's worth goes beyond its square footage and location. You’re assessing two assets in one: the physical property and its income potential. That makes accurate valuation essential in every phase of ownership.

For Buyers

Getting the valuation right protects your bottom line. You’ll avoid overpaying, forecast cash flow accurately, and ensure that the rent you generate can support your financing terms and long-term goals.

For Sellers

If you’ve built a strong short-term rental business, your asset deserves more than just a comps-based price. A well-documented rental income history, high occupancy rates, and optimized guest operations can significantly raise your asking price—especially when selling to another investor.

For Lenders & Appraisers

Traditional valuation models often fall short for vacation rentals. Without accurate rental data, lenders may undervalue your property, affecting loan-to-value ratios or refinancing potential. That’s why it’s critical to present a full picture—one that includes monthly revenue, seasonality, and market trends.

In short: understanding how to value a vacation rental property isn't just smart—it's essential for maximizing ROI, attracting the right buyers, and making strategic growth decisions.

Steps to Evaluate a Vacation Rental Property

Evaluating a vacation rental property means going beyond aesthetics and asking: Can this home perform as a profitable short-term rental? Whether you’re acquiring a luxury cabin or a beach villa, these steps will help you analyze a property’s true earning power.

Step 1: Research the Market

Location is everything—but not just for resale value. Your rental income potential depends heavily on local demand, seasonality, and regulatory environment.

• Study occupancy trends: Use platforms like AirDNA to review average nights booked, nightly rates, and revenue for similar properties.
• Understand regulations: Some areas require STR permits, limit stays, or restrict operations by zone.
• Watch tourism trends: Year-round destinations often yield more stable monthly revenue.

Step 2: Analyze Comparable Rental Properties

Look beyond basic comps on Zillow or Redfin. Focus on successful STRs in the same area:

• Compare similar vacation rentals nearby.
• Assess design, amenities, and guest appeal.

Valuation Methods Explained

Apply the right method for your property type, revenue model, and goals. These three valuation approaches form the foundation of accurate STR pricing.

1. The Sales Comparison Approach

This traditional method estimates value based on similar recently sold homes.

• Appraisers compare homes with similar size, location, and features.
• Adjustments are made for unique elements like a hot tub or view.
• Sets a baseline market value—not income potential.

Limitations for STRs:

• Doesn’t reflect rental income, guest ratings, or occupancy.
• Use it as a starting point, then layer income-based insights.

2. The Income Capitalization Method

Ideal for investors, this method uses income to estimate value.

Formula: Property Value = Net Operating Income (NOI) ÷ Cap Rate

• NOI: Gross rental income – operating expenses (not including mortgage).
• Cap Rate: Expected return, often 5–8% for top STR markets.
• Example:$60,000 NOI ÷ 0.07 = $857,143 value

This method quantifies STR value based on real earning power.

3. The Going Concern Valuation

This holistic approach values the property as a business:

• Real Property: Home and land
• Personal Property: Furnishings, appliances, décor
• Business Value: Booking history, operations, guest reviews, brand

Pro tip: Document reviews, systems, and tech tools to boost appraised value.

Use STR pricing tools to check ADR (Average Daily Rate), occupancy, and income potential.

Step 3: Estimate Income and Expenses

Once you’ve found a promising property, build your model:

• Estimate gross income: Occupancy Rate × Nightly Rate × 12
• Subtract expenses: Cleaning, management, utilities, insurance, software, licensing
• Cash Flow = Monthly Income – Monthly Expenses

Consider a calculator to account for seasonality and streamline projections.

Step 4: Evaluate Operational Requirements

A stunning home doesn’t guarantee five-star performance. Evaluate:

• Check-in logistics: keyless entry, turnover schedules
• Guest communication systems and automation
• Local property management availability

Efficient operations raise value for investors, lenders, and guests alike.

Step 5: Assess the Upside

If you operate multiple vacation rentals or manage bookings on behalf of other owners, your business is more than a set of properties—it’s a performance-based enterprise. Whether you're seeking investment, selling your company, or refinancing, knowing the value of your short-term rental business is key.

Two industry-standard methods help define what your business is worth:

1. The Adjusted EBITDA Method

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It provides a snapshot of profitability by removing financial noise and focusing on core operations.

Adjusted EBITDA goes a step further by:

• Adding back non-recurring expenses (e.g., one-time repairs, owner vacations)
• Normalizing income to reflect typical business performance
• Accounting for missing expenses (e.g., unpaid owner labor)

How it works:

• Start with your Net Income from a Profit & Loss (P&L) statement.
• Add back owner salary, personal expenses, or unusual one-offs.
• Deduct missing market-rate expenses (like a manager's salary if unpaid).

Valuation = Adjusted EBITDA × Industry Multiple

Multiples typically range from 3x to 5x, depending on:

• Revenue consistency
• Market strength
• Operational systems
• Number and quality of contracts

Example:
If your adjusted EBITDA is $200,000 and you apply a 4x multiple:
$200,000 × 4 = $800,000 business valuation

2. Price Per Contract Method

This simpler method is commonly used for smaller operations—particularly those with an adjusted EBITDA under $250,000.

Formula:
Annual Management Commissions × 1–2x Multiple

Example:
If your company earns $100,000 annually in commission revenue:
$100,000 × 1.5 = $150,000 business valuation

This method prioritizes the number and value of active contracts you manage—especially useful if your business is young or growing but not yet deeply profitable.

Whether you operate 2 units or 200, these business valuation models ensure you’re building toward a quantifiable exit or growth strategy. Well-organized financials and clear operational systems drive higher multiples—and higher returns.