How to Model Realistic Rental Income Before You Buy

Almost every marketing brochure for a vacation property includes a rental income projection, and almost every one of them is optimistic. Not necessarily dishonest — just built on the assumptions that make the number look best. Here is the framework we actually use, and recommend buyers push back on, when someone hands them a yield estimate.

Start with occupancy, not the nightly rate

The nightly rate is the easy number to find — comparable listings are public. Occupancy is where projections quietly inflate. A realistic model separates the year into peak, shoulder and off-season bands and applies a distinct, conservative occupancy rate to each, rather than one blended annual average that hides a lot of empty winter weeks.

For a coastal Mediterranean property, a defensible estimate typically assumes strong occupancy across a 10–14 week peak season, moderate occupancy across spring and autumn shoulder months, and low, opportunistic occupancy in winter — not a flat 70% booked year-round, which is rarely what actually happens outside a handful of major-city, year-round-demand markets.

Deduct management costs before you look at the headline number

A property doesn't manage itself from another country. Professional short-term rental management — guest communication, cleaning coordination, key handoff, listing optimization — typically costs somewhere in the range of 20–30% of gross rental revenue, depending on the destination and service level. Any income projection that doesn't net this out before presenting a headline figure is showing you gross revenue dressed up as profit.

“Gross revenue and net income are different numbers. Ask which one you're looking at.”

Account for your own use

If part of the appeal is using the property yourself, those weeks are not earning rental income — they're a lifestyle benefit, which is legitimate, but it means your realistic annual yield needs to subtract the weeks you intend to occupy it before comparing the return to a pure investment property.

Sense-check against comparable listings, not a spreadsheet

Before trusting any projection, look at actual public listings for comparable properties in the same immediate area — size, distance to the water, amenities — and see what they charge and, where visible, how frequently they appear booked across a full year. A model built entirely in a spreadsheet without reference to a real comparable set is a hypothesis, not an estimate.

On every project HolidayHome markets, our advisory team builds income estimates using this occupancy-band, cost-deducted approach, and we'd rather show a buyer a conservative number they can trust than an optimistic one that doesn't survive contact with a first full year of bookings.