Vacation rental profitability: how much you can earn

Owning a second home that sits empty is more common than it seems. Whether inherited or purchased as an investment, it often goes unused due to fear of the management process, bureaucracy, or simply not knowing if it’s really worth it. Compared to long-term or seasonal rentals, vacation rentals offer more dynamic income but also raise more questions: how much can you really earn? What are the actual costs? What happens if there are no bookings?

The key lies in accurately calculating profitability: nightly income, occupancy level, and all associated expenses. When managed well, it can be a solid source of passive income—especially in areas with tourist demand and the possibility of obtaining a license. If you have a property with potential or one that already has a permit for tourist rental, this model can offer a much higher return than a conventional lease. Here’s how to analyze it using real data.

How to calculate the profitability of your vacation rental (ROI)

Calculating the profitability of a vacation rental is not as complicated as it seems. The basic formula is simple: income minus expenses. That difference gives you a clear idea of the profit you can earn each month. However, even though the calculation itself is simple, what really matters is accounting for all the variables that affect it.

And that’s where many people get lost. Income can vary depending on the season, the nightly rate, or the platform where the property is listed. Expenses aren’t limited to property taxes or cleaning: there are commissions, utilities, maintenance, and the occasional unexpected cost. Average monthly occupancy is key to understanding how much you can realistically earn. At 1MAST, we explain all these factors clearly and realistically so you can make an accurate calculation for your case and decide if this model is right for you.

Vacation rental income

Income in a vacation rental is mainly generated through the nightly rate multiplied by the number of booked nights. Sounds easy, right? But behind that figure are several factors that make the difference between a property that performs well and one that barely covers its costs.

To achieve good income, you should take into account factors such as:

Nightly rate: adjusted to the market, competitive, and well calculated according to the season.
Occupancy rate: the more nights rented per month, the more income.
Location: areas with high tourist demand usually have more bookings and better rates.
Perceived value: if the property has good photos, is well decorated, and offers extras, you can charge more.
Reviews and online reputation: a profile with positive ratings attracts more bookings.
Visibility platforms: being on Airbnb, Booking, or similar platforms ensures constant exposure.

Vacation rental expenses

Before getting too excited about the income, it’s important to clearly understand what expenses are involved in renting out a vacation property. And no, there aren’t just a few. While many owners only think about the “big” costs, the truth is that a series of small expenses—if not kept in check—can eat up a large portion of the profit.

Main expenses to keep in mind:

Taxes: income tax, VAT if applicable, and tourist taxes depending on the region
Utilities: electricity, water, gas, internet, and television
HOA fees: especially if there are shared areas or an elevator
Home insurance: and ideally a policy specific to vacation rentals
Management fees: if you delegate to a professional company
Platform commissions: such as Airbnb, Booking, or Vrbo
Cleaning between stays: essential to maintain a good reputation
Maintenance and repairs: from minor issues to occasional improvements
Depreciation or mortgage: if the property is still being paid off
Initial furnishing or renovations: to keep the listing attractive
Tourist license and paperwork: as required by local regulations

Occupancy level

Occupancy level is one of the most decisive factors when calculating the profitability of a vacation rental. It’s not enough to have an attractive property or a good nightly rate: if it’s not booked enough of the time, there won’t be enough income to cover the costs.

To make the business viable, a minimum occupancy rate of 60% is usually used as a benchmark. Below that threshold, the numbers start to fall short. On the other hand, maintaining a steady average occupancy allows you to cover costs comfortably and begin generating real profits.

Example of vacation rental profitability calculation

Once you understand the formula (income – expenses = profit), it’s best to look at a realistic example to help visualize how this works month to month. Let’s consider the case of a licensed vacation property located in Alicante, an area with strong demand for much of the year, especially in spring and autumn.

Base example: April (average seasonality)

Average nightly rate: €70
Occupancy: 21 nights
Gross income: €1,470

Utilities: €150
HOA fees: €50
Cleaning (4 stays): €120
Platform commissions (15%): €220.50
Insurance, taxes, and extras: €80
Total expenses: €620.50

Estimated net profit: €1,470 – €620.50 = €849.50

Positive scenario

Average rate: €85
Occupancy: 25 nights
Income: €2,125
Expenses: €650
Profit: €1,475

Negative scenario

Average rate: €60
Occupancy: 12 nights
Income: €720
Expenses: €620
Profit: €100 (with risk of loss if there are unexpected costs)

Tips to increase your vacation rental profitability

At 1MAST, specialists in own rentals in Fuengirola and Costa del Sol we’ve spent years managing vacation rentals in high-demand areas. We know there are no magic formulas, but there are clear strategies based on data, experience, and personalized analysis. We study each property in depth, considering its location, features, potential occupancy level, owner profile, and ideal guest type. We analyze real expenses, the strongest and weakest seasons, and create a custom plan to maximize profitability without hassle for the owner.

Below are some of the many key factors we consider to maximize your vacation rental income:

Furnishing and decoration: A well-presented property rents faster and at a better rate. The décor should be neutral, functional, and photogenic. Bright, comfortable, and modern spaces attract more bookings and better reviews.
Competitive pricing: At 1MAST, we analyze competitor pricing, seasonality, and real demand to set the optimal rate at any given time. It’s not about charging less, but about renting more and better.
Online presence: We optimize your listing with professional photography, attractive descriptions, a clear cancellation policy, and highlighted extras. A well-crafted profile ranks higher on platforms and converts more visits into bookings.
Maintenance and cleaning: A poorly maintained or dirty property gets bad reviews and low occupancy. We work with trusted teams to ensure your property is always in perfect condition without you having to step in.
Payment management: We automate payments using secure systems compliant with regulations (such as PSD2), avoid delays, and give you full visibility of every transaction. You only see the results, without worrying about a thing.