So, you are looking to create an estimate of your future income with holiday rental properties and stumbled across our ROI calculator.
In this article you will read a step by step guide on how to set up the ROI calculator and get an overview on how to read the data that you will get out of it.
⚠️ Our calculator is a tool that can help you get an idea of how much income you could get in the future but it does not in any way represent a guarantee! Kitn Estates have no responsibility over how you use this tool and the decisions that you will eventually take.
Our holiday rental ROI calculator works in two phases:
1, Add the inputs. You will have to fill in the blanks starting by the first one (investment amount)and progressively complete all of them.
In some fields like "investment amount" and "nightly rate" for example, you will input numbers. In others you are required to use the sliders in order to set the values of the inputs (example: investment duration).
You have full control on all of the inputs at all times and you can always go back and change the parameters if you like so. The results will update automatically as soon as the input data of the ROI calculator has changed.
2, Read the outputs. After you done with inputs you will be able to read the outputs such as:
Fill the first field with the price of the property you are now considering or your available investment funds for your holiday rental business to reveal the next step.
Our market of reference is located in Bali where we help our investor to set up their holiday rental businesses.
We suggest a minimum investment of 100-150.000$ USD for this specific market, but the calculator can work for any other rental property market in the world.
For rental enterprises here in Bali, we often advise our investors a holding period of something between 5 to 10 years, depending on our investors time horizon, after which they put the rental property back into the market to be sold.
This is a very subjective choice and your strategy will be unique to you and your style.
In a real life scenario, you can hold onto your Balinese holiday rental business property until your contract for the right to use the land (leasehold) expires (typically 25 years) or you decide to sub-lease your property it to someone else.
To learn more about how to create a rental business in Bali read here.
To determine the value ($) you can derive from your Bali holiday rental business, you have to estimate how much you will be charging per night in your rental property.
The estimated nightly rate is the amount you plan to bill guests for a typical stay in your property.
The location, local attractions, design, and general look&feel of your holiday rental business all play a significant role in determining the nightly rate.
Use common sense when setting up this metric and keep it well proportionate with your investment amount and the time horizon of your investment.
ideally you want to get to your ROI as fast as possible before even considering selling your property in order to extract the maximum possible value from your rental property.
If you have no idea on how to rationally set this metric, consider learning how to do a competitive analysis on Airbnb or any similar platform to find your competitors and understand their pricing system as well as getting insights of their strengths and weaknesses.
The occupancy rate is the predicted annual percentage of rental income the property can generate.
The question you should ask yourself here is: for what percentage of the year my property will host guests?
In Bali, a yearly occupancy rate between 50 and 70% is realistic, according to our experience.
If you need to gather data to feed into the calculator, there are many tools online that can help you remove the "guess work" from the equation, such as Airdna.
This tool is especially useful when you do your competitive analysis. It’s a paid service with limited features for non-paying users, but very useful if not essential in the holiday rentals business.
The operation cost typically ranges between 30 and 45 % (including taxes, in Bali) and comprises all expenses that your holiday rental business is likely to incur, such as:
taxes, management charges, utilities bills, supplies, and routine maintenance, just to name a few.
With our ROI calculator you can estimate the impact% of costs when managing a rental business and how it affect your future revenue.
Use this slider to estimate the average growth of your property value overtime.
Remember that the percentage you set will be multiplied by the number of years so in the end result will sum up.
Try to establish an average and don’t pump impossible values like 20% x 10 years = 200%.
We are not saying it’s not going to happen but you have to be smart about it and set realistic expectations.
If you are looking at Balinese properties the standard sale tax is 10%, but you can always modify the input if you decide to employ a different tax strategy or you operate in a different tax environment.
This slider affects only the value of the property and is not related with the operating cost mentioned above.
As soon as you finish setting up all the parameters of our holiday rental business calculator the tool will generate a report with all the data generated by your inputs.
In this first section you will read the total value you can possibly extract from your rental business during the investment time you have specified.
Note: Because the values are determined independently of the original investment amount, altering it will not affect the results of this section exception given to the ROI metric.
The monthly rental business data is a simple breakdown of the total data but on a monthly time frame. This is useful to determine your monthly net income with your rental business in Bali and thus, understand how much you can actually pocket each month.
Now that you have a peek into how much you can potentially earn with rentals it's time to focus on selling your property, possibly at a profit 😉.
What you find in this section is the (total value of your property + the annual growth rate) x investment time frame.
In this section, the sale taxes on your property get included revealing the net value of your property and ultimately how much you will pocket from the sale of your holiday rental business.
Here's how to interpret the results:
Here you will find gathered all of your net incomes both deriving from rental activities and the net property valuation.
All of it get summed and from that subtracted from your investment amount in order to determine your Profit or losses (P&L) and your final return on investment from your holiday rental business.
The ROI rental business calculator is a tool that cal really give you an approximate idea on how much income you can expect in the future. Obviously it does not make magic tricks and is very important that you consider this as an indication.
We have a whole article here, on how to create more accurate estimates of your ROI. If you have any questions, or you need a custom a quote from one of the top agencies here in Bali feel free to reach out.
In the meantime we hope this guide has been helpful to you!
Invest in Bali villas from $1.00Learn more