How to Calculate Vacation Rental ROI in New England

The Three Numbers That Matter

Most "ROI" talk mixes up different measures. Each one answers a different question, so it helps to keep them apart.

A fourth number, total return, adds what the spreadsheet above leaves out: principal you pay down on the loan, any change in the home's value, and the tax effect of depreciation. It is real, but it is also the part you cannot see until you sell, so do not lean on it to justify a property that loses cash every month.

Step 1: Build Gross Income Honestly

Gross income is everything guests pay you, before any costs: nightly rent plus any cleaning fee you charge. Do not include the lodging tax the platform collects; that money belongs to the state, and in New Hampshire, Massachusetts and Vermont Airbnb collects and remits the state tax on bookings made through its platform (see our pages on NH lodging taxes and the Massachusetts room occupancy tax).

Estimate it season by season rather than as one annual guess. A ski home near Okemo and a camp on a Lakes Region pond earn in very different months. Our revenue estimate guide walks through comparable listings, nightly rate times occupancy and how to use market data tools. Use a conservative case, not the best month you have seen on a competitor's calendar.

Step 2: List Every Operating Cost, New England Style

National ROI calculators often miss the costs that make a northern home different. Go line by line:

• Platform fees. As of October 2026, Airbnb's help center says most hosts on the single host-only fee pay 15.5% of the booking subtotal, and hosts still on the split fee typically pay 3% (with guests paying a separate service fee). Hosts who use property management software are on the single fee. Vrbo's help page lists a 12% commission on rent and guest fees, plus a 3% payment processing fee charged on the total payment. See net vs gross income for how these land on a real booking.
• Cleaning and laundry after every stay, whether you pay a cleaner or do it yourself (count your time).
• Heat. Oil, propane or electric heat must run all winter even when the house is empty, to keep pipes from freezing. Get the last 12 months of delivery tickets or bills.
• Electric, internet, streaming, trash. Guests expect fast Wi-Fi; rural internet can cost more than you think.
• Snow removal. A plowing contract, plus shoveling or sanding of steps and decks between storms. Guests arriving at 9 pm in January need a clear driveway.
• Wells and septic. Septic pumping on a more frequent schedule when the home sleeps more people, water testing and treatment for a private well.
• Property tax. Ask the town assessor for the current bill. A purchase can trigger a reassessment in some towns.
• Insurance. A short-term rental policy usually costs more than a standard homeowners policy. See insurance and safety.
• Supplies and consumables: paper goods, soap, coffee, propane for the grill, firewood if you offer it.
• Repairs and maintenance: set aside a reserve every month, because guests use a home harder than a family does.
• Software: pricing tools, smart lock subscriptions, guidebook apps.
• Management, if you hire it. Fee models vary (percentage of gross, percentage of net, co-host split); see how management fees work.
• Licenses and registration: the state tax license or registration plus any town permit. See permits and licenses.

The best source for most of these lines is your own history: a year of bills for the house. If you are buying, ask the seller for utility history and get quotes for insurance and plowing before you make an offer.

Step 3: Worked Example (Hypothetical)

The numbers below are an example only, made up to show the arithmetic. They are not a forecast for any home, town or market, and not what any home of ours earns.

A buyer is looking at a lake house for $500,000. They plan to put 25% down ($125,000), pay about $10,000 in closing costs and spend $30,000 furnishing it. Total cash in: $165,000.

Hypothetical year one, operating:

Cap rate: $17,200 divided by $500,000 = 3.44%.

Financing: a $375,000 loan at a hypothetical 6.5% for 30 years has a payment of about $2,370 a month, or about $28,443 a year.

Cash flow: $17,200 minus $28,443 = about negative $11,243 for the year.

Cash-on-cash return: negative $11,243 divided by $165,000 = about negative 6.8%.

That is the honest lesson of the example: a property can have positive NOI and still lose cash once the mortgage is paid. Some of that mortgage payment is principal you keep as equity, and depreciation may lower your income tax (IRS Publication 527 says residential rental property is depreciated over 27.5 years, and land is not depreciable). But neither of those pays the oil bill in February.

Same home, already owned. Now suppose you already own the house with no mortgage and you only spend $30,000 to furnish it. The same $17,200 NOI is about a 57.3% cash-on-cash return on that $30,000 in year one. That looks great, but it ignores the other choices for the house: selling it, renting it long-term, or simply not having strangers in your family's lake house. Compare against those, too (see short-term vs long-term rental).

Step 4: Stress-Test the Result

Run the numbers again with:

• Gross income 20% lower than your estimate (a warm, snowless winter or a rainy summer).
• Heat costs 30% higher.
• One big repair: a well pump, a septic issue, a roof leak.
• A town rule change that limits rentals or adds a permit fee.

If the home only works in the best case, that is your answer. The break-even analysis shows how many booked nights you need just to cover costs.

Common Mistakes

• Counting lodging tax as income. It passes straight through to the state.
• Using peak-season occupancy for the whole year. Mud season and early December are slow in most New England markets.
• Leaving out your own time. If you clean, shovel and answer messages yourself, the return is partly a wage.
• Forgetting startup costs. Furniture, linens and safety gear are part of cash invested. See cost to set up an Airbnb.
• Mixing in the tax result. Calculate cash flow before income tax, then look at taxes separately with a professional.

Where New England Host Co Fits

If you would like a second set of eyes on the income side, New England Host Co offers a free property analysis for homes in its service area in Southern New Hampshire, the Lakes Region, Central Massachusetts and Southern Vermont. Call (978) 672-4578 or use the contact page. You can also start from the owner hub.

FAQ

What Is a Good Cap Rate for a Vacation Rental?

There is no single good number. Cap rate depends on the price of the home and the local market, and lake and ski homes often have high prices relative to income. Use cap rate to compare properties with each other, then check cash-on-cash and stress tests before deciding.

Should I Include the Cleaning Fee in Gross Income?

Yes, if guests pay it to you. Then include what you pay the cleaner as an expense. Platform fees are usually charged on cleaning fees too, so include them in the fee line.

Is Mortgage Interest an Operating Expense?

Not for NOI or cap rate. Both are calculated before financing so you can compare properties fairly. Mortgage payments come out when you calculate cash flow and cash-on-cash return.

Does Depreciation Change My ROI?

It does not change cash flow, but it can change your income tax. IRS Publication 527 covers rental depreciation; ask a tax professional how it applies to you, especially if you also use the home yourself. See our tax basics for homeowners.

How Often Should I Recalculate?

At least once a year, after you have a full year of bookings and bills, and any time a big cost changes (a tax reassessment, an insurance renewal or a new town rule).