If you ask five investors for a “good ROI,” you’ll get five answers. A smarter approach is to build a simple model that makes your assumptions explicit—and conservative.
This framework is designed for Santa Teresa-style markets where seasonality is real and guest expectations are high.
Key takeaways
- Define the property’s “rental identity” before estimating rates and occupancy.
- Model seasonality with separate assumptions (peak, shoulder, green) instead of one annual number.
- Underwrite expenses realistically—operations quality is part of the product.
Step 1: Define your rental identity
Before you estimate numbers, define the property position:
- Luxury retreat
- Family villa
- Surf and wellness home
- Ocean-view hideaway
The position influences pricing power and review velocity.
Step 2: Forecast occupancy by season
A realistic model separates:
- Peak season
- Shoulder season
- Green season
Instead of one annual occupancy number, use a band for each season.
Step 3: Estimate ADR (average nightly rate)
ADR is not just square meters and photos. It’s:
- Location and access
- Sleep capacity and layout
- Reliability (AC, internet, power backups)
- Design coherence
- Reviews and service quality
Step 4: Build your expense stack
Common categories:
- Management and operations
- Housekeeping and laundry
- Maintenance and replacements
- Utilities
- Insurance and taxes
If you want a world-class operation, budget for it.
Step 5: Use conservative scenarios
Model three cases:
- Conservative
- Expected
- Upside
If the deal only works in upside, it’s not a deal—it’s a hope.
FAQ
What occupancy rate should I assume?
It depends on seasonality, positioning, and operations. Use ranges by season and benchmark against comparable properties.
What expenses do buyers underestimate most often?
Maintenance/replacements and utilities can be higher in coastal environments, especially with heavy guest usage.
Should I model professional property management from day one?
If you’re targeting consistent luxury performance, yes—management and service are part of the guest experience and affect reviews and pricing.
Next step
If you want help matching a property to a realistic operating plan, start with Property Management and explore opportunities on Real Estate.