The STR Investor Glossary

A tax deferral strategy under IRS Section 1031 that lets investors sell an investment property and reinvest all proceeds into a like-kind replacement property without paying capital gains taxes at the time of sale.

The mean revenue earned per night actually booked, calculated by dividing total rental revenue by total booked nights. Excludes cleaning fees and platform charges.

The rate at which a property or market is accumulating reservations for a future period compared to the same point in a prior year. A leading indicator of whether demand is strengthening or weakening.

The ratio of a property's Net Operating Income to its market value, expressed as a percentage. Represents unlevered return — what you'd earn with no mortgage. STR cap rates typically run 8–14%, vs 4–6% for long-term rentals.

Annual pre-tax cash flow divided by total cash invested (down payment + closing costs + startup costs), expressed as a percentage. Unlike cap rate, accounts for your actual financing. Seasoned STR investors typically target 8–15%.

The money left over in a period after operating expenses and debt service (and other cash outlays you model) are paid — what actually accumulates in or leaves the investor's pocket. The core "does this deal pay me?" metric for financed STRs.

A one-time charge per reservation covering turnover cleaning between guests. A critical revenue and guest experience lever — set too high and short-stay bookings drop; set too low and margins erode on every turn.

A tax engineering study that reclassifies property components from 27.5-year depreciation into 5, 7, or 15-year schedules. Combined with bonus depreciation, can generate a paper loss equal to 20–40% of purchase price in Year 1.

Reservations made through an owner's website, repeat-guest outreach, or direct marketing channels — bypassing OTA platform commissions. Can increase net revenue by 12–18% per booking versus Airbnb or Vrbo.

An investment property mortgage that qualifies borrowers on rental income rather than personal income. DSCR = NOI ÷ Annual Debt Service. No W-2s or tax returns required. The primary financing vehicle for self-employed and portfolio-scaling STR investors.

The practice of automatically adjusting nightly rates in real time based on demand signals, seasonality, competitor pricing, and local events. The single highest-leverage revenue optimization strategy for STR operators.

Annual rental income from a property divided by its market value (or purchase price), expressed as a percentage. A quick, unlevered snapshot of how hard income is working against the price of the asset — before operating expenses and financing.

The systematic process of improving an STR listing's photos, title, description, amenity tags, and pricing to maximize search ranking and booking conversion rate on platforms like Airbnb and Vrbo.

The systematic evaluation of STR performance metrics — occupancy, ADR, RevPAR, supply growth, and regulatory environment — in a specific geographic area to determine investment viability before committing capital.

An IRS standard that determines whether STR losses are active (can offset W-2 income) or passive. STR owners with average stays ≤ 7 days who log 500+ hours/year of participation can unlock depreciation deductions against ordinary income.

A furnished rental for stays of 30 days to 12 months, targeting traveling professionals, relocating families, and insurance claimants. Combines STR-level revenue premiums with LTR-level operational stability and lighter regulation.

Annual income after all operating expenses but before mortgage payments, depreciation, and income taxes. The foundational number for cap rate, DSCR, and property valuation. Formula: Gross Revenue − Operating Expenses.

Any mortgage that doesn't conform to Fannie Mae/Freddie Mac guidelines. DSCR loans are the most common Non-QM product for STR investors. Rates run 0.5–2% above conventional, in exchange for flexible income qualification.

The percentage of available nights that were actually booked in a given period. Formula: (Nights Booked ÷ Nights Available) × 100. One of the three core STR performance metrics alongside ADR and RevPAR.

A regulatory condition in many city STR ordinances requiring that short-term rental permits only apply to the owner's primary home. Non-owner-occupant investors may be entirely excluded from operating STRs in these markets.

A family of measures for how much gain you get relative to what you put in. In STR conversations it often means total return (cash flow + appreciation + loan paydown + tax benefits) divided by equity — but many people casually use “ROI” to mean cash-on-cash or a simple profit multiple.

The single most comprehensive STR performance metric. Formula: ADR × Occupancy Rate. Captures both pricing power and demand simultaneously — the industry standard for comparing properties and markets.

A furnished property rented to guests for stays typically shorter than 30 days at a time, usually marketed on platforms like Airbnb or Vrbo. Distinct from long-term leases and from mid-term corporate-style stays.

How lenders determine qualifying rental income when underwriting an STR loan. Methods vary: market rent appraisal, actual Airbnb/Vrbo history (×75%), or Schedule E. The method used can be the difference between loan approval and denial.

A local tax on short-term lodging guests, typically 6–15% of the nightly rate. Also called hotel tax, lodging tax, or bed tax. Collected by the host and remitted to the municipality. Many OTAs auto-collect in certain jurisdictions.