Education for Investors
Should You Buy a Short-Term Rental Based on Potential or Past Performance?
Airbnb Invest: Q&A Series for new Short-Term Rental investors
Today’s question is from Reddit where the new investor asks:
”I am interested in a STR in Texas and I’m conflicted: based on AirDNA, it rents out at $600-$900 a night which is fantastic, on other hand the seller only grossed 32,000 annually.
The area is somewhat remote. 1 hour from major metropolitan cities (DFW area). Summers are more popular than winters but bookings scattered throughout. The property is valued 650k just to give you an idea that its a mid tier property, not ultra luxury and not cheap by any means.
The numbers truly work but only if the occupancy rate 2x-3x. Target is 108k/annually (50% occupancy, $600 ADR). Current seller has obviously proven that people pat 600+/night, but occupancy has been dismal.
My question is, should I take that leap of faith, believing that I can market, furnish, and gain popularity in which case its seems lucrative - or be disciplined and look at hard numbers/history, in which case its a hard pass.”
The Data Expert Weighs In
When high nightly rates don't match low historical revenue, how do you decide if an Airbnb investment is worth it?
As a business intelligence professional and Airbnb Superhost who's analyzed hundreds of properties across the country, I see this dilemma all the time: investors fall in love with a property's potential while ignoring what the data is actually telling them.
Here, I'm breaking down a real question from Reddit that perfectly illustrates this challenge—and sharing my 3-part framework for making smart, profitable short-term rental investments.
Watch the YouTube video of our answer, while still getting the detailed framework in the text below.
The Investor's Dilemma: A Texas Case Study
The Property:
Location: Texas, near Dallas-Fort Worth (within an hour of the metro)
Purchase Price: $650,000
Current Performance: $32,000 annual revenue
Market Data (AirDNA): Shows $600-$900 ADR in the area
Seasonality: High occupancy in summers
The Catch: Currently operated as an STR, but clearly underperforming
The Question: "Do I buy based on what I think I can achieve with better furnishings and marketing? Or do I trust the property's actual track record and walk away?"
If they trust the hopeful strategy, they might pull the trigger. If they look at the hard numbers and historical performance, it's a hard pass.
So what's the right answer?
The Reality Check: Hope Is Not a Strategy
Let me be direct: you're about to invest $650,000 in the property alone, plus another $50,000+ in setup and amenities. This is an enormous financial commitment, and you need more than optimism to justify it.
Here's my 3-part framework for evaluating any short-term rental investment—especially when the numbers don't immediately add up:
1. Look at the Numbers in Excruciating Detail
Yes, AirDNA shows $600-$900 ADR in the market. But here's what you need to dig deeper on:
Why is the current owner only earning $32,000 annually? With those ADR numbers, the occupancy must be devastatingly low. What's causing that?
What are your true expenses? Property taxes, insurance, utilities, cleaning, maintenance, HOA fees, property management (if applicable)
Can you actually cash flow? Run conservative projections—not best-case scenarios
The data exists to answer these questions. Don't skip this step.
2. Understand Your Guest Persona (Because Hope's Not a Strategy)
You can have a fantastic property, but if people don't actually travel to your location for compelling reasons, you'll struggle to fill your calendar.
Ask yourself:
Who is traveling to this specific location? (Business travelers? Families? Weekend getaways?)
Why are they going there? (Events? Nature? Urban amenities?)
When do they book? (Last minute? Months in advance?)
What do they value most? (Luxury amenities? Kid-friendly spaces? Remote work setups?)
Occupancy is very hard to influence if you don't deeply understand your guest clientele.
When you truly know your ideal guest, you can:
Design specifically for their needs
Anticipate what they're looking for
Create an experience that generates 5-star reviews
Drive traffic through social proof and word-of-mouth
Market directly to them with messaging that converts
This is what separates properties that look great from properties that perform great.
3. Know Your Buy Box and Investment Goals
Not every investor is buying for the same reason. Get crystal clear on YOUR goals:
Are you buying for:
Cash flow? You need strong monthly income from day one
Appreciation/equity? You can handle lower returns short-term
Tax benefits? The property needs to meet specific criteria
Personal use + income? Different strategy entirely
Does this property check all YOUR boxes?
Some investors are willing to take more risk than others. That's fine—but be honest about your risk tolerance and financial capacity. Don't convince yourself you can "make it work" if the numbers don't support your actual goals.
Being diligent on your numbers isn't optional when you're making a $700,000+ investment.
Based on what this investor shared, here's what I'd want to investigate:
Red flags:
Earning only $32K on a $650K property = ~5% gross return (before expenses)
Already being operated as an STR but severely underperforming market comps
Remote location might limit guest pool despite proximity to Dallas
Potential opportunities:
If market ADR truly supports $600-900/night, there's clearly a gap
Summer seasonality could be captured with the right guest targeting
Previous owner might have done zero marketing or had poor photos/reviews
My recommendation: Before you buy, you need answers to:
What specifically caused the low occupancy? (Bad reviews? No marketing? Wrong guest targeting? Actual demand issues?)
Who successfully rents in this area at $600-900/night, and what are they doing differently?
What would it realistically take to close that gap?
If you can't answer these questions with confidence, you're gambling—not investing.
My Take on the Texas Property
The Bottom Line: Data-Driven Decisions Beat Hope Every Time
I've reviewed hundreds of properties as both an investor and a data intelligence professional. Here's what I know for certain:
Properties succeed when three things align:
The market has real demand (not just high theoretical ADR)
The property meets a specific guest need (not just generic appeal)
The numbers actually work (conservative projections, not best-case scenarios)
When even one of these is missing, you're setting yourself up for disappointment—no matter how beautiful the property or how "good" the deal seems.
Ready to Make Confident, Profitable STR Investments?
At Data Led Designs, our Market Insight Reports give you the exact data successful investors use to:
Identify high-performing locations with real demand
Understand who your ideal guests are and what they value
Calculate ROI-driven amenity investments
Position your property to outperform your market
Stop guessing. Start profiting.
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