STR fragility checklist: what breaks first in tight deals
When STR margins are thin, small changes in occupancy, rate, or expenses can flip the deal. Here is what tends to break first and how to stress-test before you buy.
Occupancy
The biggest lever. A 5–10% drop in occupancy can wipe out most or all of the cash flow on a tight deal. Seasonality, new supply, or a dip in demand will show up here first. If your deal only works at 70%+ occupancy, it is fragile. We cap optimistic occupancy and flag when high occupancy is doing too much of the work. For how we handle seasonality, see our STR seasonality reality check.
Nightly rate
Comps can be stale or from better listings. Rate compression from new inventory or regulation can push effective rates down. Stress-test 10–15% below what you think you can get. If the deal fails at that level, the margin is too thin.
Expenses
Management, cleaning, utilities, STR insurance, maintenance, and reserves are often understated. One big repair or a rate increase in insurance can erase months of profit. We build in realistic expenses and call out the assumptions. If you are self-managing, do not assume zero cost for your time.
Financing and holding costs
Higher rates or a longer vacancy period increase holding costs. If you are stretching on the mortgage, a weak year can force you to subsidize the property out of pocket. Model a weak year and make sure you can carry it.
The one assumption that could kill the deal
In every deal, one or two assumptions do most of the work. Often it is occupancy or rate. We identify that in the report and explain what would have to go right for the deal to hold. If that assumption is fragile, the verdict reflects it.
How to use this
Before you buy, run the numbers through conservative underwriting. Get a clear verdict (Proceed, Borderline, Walk Away) and a fragility explanation. If the deal is borderline, know exactly what would have to go right and whether you can stomach the downside. For why calculators disagree, read why STR calculators disagree. For how to stress-test properly, see conservative STR underwriting. See the sample report or run your deal.