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How To Evaluate St. Croix Vacation Rental ROI

Evaluate St Croix Vacation Rental ROI Step by Step

Wondering if a St. Croix vacation rental will actually cash flow or just look good on paper? You are not alone. Between seasonality, insurance, and management costs, the numbers can shift quickly. In this guide, you will learn a clear, St. Croix–specific way to model ROI so you can make confident decisions and avoid surprises. Let’s dive in.

Know St. Croix seasonality

St. Croix demand is seasonal. Winter months from December through April generally see stronger occupancy and higher ADR, with holiday weeks and spring break as peak periods. Late spring through fall is slower, and hurricane season from June through November adds vacancy risk.

Because of this pattern, you should model revenue by month rather than using a single annual average. A monthly curve that reflects high, shoulder, and low seasons will give you a more accurate outlook for both cash flow and cash reserves.

Gather the right inputs

Build your model with monthly or seasonal inputs. Start with:

  • ADR by month and expected occupancy percentage
  • Minimum stay rules and average length of stay
  • Platform and payment fees, and how cleaning fees are handled
  • Management fee structure and what it applies to
  • Operating expenses: utilities, insurance, property tax, HOA, internet, landscaping, pool service, pest control, supplies, linens, accounting, licensing
  • Maintenance and repairs plus a separate CapEx reserve
  • Debt terms if financing: amount, rate, amortization, closing costs
  • Vacancy buffer for off-season and storm-related downtime
  • Local tax obligations on rental income and transient stays

Talk to two or three local property managers to validate your ADR and occupancy curve. Also obtain insurance pre-quotes that reflect wind and hurricane coverage on St. Croix.

Calculate revenue and net income

Step 1: Forecast gross rental revenue

  • Formula: Gross Revenue = Sum over months of (ADR_month × Occupied Nights_month).
  • If you charge a cleaning fee, decide whether you keep it net of platform commissions or treat it as a pass-through to housekeeping.

Step 2: Subtract platform and payment fees

  • Platform fees = Gross Revenue × Platform Fee percentage.
  • Payment processing fees may be separate; subtract those as well.

Step 3: Apply management fees

  • Managers often charge a percentage of revenue. Clarify if the fee applies to gross revenue or net of platform fees.
  • Management fee = Net Revenue before management × Management Fee percentage.

Step 4: Deduct operating expenses

  • Include recurring items: utilities, internet, property tax, HOA dues, landscaping, pool, pest control, supplies, routine maintenance, licensing, and accounting.
  • Net Operating Income (NOI) = Net Revenue after management − Operating Expenses.

Step 5: Fund CapEx reserves

  • Annualize major replacements such as furniture, roof, HVAC, and appliances.
  • CapEx Reserve is separate from routine maintenance.

Step 6: Cash flow before debt

  • Cash Flow Before Debt (CFBT) = NOI − CapEx Reserve.

Step 7: If financing, calculate debt service and cash-on-cash

  • Compute your annual principal and interest based on loan terms.
  • Cash Flow After Debt = CFBT − Annual Debt Service.
  • Cash-on-Cash Return = Cash Flow After Debt ÷ Total Cash Invested.

Step 8: Review yield metrics

  • Cap rate (unlevered) = NOI ÷ Purchase Price.
  • Gross multiplier = Purchase Price ÷ Gross Rental Revenue.
  • Consider multi-year IRR if you plan a 5 to 10 year hold.

Example: Base-case math

Here is an illustrative scenario to show the math. Replace the numbers with your own monthly inputs.

  • ADR: 350 dollars, annual occupancy: 50 percent (183 nights)
  • Platform fees: 15 percent, management: 25 percent
  • Operating expenses: 18,000 dollars per year, CapEx reserve: 3,000 dollars per year
  • Purchase price: 750,000 dollars, down payment: 25 percent

Walk-through:

  • Gross Revenue = 350 × 183 = 64,050 dollars
  • Platform fees (15 percent) = 9,608 dollars, Net before management = 54,442 dollars
  • Management (25 percent of net) = 13,610 dollars, Net after management = 40,832 dollars
  • NOI = 40,832 − 18,000 = 22,832 dollars
  • After CapEx reserve = 19,832 dollars
  • Example annual debt service on a 30-year loan at 4.5 percent for 562,500 dollars is about 34,191 dollars
  • Result: negative cash flow after debt in this illustration

Small shifts in ADR, occupancy, or fees can flip the outcome. Build sensitivity cases before you commit.

Stress-test your assumptions

Run scenarios so you understand your range of outcomes:

  • ADR change of plus or minus 10 to 20 percent
  • Occupancy change of plus or minus 5 to 15 percentage points
  • Management fee range from 15 to 35 percent, plus per-stay cleaning costs
  • Insurance premiums and deductibles with increases of 10 to 50 percent
  • CapEx reserve higher vs lower depending on age and condition
  • Financing rate shifts and loan availability

Start with seasonality, insurance, management fees, and cleaning turnover. Those variables tend to move the needle most in St. Croix.

Expense lines owners often miss

  • Insurance: hurricane and windstorm coverage with named-storm deductibles can be a major expense. Get island-specific quotes early.
  • Utilities: electricity and backup power fuel can add up, especially with heavy air conditioning use or generator runs.
  • Cleaning turnover: model per stay, not per night. Shorter stays increase cleaning cost per booked night.
  • HOA dues and assessments: condos and resort communities can have special assessments. Review budgets and reserves.
  • Maintenance: set aside 5 to 10 percent of gross revenue or a fixed dollar amount depending on property age.
  • Supplies and linens: plan for ongoing replacements and wear.
  • Marketing and photography: if you operate beyond a single platform, budget for creative and promotion.

Compliance, risk, and insurance

Before you underwrite, confirm what applies to your property type and location:

  • Registration and licensing: short-term rentals generally require local registration or business permits and may be subject to inspection or zoning rules.
  • Transient occupancy taxes and filing: short-term rental income is typically subject to local hotel or transient accommodation taxes. Confirm the rate and reporting requirements with the local tax authority.
  • Gross receipts exposure: consider how cleaning or service charges are treated.
  • Insurance and building code: verify hurricane resistance standards, permitted alterations, and any requirements that affect insurability.
  • Hazard exposure: review FEMA flood maps and property elevation for flood risk and insurance implications.

Build a compliance timeline into your cash flow plan, since registrations, inspections, and policy binding can affect your first months of operations.

Due diligence checklist

  • Gather 12 to 36 months of booking and expense history if available: ADR by month, occupancy, revenue, and guest reviews.
  • Audit 6 to 12 comparable listings that match bedroom count, location, and amenities to shape your monthly ADR and occupancy curve.
  • Obtain pre-quotes for wind, hurricane, liability, and contents coverage.
  • Verify transient tax rates and filing processes with local authorities.
  • Confirm short-term rental licensing or permit requirements and any community restrictions.
  • Inspect for hurricane readiness: roof, shutters, windows, elevation, utilities, and backup power.
  • Check flood zone and elevation.
  • Review HOA documents for rental rules and potential assessments.
  • Build a monthly pro forma, not just annual averages.
  • Speak with two or three local managers about management fees, cleaning costs, average length of stay, and guest expectations.

What a professional manager runs for you

A full-service manager typically handles pricing, channel distribution, guest communication, housekeeping scheduling, routine maintenance coordination, on-island check-in and concierge, compliance assistance, monthly performance reporting, marketing and photography, and inventory of linens and supplies. This support helps stabilize operations for remote owners.

Decisions that usually remain with you include major capital upgrades, financing, title and closing, strategic tax planning, and long-term repositioning or redevelopment. Clarify the scope in the management agreement.

Build a monthly pro forma

Use a simple sheet with these inputs and outputs:

  • Inputs: ADR by month, nights available, occupancy percent, cleaning fee and per-turn cost, platform and payment fees, management fee, and each operating expense line.
  • Outputs: Gross revenue, net revenue after fees and management, NOI, CapEx reserve, cash flow before debt, debt service, and cash-on-cash return.

Create three scenarios: conservative, base, and optimistic. Adjust ADR, occupancy, insurance, and management fees first. This will show you how sensitive your returns are to the core drivers on St. Croix.

When to walk or reposition

If your base and conservative cases both show negative cash flow after debt, consider a larger down payment, different product type, or a property that needs value-add improvements. You can also evaluate longer minimum stays or corporate rentals during slower months. Keep an eye on exit options and liquidity, since island real estate can take longer to sell than mainland markets.

Getting the math right is the first step. The next step is aligning your underwriting with on-island operations and compliance so your rental performs year-round. If you want a grounded, local view of the numbers and a management plan that actually works on St. Croix, reach out to the team at S & S International. We are here to help you invest with confidence.

FAQs

What is a good cap rate for a St. Croix vacation rental?

  • Cap rate depends on ADR, occupancy, fees, and expenses. Underwrite monthly seasonality, price insurance accurately, and compare the unlevered cap rate to your risk tolerance rather than using a single rule of thumb.

How do hurricanes affect vacation rental ROI on St. Croix?

  • Hurricanes can cause property damage, closures, higher insurance costs, and deductibles. Mitigate with wind-rated construction, storm shutters, robust insurance, cash reserves, and backup power to protect guest experience.

What management fee should I expect for a St. Croix short-term rental?

  • Full-service management commonly ranges from 15 to 35 percent of rental revenue depending on services. Clarify if the fee applies to gross revenue or net after platform fees, and confirm who pays for housekeeping and supplies.

How should I model cleaning and turnover costs?

  • Model cleaning per stay, not per night. Higher turnover means a higher cleaning cost per booked night. Multiply your average per-turn cost by the expected number of stays each month.

What licenses and taxes apply to St. Croix short-term rentals?

  • Short-term rentals generally require local registration or business licensing and are typically subject to transient accommodation taxes. Confirm current rates and filing schedules with the local tax authority before you buy.

What are the biggest underwriting risks to stress-test first?

  • Seasonality and occupancy swings, insurance premium and deductible changes, management and cleaning costs, and major CapEx timing. These variables have the largest impact on cash flow.

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