You're staring at a Ballard townhouse listing. Three beds, two and a half baths, rooftop deck, $700,000. The photos are good. The agent says it "would crush it on Airbnb." Your gut says maybe.
Guts are bad underwriters. Spreadsheets are better — fed honest numbers instead of the agent's. What follows is a full Seattle STR underwriting of one illustrative deal, step by step, the way we'd actually do it. Your numbers will differ. The method shouldn't.
This walkthrough is educational, not financial advice. It uses invented, illustrative figures to demonstrate analysis — not a prediction of what any property will earn. Talk to a financial advisor or CPA before you invest.
This is general education, not tax or legal advice. Talk to your CPA or attorney about your situation.
The deal we're underwriting
Picture a 2016-built townhouse a few blocks off Ballard Avenue — close enough to the breweries that guests walk, far enough they don't hear last call.
- Purchase price: $700,000 (illustrative)
- Down payment: 20%, or $140,000
- Loan: $560,000 at 7.25%, 30-year fixed → about $3,820/month in principal and interest
- Property taxes: ~$7,000/year, or $583/month (illustrative King County figure)
- Insurance: ~$2,400/year, or $200/month for a landlord policy that covers short-term rental use
That puts monthly PITI at roughly $4,603. Everything earned has to clear that bar, plus operating costs, before you see a dollar. Keep that number in your head — it's the villain of this story.
Step 1: Estimate the STR revenue honestly
This is where most analyses die. Investors take the best month the seller ever had, annualize it, and call it a projection. Don't.
Build three scenarios instead, based on what similar three-bedrooms in northwest Seattle actually post:
| Scenario | Monthly gross revenue | What it assumes |
|---|---|---|
| Conservative | $5,000 | 55–60% occupancy, soft winter, average reviews |
| Base case | $6,400 | ~68% occupancy, solid listing, normal seasonality |
| Strong | $7,800 | 75%+ occupancy, Superhost-level reviews, strong summer |
Notice the spread: Seattle STR revenue is violently seasonal — a Ballard rooftop in July is a different product than in January. If your analysis only works in the strong scenario, you don't have a deal. You have a hope.
In real life these come from twelve months of the seller's platform statements, comparable listings' calendars, and tools like AirDNA or PriceLabs — always haircut for optimism. Our acquisition due-diligence guide covers this step in more detail.
Step 2: Add up the real operating costs
Revenue is vanity; operating costs are where deals quietly bleed out. Here's the monthly expense stack, computed per scenario since several lines scale with revenue:
| Expense line | Conservative | Base case | Strong |
|---|---|---|---|
| Management (15% of revenue) | $750 | $960 | $1,170 |
| Utilities (water/sewer/garbage, power, internet) | $440 | $440 | $440 |
| Supplies and restocking | $150 | $150 | $150 |
| Maintenance reserve (5% of revenue) | $250 | $320 | $390 |
| Licenses and misc. fees | $30 | $30 | $30 |
| **Total operating expenses** | **$1,620** | **$1,900** | **$2,180** |
The 15 percent management line is our own flat 15% of rental proceed — most Seattle managers charge 20 to 30 percent, sometimes with setup fees, so adjust when comparing quotes. Our fee breakdown shows what those quotes hide.
Utilities at $440 reflects Seattle reality: water/sewer/garbage runs steep, and guests treat hot water like it's free. Because it is — to them. The maintenance reserve isn't optional. STRs take roughly triple the wear of a long-term rental — that rooftop deck will need restaining. Budget it now or pay later with interest.
Subtract operating expenses from revenue for net operating income — earnings before debt:
- Conservative: $5,000 − $1,620 = $3,380
- Base case: $6,400 − $1,900 = $4,500
- Strong: $7,800 − $2,180 = $5,620
Step 3: Debt service and the bottom line
Now the villain returns. Subtract the $4,603 monthly PITI from each NOI:
| Conservative | Base case | Strong | |
|---|---|---|---|
| Purchase price | $700,000 | $700,000 | $700,000 |
| Down payment (20%) | $140,000 | $140,000 | $140,000 |
| Loan amount | $560,000 | $560,000 | $560,000 |
| Interest rate (illustrative) | 7.25% | 7.25% | 7.25% |
| Monthly P&I | $3,820 | $3,820 | $3,820 |
| Property taxes (monthly) | $583 | $583 | $583 |
| Insurance (monthly) | $200 | $200 | $200 |
| Gross STR revenue (monthly) | $5,000 | $6,400 | $7,800 |
| Total operating expenses | $1,620 | $1,900 | $2,180 |
| Net operating income | $3,380 | $4,500 | $5,620 |
| **Monthly cash flow** | **−$1,223** | **−$103** | **+$1,017** |
| **Annual cash flow** | **−$14,676** | **−$1,236** | **+$12,204** |
Total cash invested: $140,000 down + ~$14,000 closing costs + ~$25,000 to furnish = $179,000 (illustrative).
Cash-on-cash return — annual cash flow divided by cash invested:
- Conservative: −8.2%
- Base case: −0.7%
- Strong: +6.8%
Read that again: at 7.25 percent with 20 percent down, this townhouse only pays you in the strong scenario. The base case — the one to plan around — loses about a hundred bucks a month. An extremely common result in Seattle at current prices and rates, and why the spreadsheet beats the listing photos.
The Seattle checks that numbers alone won't catch
A deal can survive the math and still die on logistics. Before writing an offer, verify:
STR license eligibility. As of 2026, Seattle caps operators at two dwelling units, one your primary residence. Already operating two elsewhere? This townhouse can't legally join the rotation. License: $75 per unit per year, and the number must appear on the listing.
HOA restrictions. Ballard townhouse complexes love quiet — many ban sub-30-day rentals outright, and some cap STR units per complex. Get the CC&Rs during inspection, not after closing. We've seen buyers discover the ban at the final walkthrough. It never goes well.
Insurance. A standard landlord policy doesn't cover nightly guests. You need STR-specific coverage plus the city's required $1 million liability. Price it before you underwrite, not after.
Seasonality and the winter test. If January revenue comes in 40 percent below July, does the mortgage still get paid from reserves? Six months of PITI in reserve isn't pessimism in Seattle. It's the climate.
So — green light or pass?
Our honest read: at these numbers, it's a pass unless you can change the inputs. The base case doesn't pay you, and "hope for the strong scenario" isn't an investment thesis.
But the walkthrough shows which levers flip it. Twenty-five percent down instead of 20 drops monthly P&I by about $230. A buydown or a $660,000 purchase price moves the base case positive. Self-managing saves the 15 percent fee but costs you every 11pm lockout call — a lifestyle trade, not a free lunch.
And notice what we didn't count: appreciation. Seattle's long-run property appreciation is real, and plenty of investors buy for it. Legitimate — just don't let it launder a bad cash-flow deal. Underwrite cash flow as if appreciation is zero. If it works anyway, that's bonus; if it only works with appreciation, you're speculating — say so out loud before wiring earnest money.
FAQ
How do you analyze a short-term rental deal?
Estimate gross revenue across three scenarios — conservative, base, strong — then subtract operating expenses and debt service. Divide annual cash flow by total cash invested for your cash-on-cash return. If the base case doesn't pay, keep looking.
What is a good cash-on-cash return for an Airbnb?
No universal target exists, but most Seattle investors want the base case — not the rosiest scenario — to clear 6 to 8 percent after all expenses. A deal that only works in the strong scenario is speculation in a spreadsheet costume.
How do you estimate Airbnb revenue in Seattle?
Start with twelve months of the seller's platform statements, sanity-check against comparable listings' calendars, and haircut for optimism. Build three scenarios. Seattle's seasonality punishes single-number projections.
What expenses do Airbnb investors forget?
Utilities — Seattle water/sewer/garbage is steep — plus restocking, a real maintenance reserve, the city's $75-per-unit STR license, and income taxes. Turnover wear runs roughly triple a long-term rental's — budget it now or pay later.
Should you include appreciation in an STR analysis?
Underwrite cash flow as if appreciation is zero. If the deal works anyway, appreciation is a bonus. If it only works with appreciation baked in, you're speculating — fine, as long as you say so out loud first.
Every figure in this walkthrough is illustrative — invented to demonstrate the method, not to predict any property's performance. Investment decisions carry real risk. Run your own numbers and review them with a financial advisor or CPA.
This is general education, not tax or legal advice. Talk to your CPA or attorney about your situation.
Want a second set of eyes on a real Seattle address — actual revenue comps, the STR eligibility check, an honest expense stack? Our free property assessment does exactly that. No obligation, no sales deck. Just this math, on your property instead of an example.