Case Study #14 – AIRNYC: Short-Term Rental Acquisition (Case Only)

For our 14th case study, we explore rising investment in short-term rentals with a challenging, real-world acquisition analysis. These case studies are designed to help you practice and perfect your real estate financial modeling skills. This AIRNYC case study places you in the role of an Investment Analyst at A.CRE Capital, a firm specializing in acquiring and repositioning high-yield short-term rental assets in prime urban and resort markets.

In this scenario, you’ll evaluate the financial feasibility of acquiring and repositioning a five-unit brownstone in Manhattan’s East Village. Amidst a resurgence in urban travel and experiential lodging demand, the opportunity presents strong upside potential—but also heightened regulatory and operational risks.

A beautifully renovated brownstone in East Village, Manhattan, New York, designed as a luxury short-term rental property.

As with all A.CRE case studies, the names and some details have been adjusted for confidentiality, but the fundamentals and modeling challenges reflect real-world deals. Whether you’re preparing for a role in acquisitions, capital markets, or working on your modeling proficiency for interviews, this case simulates the kinds of decisions and analysis required in today’s investment landscape.

Are you an Accelerator Advanced member? The solution to this insightful case is covered in the Career Advancement Endorsement of the program. Not yet enrolled? Join the A.CRE Accelerator—the leading training program used by top firms and universities to train the next generation of commercial real estate professionals.

AIRNYC – The Background

You are an Investment Analyst at A.CRE Capital, a real estate investment fund specializing in acquiring and optimizing high-yield short-term rental properties across major urban and resort destinations. The firm’s strategy is to identify undervalued multifamily or single-unit properties, reposition them into premium short-term rentals (e.g., Airbnb-style), and exit within 10 years at a stabilized valuation.

Given the post-pandemic tourism boom, New York City has seen a surge in demand for well-located, professionally managed short-term rentals despite increasing regulatory hurdles. A.CRE Capital is considering acquiring a four-unit brownstone in Manhattan’s East Village to convert it into a luxury, fully automated, short-term rental operation.

Your task is to analyze the financial feasibility of this investment, structure an optimal equity and debt financing strategy, and assess risk factors that could impact returns.

AIRNYC – The Details

Acquisition & Market Assumptions

Property Type: 5-unit brownstone, 5,200 SF
Location: East Village, Manhattan, NYC
Acquisition Price: $4.5 million
Acquisition Closing Costs: 2% of purchase price
Planned Renovation & Furnishing Cost: $700,000
Total Project Cost: $5.2 million (Acquisition + Renovation)
Holding Period: 10 years

Revenue Assumptions

Nightly Rate (Average across 5 units): $400 per night
Occupancy Rate: Year 1: 65%, Year 2: 75%, Year 3-10: 80%
Annual Revenue Growth: 3% per year

Operating Expenses

Property Taxes: 1.2% of acquisition price per year
Insurance: $15,000 per year
Utilities & Maintenance: $40,000 per year
Platform & Management Fees: 15% of revenue
Cleaning & Housekeeping: $22500 ($75 per turnover – average of 5 turnovers per unit per month)
CapEx Reserve: $15,000 per year

Debt Assumptions

Loan-to-Cost Ratio (LTC): 70%
Interest Rate: 6.25% fixed
Loan Term: 10 years
Amortization: 30 years
Interest-only payments: 3 years
Loan Fees: 1% of loan amount

Exit Assumptions

Exit Cap Rate: 5.5% on Year 10 NOI
Selling Costs: 3% of sale price

AIRNYC – The Task

1) Investment Return Metrics

Calculate the investment’s unlevered and levered internal rates of return (IRR), along with the corresponding equity multiple.
Determine the cash-on-cash return to evaluate the investment’s annual income relative to the equity invested.
Also, analyze key debt metrics, including the Debt Service Coverage Ratio (DSCR) and Debt Yield.

2) Sensitivity Analysis

Build sensitivity tables showing the results for the Levered IRR and Levered Equity Multiple with the following variables:

Exit Cap Rate vs Hold Period
Exit Cap Rate vs Purchase Price
Loan to Cost vs Cost of Debt

Do you want to create a real estate financial modeling case study that perfectly suits your educational or professional needs? Check out our A.CRE Real Estate Case Studies Creator Assistant!

Download the Short-term Rentals Case PDF

In addition to the web-based case, we’ve created a PDF version to download and use offline. As with our real estate financial models, this case study is offered on a “Pay What You’re Able” basis with no minimum (enter $0 if you’d like) or maximum (your support helps keep the content coming). Just enter a price together with an email address to send the download link to, and then click ‘Continue’.

We occasionally update these cases. Paid contributors will receive lifetime access to the case, and all updates.

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Frequently Asked Questions about Case Study #14 – AIRNYC: Short-Term Rental Acquisition

What is the objective of the AIRNYC case study?

The objective is to evaluate the financial feasibility of acquiring and repositioning a 5-unit Manhattan brownstone into a luxury short-term rental, and to practice modeling key investment return metrics and risks in a real-world acquisition scenario.

What are the key assumptions about the property and project cost?

The brownstone is in East Village, NYC, with an acquisition price of $4.5 million and $700,000 in renovation/furnishing costs. Including 2% closing costs, the total project cost is $5.2 million, with a 10-year planned holding period.

What are the revenue assumptions used in the case study?

Average nightly rate is $400 per unit. Occupancy starts at 65% in Year 1, increases to 75% in Year 2, and stabilizes at 80% for Years 3–10. Revenue grows at 3% annually.

What are the major operating expenses included in the model?

Expenses include property taxes (1.2% of purchase price), insurance ($15,000), utilities/maintenance ($40,000), platform/management fees (15% of revenue), cleaning ($22,500), and a CapEx reserve ($15,000) annually.

What financing structure is assumed in the case?

A 70% loan-to-cost ratio is assumed, with a 6.25% fixed interest rate. The loan term is 10 years with a 30-year amortization schedule and the first 3 years interest-only. Loan fees are 1% of the loan amount.

How is the property’s exit value estimated?

The property is assumed to sell at the end of Year 10 using a 5.5% exit cap rate applied to Year 10 NOI. Selling costs are estimated at 3% of the sale price.

What key investment metrics are required in the analysis?

You are expected to calculate unlevered and levered IRRs, equity multiples, annual cash-on-cash return, and key debt metrics such as Debt Service Coverage Ratio (DSCR) and Debt Yield.

What sensitivity analyses should be included?

Three sensitivity tables are required:

Exit Cap Rate vs Hold Period,

Exit Cap Rate vs Purchase Price,

Loan-to-Cost Ratio vs Cost of Debt.
Each should evaluate the impact on Levered IRR and Equity Multiple.

Who is the case study intended for?

The case is designed for real estate professionals and students preparing for roles in acquisitions, capital markets, or interview prep. It’s part of the A.CRE Accelerator training platform for advancing modeling skills.

Where can I find the full case and supporting files?

The full case and downloadable Excel/PDF materials are available on a “Pay What You’re Able” basis through the A.CRE website. Paid contributors receive lifetime access to updates.

About the Author: Arturo is a Financial Analyst at A.CRE. With a background as a Mechanical Engineer, he further honed his skills by obtaining a Master’s Degree in Industrial Maintenance. His experience spans over a decade as a university professor, and he has dedicated 3 years to the real estate domain, holding an instrumental role in administering the A.CRE Accelerator real estate financial modeling program and helping its members master complex modeling solutions.

Arturo's passion lies in building, improving, and analyzing real estate financial models. Arturo loves being with his family and climbing mountains in his free time. You can contact Arturo from his LinkedIn page.

Contact Arturo