How to Calculate Vacation Rental ROI in Ocean City NJ
A practical, data driven playbook for buyers and owners
Quick takeaway: Good Ocean City investments typically sit near a 4 to 6 percent cap rate. Cash on cash returns depend on down payment, debt terms, and how many profitable weeks you can book. A few extra prime or shoulder weeks often move an investment from negative to positive cash flow.
The problem with generic ROI calculators
National calculators miss four local truths. First, peak season can earn six times what winter earns. Second, New Jersey taxes and local fees affect net income. Third, Gardens, Gold Coast, North End, and South End perform very differently. Fourth, licensing and compliance add real costs. You need a model built for Ocean City.
Step 1. Collect the right inputs
Property and loan
| Field | Typical range or example |
|---|---|
| Purchase price | Example 750,000 |
| Down payment | 20 to 30 percent |
| Loan term and rate | 30 years at 6.25 to 7.50 percent |
| PMI | Only if down payment is below 20 percent |
Home attributes
| Field | Why it matters |
|---|---|
| Bedrooms and baths | Drives party size and weekly rate |
| Exact neighborhood | Each zone has different rate multipliers |
| Parking, view, elevator, pets | Premiums that lift rate and occupancy |
Tip: Many investment loans require 25 percent down and carry slightly higher rates than primary homes.
Step 2. Price by season, not annual averages
Seasonal rate guide
| Season | Typical stay rule | 1 BR | 2 BR | 3 BR | 4+ BR |
|---|---|---|---|---|---|
| Prime Jun to Aug | Usually weekly | 200 to 350 nightly | 300 to 500 nightly | 450 to 700 nightly | 600 to 1,000 nightly |
| Shoulder Apr to May, Sep to Oct | Often 3 to 5 nights | 25 to 35 percent lower than prime | 25 to 35 percent lower | 25 to 35 percent lower | 25 to 35 percent lower |
| Off season Nov to Mar | Flexible stays, monthly possible | 50 to 60 percent lower than prime | 50 to 60 percent lower | 50 to 60 percent lower | 50 to 60 percent lower |
Neighborhood multipliers
| Area | Multiplier vs central base |
|---|---|
| Gardens | plus 25 percent |
| Gold Coast | plus 20 percent |
| North End | plus 10 percent |
| Central Boardwalk | base rates |
| South End | minus 15 percent |
| Bay Area | plus 5 percent |
These are directional. Always validate with same size, same quality comps on your target blocks.
Step 3. Set occupancy like a local
Count weeks, not just percentages.
| Size | Typical booked weeks |
|---|---|
| 1 BR | 18 to 23 weeks |
| 2 BR | 20 to 25 weeks |
| 3 BR | 22 to 27 weeks |
| 4+ BR | 18 to 24 weeks |
| Season | Share of bookings |
|---|---|
| Prime | 10 to 12 high rate weeks |
| Shoulder | 6 to 10 medium rate weeks |
| Off season | 2 to 6 low rate weeks or monthly stays |
Top properties rarely exceed the mid 50s in annual occupancy percent because of turnovers, maintenance, and seasonality.
Step 4. Include every Ocean City expense
Fixed annual items
| Item | Typical rule of thumb |
|---|---|
| Property taxes | 1.5 to 2.0 percent of value |
| Insurance for STR use | 0.3 to 0.5 percent of value |
| Rental license and inspections | 150 to 300 per year |
| HOA or condo fees | Varies by building |
Variable operating items
| Item | Typical range |
|---|---|
| Management | 10 to 15 percent of gross rent |
| Maintenance and reserves | 6 to 8 percent of gross rent |
| Cleaning and turnovers | 100 to 200 per stay |
| Utilities | 400 to 800 per month, seasonal swings |
| Marketing and listing fees | 3 to 5 percent of gross |
Taxes on short stays
State sales tax can apply to rentals under 90 days. Some bookings through online platforms also pick up occupancy or local hotel taxes. Rules change by platform and municipality, and many charges are pass through to the guest. Confirm with your accountant before finalizing a pro forma.
Step 5. Worked example you can copy
Property
Three bedroom North End home at 750,000 with 25 percent down and a 30 year loan at 6.5 percent. No HOA. Utilities 600 per month. Cleaning 175 per stay with 18 stays. Management 12 percent. Maintenance 7 percent. Marketing fees 4 percent. Taxes 1.5 percent. Insurance 0.4 percent.
Revenue plan
Ten prime weeks at 5,500 equals 55,000. Six shoulder weeks at 3,800 equals 22,800. Two winter weeks at 1,800 equals 3,600. Total planned gross is 81,400.
Results
Net operating income is 37,828 which is a 5.04 percent cap rate on 750,000. Annual principal and interest at these terms is about 42,665. Cash flow after debt service is negative 4,837 which yields a negative 2.3 percent cash on cash return if you assume 25 percent down plus 3 percent closing costs.
How to cross into positive cash flow
Add three more shoulder weeks at the same rate and hold all other assumptions constant. Gross rises to 92,800. Cash flow turns positive at roughly 3,941 per year and DSCR moves just above 1.09. A stronger plan uses 30 percent down, a 6.25 percent rate, 10 percent management, and the extra weeks. That scenario produces about 9,672 in annual cash flow, a 6.46 percent cap rate, and a DSCR near 1.25. The point is simple. A few profitable weeks make the difference in Ocean City.
Step 6. Read the outputs like a pro
Cap rate is NOI divided by purchase price. Use this to compare properties without financing in the mix. Ocean City deals usually cluster near 3 to 6 percent depending on location and quality.
Cash on cash is annual cash flow divided by your total cash invested. This shows what your down payment and closing costs are earning. Strong deals often require either more down or better weekly pricing.
DSCR is NOI divided by annual debt service. Many lenders look for 1.20 or higher. Below 1.00 means your NOI does not fully cover principal and interest.
Step 7. Stress test before you offer
Cut occupancy by 20 percent and raise expenses by 15 percent to see if the deal still clears 1.15 DSCR. Test a pricing downturn that trims nightly rates by 25 percent during shoulder and off season. Add two months of vacancy for maintenance or unexpected events. If the numbers break under those tests, keep looking.
Common mistakes to avoid
Overestimating booked weeks. Understating maintenance and turnovers. Averaging rates across the year. Ignoring new taxes and fees. Pricing every week like it is July.
Advanced ways to lift ROI
Use dynamic pricing that reacts to local events and comps. Invest in photo and listing quality for higher click through. Offer premium amenities that justify better prime and shoulder rates. Negotiate multi property insurance and vendor pricing if you plan to own more than one unit. Preventive maintenance reduces cancellations and bad reviews.
When to walk away
If cash on cash is below 8 percent, DSCR is under 1.15, cap rate is under 3 percent, or payback stretches past 15 years, the risk adjusted return is usually not worth it in this market. Exceptions exist for buyers prioritizing lifestyle use, tax strategy, or long term appreciation.
Ready to run your numbers
Use our free ROI Calculator that is tuned to Ocean City pricing and occupancy. You can enter your own weekly plan or pull data driven estimates, then save scenarios for your short list.
Frequently asked questions
What is a good cap rate in Ocean City
Most properties sit between 3 and 6 percent. The higher end often requires stronger locations, better amenities, and professional marketing.
How many weeks can I realistically book
A well run three bedroom often books 22 to 27 weeks. The exact mix of prime and shoulder weeks drives profits.
Are taxes and fees charged to me or the guest
Many platform and occupancy taxes are pass through to the guest, but collection and remittance still require attention. Speak with your accountant.
Should I self manage or hire a manager
Self management can save 10 to 15 percent on paper, but only if you already have systems and vendor coverage. Most investors prefer professional management to protect reviews and reduce risk.
Next steps
- Run your property through the calculator and save a conservative and an upside case.
- Ask us for a comp set matching your size, location, and amenities.
- Book a call to review DSCR and lending options before you offer.