Modeling STR ROI in the Village of Oak Creek

Thinking about buying a short-term rental in the Village of Oak Creek but unsure how to model the return? You are not alone. STRs in 86351 can perform well, yet results vary widely because seasonality, regulations, and operating costs all matter. In this guide, you will learn a clear, step-by-step way to model ROI for VOC properties, plus local factors that influence performance. Let’s dive in.

VOC demand and seasonality

The Village of Oak Creek sits in the Sedona area, where traveler demand is fueled by red-rock views, trail access, scenic drives, Oak Creek, and walkable dining. Seasonality is real. Spring and fall are often the strongest months, while mid-summer and winter can be more variable. Your model should use monthly assumptions, not a single annual average.

Proximity and amenities move the needle. Homes with red-rock views, quality outdoor spaces, hot tubs, and easy access to trailheads tend to command stronger rates. Parking, driveway access, and quiet enjoyment policies also affect appeal.

Local rules and taxes to verify

Before you underwrite a purchase, confirm the rules that apply to your specific address. In unincorporated areas, county rules and HOA covenants often govern STR use. Check:

• Yavapai County Planning and Zoning for zoning, occupancy and nuisance standards.
• Yavapai County Assessor or Treasurer for property tax classification and rates.
• Arizona Department of Revenue for transaction privilege tax and lodging tax reporting.
• HOA or subdivision CC&Rs for rental allowances, minimum stays, parking, and registration.

Regulations in tourism markets can change. Build a regulatory risk scenario into your analysis and budget for any compliance or licensing costs.

Data to collect for 86351

Gather recent market data for properties comparable to your target home. Focus on the most recent 12 to 36 months.

• ADR by month and bedroom count.
• Occupancy by month.
• Seasonality pattern by month.
• Listing characteristics: beds, baths, max guests, views, hot tub, parking, air conditioning, outdoor living areas.
• Turnover metrics: average length of stay and cleanings per month.
• Operating costs: cleaning per turnover, management fee, utilities, HOA dues, insurance, supplies, maintenance, capital reserves, platform fees.
• Financing terms: purchase price, down payment, interest rate, amortization, closing costs, initial furnishing budget.

Use STR market data providers for ADR and occupancy by ZIP and property type. Cross-check 10 to 20 local listings for pricing, minimum stays, cleaning fees, and calendars. Confirm property taxes and any HOA restrictions that could limit your availability or ADR.

Build the revenue model

Model at the monthly level to capture seasonality. For each month, set ADR and occupancy based on comps. Then calculate:

• Nights available = days in month (less owner blocks if any)
• Nights rented = Nights available × Occupancy rate
• Gross rental revenue = ADR × Nights rented
• Add cleaning fees collected only if you actually retain them, then include the cleaning cost separately

Example with placeholders only:

• ADR = 300
• Occupancy = 60 percent across the year for illustration
• Nights rented = 365 × 0.60 = 219
• Gross rental revenue = 300 × 219 = 65,700

Replace these placeholders with actual VOC comps by bedroom type and month. Your true results will differ based on location, amenities, and seasonality.

Map seasonality into the model

Create a simple monthly grid with stronger ADR and occupancy assumptions in March to May and September to November, and more conservative figures in other months. This will prevent overstating revenue and will improve your break-even analysis.

Model operating costs

Short-term rentals have both fixed and variable costs. Break them out clearly.

• Platform fees = Gross rental revenue × platform fee percent
• Management fees = Gross rental revenue × management fee percent, or a base plus variable if used
• Cleaning cost = Cleaning cost per turnover × number of turnovers
• Utilities: electricity, gas, water, internet, and any streaming packages
• Insurance: STR-specific policy premiums
• Property taxes and HOA dues
• Supplies and maintenance: linens, consumables, minor repairs
• Capital reserves: set a target each year for furniture, appliances and periodic replacements

Net operating income formula:

• NOI = Gross rental revenue − platform fees − management fees − operating expenses − any lodging taxes you do not pass through to guests

Many hosts pass transient taxes to guests. Even if you pass them through, you still need a process for collection and remittance per Arizona rules.

Add financing and returns

If you use a loan, include debt service and compute cash returns.

• Annual debt service = monthly mortgage payment × 12
• Cash flow before tax = NOI − annual debt service
• Cap rate = NOI ÷ Purchase price
• Cash-on-cash return = Cash flow before tax ÷ Cash invested

Cash invested typically includes down payment, closing costs, and initial furnishing and setup.

Break-even occupancy

Break-even occupancy shows the minimum occupancy needed to cover fixed costs and debt. Solve for occupancy in this equation:

Revenue(occ) = fixed costs + variable costs(occ) + debt service

Where Revenue(occ) = ADR × Nights available × occ.

Variable costs, such as cleaning, scale with occupied nights. Fixed costs include property taxes, insurance, HOA, and most utilities.

Sensitivity tests to run

Do not rely on a single case. Run at least three scenarios and a few what-if tests.

• Conservative: lower ADR, lower occupancy, higher cleaning and management costs.
• Base: market-median ADR and occupancy from recent comps.
• Optimistic: higher ADR and occupancy for top-tier properties and smooth operations.

Sensitivity tests to include:

• Occupancy ±10 to 20 percent and ADR ±10 to 30 percent, track impact on NOI and cash-on-cash return.
• Interest rate shocks of +1 to +3 percent, to see how debt affects cash flow.
• Management fee range and cleaning cost variability, since local labor supply can shift.
• Regulation change scenario, for example a 20 percent limit on available nights or a 15 percent rise in fees.

VOC operations, taxes and insurance

Operational details in VOC can influence results.

• Guests value red-rock views, outdoor living areas, hot tubs, and easy trail access, which can support stronger ADR.
• Parking, driveway grade, and clear access instructions matter for guest experience.
• Utilities can swing seasonally. Air conditioning demand climbs in summer, and winter nights can be cold at elevation.
• Cleaning and laundry cadence depends on average stay length and turnover volume.

For taxes and licensing, confirm who collects and remits lodging-related taxes, what the current rates are, and any business license or registration requirements. For insurance, standard homeowner policies often exclude STR use. Obtain STR-specific coverage and consider umbrella liability and loss-of-income riders where available.

Regulatory and environmental risk

Plan for changes. Many communities are refining STR regulations to address neighborhood impacts and housing supply. Include the possibility of caps on nights, stricter registration, occupancy limits, or higher fees.

Environmental risks in Northern Arizona include wildfire, drought, and flash flooding. Insurance availability and premiums may reflect these risks. Review hazard maps, consider mitigation costs, and budget for resilience improvements.

Practical modeling checklist

1. Define the property: bedrooms, baths, guest count, views, outdoor features, parking, proximity to trailheads.
2. Collect market data: ADR and occupancy by month for 86351 and your bedroom type. Review 10 to 20 comparable listings to validate.
3. Gather costs: cleaning per turnover, management fee structure, utilities, insurance quotes, HOA dues, maintenance, and a capital reserve target.
4. Confirm taxes and rules: transient lodging taxes, STR licensing or registration, and HOA CC&Rs.
5. Set financing: down payment, rate, amortization, closing costs, and furnishing budget.
6. Build the 12-month model: monthly ADR × occupancy to calculate revenue, then subtract fees and expenses to get NOI.
7. Add debt service: compute cash flow, cap rate, and cash-on-cash return.
8. Run scenarios and sensitivities: conservative, base, optimistic, plus ADR, occupancy, and rate shocks.
9. Stress test regulation: assume fewer available nights or higher fees and confirm cash flow remains acceptable.
10. Prepare a contingency reserve: at least 5 to 10 percent of revenue for surprises.

When to partner with a local expert

If you want a clear, defensible STR underwriting for VOC, you will benefit from local pricing, HOA and compliance insights, and contract-level guidance. Oak Creek Realty is a boutique, founder-led brokerage focused on Sedona micro-markets. You get senior-level representation, valuation guidance, and legally informed negotiation, all centered on your goals and risk tolerance.

Ready to evaluate an STR purchase or sale in 86351 with a thorough, seasonality-aware model? Schedule a free consultation with Liz Adams to get started.

FAQs

How do I estimate ADR for a Village of Oak Creek STR?

• Collect ADR from recent comparable listings by bedroom type and month, then validate against third-party STR market data for 86351 and adjust for your amenities and views.

What taxes apply to a short-term rental in 86351?

• Expect a combination of state transaction privilege tax and local lodging-related taxes, plus any registration or business licensing. Confirm current rates and who remits before modeling.

How should I account for seasonality in Sedona-area rentals?

• Build a 12-month model with higher ADR and occupancy in spring and fall, and more conservative assumptions in summer and winter, rather than a single annual average.

What operating costs do VOC STRs typically include?

• Cleaning per turnover, platform and management fees, utilities, insurance, property taxes, HOA dues if applicable, supplies, maintenance, and a capital reserve for replacements.

How do I calculate break-even occupancy for my STR?

• Solve for occupancy where ADR × Nights available × occ equals fixed costs plus variable costs at that occupancy and annual debt service, then compare to your conservative scenario.

What risks should I include in my STR ROI model for VOC?

• Regulatory changes, HOA limits, supply increases, wildfire and weather hazards, labor and cleaning cost shifts, and demand shocks from economic cycles or events.