How to calculate the lifetime value of a managed short-let unit

What is lifetime value for a managed property?

Lifetime value is the total gross profit a single unit earns your business over the whole time you manage it.

It is a simple formula, and that simplicity is the point. Once you know the two inputs, you know what every property on your books is worth to you, and what every new property you add will be worth. That number then sets the ceiling on what you can sensibly spend to win a landlord.

You can work it out by hand using the formula above, on either commission or rent-to-rent. We'll also walk through your own figures with you on a demo call.

How do you work out monthly gross profit on commission?

On commission, monthly gross profit is the unit's average monthly booking revenue multiplied by your commission rate, minus any direct costs you carry yourself.

The key word is average. Booking revenue swings with the seasons, so a single busy month overstates the unit and a quiet one understates it. Take the unit's revenue across a full year and divide by twelve, so the highs and lows even out. That gives you a monthly figure that reflects what the property actually earns, not what it earns in August.

Then apply your commission rate, and subtract any direct costs you absorb that the landlord does not pay. What is left is the monthly gross profit that unit puts in your business, which is the figure lifetime value is built on. This is the model we use for Airbnb and short-let management companies.

How do you work out monthly gross profit on rent-to-rent?

On rent-to-rent, monthly gross profit is what the unit leaves you after rent, bills, cleaning, platform fees and other running costs.

The structure is different from commission. You pay the landlord a fixed rent, and you keep whatever is left after the unit's running costs. That means both the upside and the risk sit with you: a strong month is yours, and a void is yours too.

Because the costs are yours, the gross profit figure has to capture all of them. Rent to the landlord, utilities, cleaning between stays, platform fees, insurance and anything else the unit needs to run. What remains is the monthly gross profit. From there, lifetime value works exactly the same way as on commission. This is the model rent-to-rent operators use.

How long does a landlord stay with you?

Your average length of management is the average number of months landlords stay before leaving or selling, taken from your own records.

If you have been operating for a while, the cleanest way to find it is to look at the landlords who have already left. Average how many months each one stayed with you. That is your real retention number, drawn from your own portfolio rather than an industry figure that may not match your model.

If you are newer and do not have enough departures to average, use a cautious estimate. It is better to understate length of management and be pleasantly surprised than to overstate it and set an acquisition budget you cannot sustain. Revisit the figure every six to twelve months as your portfolio matures and more landlords move through.

A worked example.

Take an illustrative unit taking £2,000 a month in bookings at a 20% commission, with no extra costs: it makes you £400 a month in gross profit.

Kept for 30 months, its lifetime value is £12,000. Ten units like it add £120,000 in lifetime gross profit to your business.

These are illustrative figures to show the arithmetic, not benchmarks. Your own numbers will differ, and that is exactly why you should run them yourself. The point is to see how a modest monthly profit, carried over the months a landlord stays, becomes a meaningful total. We'll run your own figures with you on a demo call.

How should lifetime value shape your acquisition budget?

Your cost to acquire a unit should sit comfortably below its lifetime value, leaving room for running the unit and for landlords who leave early.

Lifetime value is the ceiling. If a unit is worth £12,000 to you over its life, spending £3,000 to acquire it leaves £9,000 of gross profit to cover running costs, early departures and your margin. Spending £11,000 to acquire it leaves almost nothing, and turns a good unit into a poor one.

This is why the comparison matters. A typical deal sourcer charges at least £3,000 for one completed acquisition. Through Crescent Beaumont, the cost is around £450 per landlord acquired. Both need to be judged against the unit's lifetime value, not against each other alone. A landlord lead generation system paired with a CRM keeps that cost low and predictable, so more of each unit's lifetime value stays in your business.

What are the most common mistakes?

The most common mistake is using booking revenue instead of gross profit.

• Using revenue instead of profit, which overstates what a unit is worth, especially on rent-to-rent where costs sit with you.
• Guessing the length of management instead of checking your own records, which sets the budget on a hunch rather than a fact.
• Ignoring seasonality, so a peak-month revenue figure inflates the monthly gross profit and the lifetime value that follows.
• Assuming every unit is average rather than splitting by property type or area, which hides the units that earn well and the ones that don't.

Avoid these and your lifetime value becomes a number you can trust. For a fuller comparison of what it costs to add a unit, read our guide on deal sourcers versus landlord lead generation.