Test a bad year—and your next move
7 min read · Sources checked October 4, 2026 · Not specialist reviewed
A useful stress test shows what would happen under specified assumptions, not how likely it is to happen.
Change multiple assumptions together. Weak demand can lower both occupancy and rates while fixed costs continue. A repair can arrive in the same month as a slow season. An annual surplus can still hide a temporary cash shortage.
Build an explicit scenario
Our downside presets are illustrative shocks you can edit. A 10% nightly-rate decline and a 20% relative occupancy decline multiply: room revenue becomes 90% × 80% = 72% of base. For LTRs, test lower rent and additional lost months without counting the same vacancy twice. A fixed-rate loan payment stays fixed when market interest rates rise.
Look at monthly cash
Start with a dedicated reserve, add monthly cash collected, and subtract actual outflows. Ask when the balance is lowest and whether it crosses your minimum buffer. Our prototype uses an illustrative seasonal STR pattern, with a selectable repair month; it is not a market forecast. LTR losses are smoothed over the year and must be replaced with a property-specific timeline for a purchase decision.
Test the change in strategy
Switching from STR to LTR may require repair work, furnishing changes, leasing time and new operating arrangements. Model that transition before calling it a fallback. A less negative LTR result may reduce losses without making the property self-supporting. Selling also involves timing, transaction costs and loan payoff; sale outcomes are outside this prototype’s calculator.
A $20,000 starting reserve falls to $12,000 during a modeled transition and the LTR then loses $500 per month. The fallback slows the loss but does not stop it. The next step could be negotiating price, changing financing, verifying rent—or passing.
Your next action
Run the downside and severe examples, inspect the reserve curve, then test the LTR transition. Write down which assumption matters most and what evidence would change your decision.
A mistake to avoid
Calling the severe preset a worst case or treating a positive projection as proof that losses are bounded.
Sources & further reading
General U.S. educational material. Property-specific rules, tax treatment and suitability need separate verification. See our methodology.