What Investors Should Know About Short Term Rental (STR)

Short-term rental investing has evolved from a niche concept to a mainstream form of real estate investment. With the emergence of online marketplaces like Airbnb and Vrbo, property owners have the opportunity to rent out homes, apartments, and even single rooms. It is no surprise that many investors have taken interest in this space because of the enormous potential of the market. According to industry data, the global short term rental market size has reached $174.84 billion in 2025. Understanding how the short term rental market actually works is essential before committing capital to this growing real estate segment.

Key Takeaways

• ‍Short term rentals (STR) offer investors the potential for higher income and access to the growing travel accommodation market.
• Investors must carefully evaluate location, local regulations, seasonality, and management requirements before committing to a short-term rental property.
• Successful short-term house rentals depend on strong market research and active property management.

What Is a Short Term Rental?

Short term rentals (STR) or vacation rentals are homes you rent for short periods. Unlike long-term rentals that usually have a lease of one to 12 months, short term rentals are rented out for days or maybe weeks at a time.

The most popular form of short term rentals is Airbnb. However, there are many other opportunities of renting your available home, apartment, and condos as a short term rental. STR properties can be excellent for investing in rental properties for beginners.

Why Investors Are Turning to Short-Term Rental Investing

The short term accommodation rental model allows investors to tap into the growing travel economy while maintaining greater control over pricing, property use, and occupancy. Here are the key benefits of short term rental:

Higher Income Potential Than Long-Term Rentals

While investors can only gain a certain amount of income from long-term rentals, the short term accommodation model provides investors with the opportunity to gain more income from their properties, especially during the holiday season and special events in the area. Investors can increase the prices of the properties using the pricing models available in the vacation home rental industry. 

Flexibility for Property Owners

While long-term rentals require investors to sign contracts for a certain period of time, the short term model provides investors with more flexibility and control over the properties they invest in. The flexibility of short term rental gives investors the ability to block out certain days of the week or month for personal use or for any reason they see fit. 

Easier Property Management Through Online Hosting Platforms

Technology has made STR investing far more accessible than it was a decade ago. Online hosting platforms have simplified the process of listing properties, managing reservations, and reaching travelers worldwide. What used to require investors to hire a management company can be done by the investors themselves using the online hosting platforms available in the industry today. 

Risks of Short-Term Rental Properties

Understanding the potential risks of short term apartment rentals help investors prepare for operational demands and avoid unexpected financial setbacks.

Seasonality and Income Fluctuations

One of the most common challenges in short-term rentals is seasonality. Many hot real estate markets experience significant swings in demand depending on the time of year. Tourist destinations may see strong bookings during peak travel seasons but slower occupancy during off-peak months.

Higher Management Effort

Short-term rental or vacation rental investment typically requires more hands-on management than traditional rental properties. Instead of dealing with a single tenant for a year or more, owners may host dozens or even hundreds of guests throughout the year. Many investors eventually hire property managers or cleaning teams to help handle these operational tasks.

Property Damage and Wear

Frequent guest turnover can also increase the risk of property damage and general wear. This is due to the fact that the people staying in the rental will not feel as responsible for the property as long-term renters do.

Short Term Rental vs Long Term Rental

Understanding the differences between short-term and long-term real estate investing can help you decide which meets your investment strategy and financial goals.

Long-term rentals have a fixed or at least a more predictable income. You know how much to expect, assuming the tenants fulfill their lease obligations. In short-term rentals, there is an agreement of what renters will pay for the short while they are with you, but then you'll continue renting to other renters throughout the year. The market rent can change throughout that time, or you might have long periods of vacancies.

You should also consider your exit strategies for both investment types. Long-term rentals with tenants have a limited audience of other real estate investors. House rentals for the short-term, though, won't have existing tenants, so you open up your audience to other real estate investors plus anyone looking for a primary residence. 

Key Considerations for Short-Term Rental Investors

Before investing in short-term house rentals, it is important to evaluate several practical factors that can influence both profitability and long-term sustainability to succeed in STR real estate.

Best Locations for Short-Term Rental Investing

One of the most significant determinants of success in short-term rentals is location. As you begin researching how to find short term rentals that are worth investing in, you should first look into locations with high tourism levels, tourist attractions, business travel, and events. These are locations that are more likely to have high occupancy and revenue rates.

Legal Restrictions and Compliance

Not all cities and states allow house rentals for the short-term, so always check with the local laws before investing. In areas of high tourism, short-term rentals are typically encouraged and allowed. In other areas, the local regulations don't allow rentals for less than 30 days or sometimes more.

Licensing and Regulations

Always check with the local regulations to see if short term rental licensing is required. Not all cities and states require it, but some do. Allow enough time to apply for a short term rental operating license before you're up and running.

Financing

It might be more challenging to get financing for short-term house rentals. Since it's not the home you're living in, you can't borrow any of the government-backed loans. Instead, you may be eligible for conventional financing, or you may have to find a private investor. Your financing may be contingent on the net operating income you'll earn, the rental market demand in the area, and property values. 

Costs and Taxes

Depending on the laws in your area, you may be required to collect and pay lodging or rental tax for your jurisdiction. Talk to your local government to find out what they need for real estate investing businesses operating short-term rentals.

Owning rental properties also means you're responsible for the regular maintenance, repairs, and necessary renovations. Essentially, all short-term rental property management is usually up to you. 

Active Management

Unlike in traditional rental properties, short-term rental requires active management. Owners might need to attend to the constant number of guests that would stay in the property. You might need to consider the time to spend in maintaining the quality service that you offer.

Seasonality and Demand

Demand for short-term rentals can vary significantly throughout the year. Many markets experience peak travel seasons where occupancy and nightly rates are high, followed by slower periods when bookings decline. This seasonality can affect monthly cash flow, making it important for investors to plan ahead. 

Ways to Invest in Short-Term Rentals

Real estate investors have two ways to invest directly or indirectly in short-term house rentals. Investing directly means the investor researches, looks at the housing market in certain areas, assesses the real estate demand, and ensures it's an area of high tourism and business activity. Then, the investor buys the property, advertises the property for rent, maintains the property, and screens tenants throughout the year.

On the other hand, investors can invest passively with Real Estate Investment Trusts (REIT) if an active investment doesn't sound appealing. Instead of buying commercial real estate themselves, investors invest in a real estate company that does the investing for them. All investors must do is fund their REIT account and let their earnings grow. Most REITs pay dividends, aka a share of their profits from rental income, back to investors throughout the investment. 

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5 Best Cities for Short-Term Rental Real Estate in 2026

As of 2026, successful short-term rental investors focus on investing in cities that offer high tourism and clear regulations. As of 2024, the short-term rental industry in the United States generated over $67 billion in revenue, with continued growth in the industry attributed to domestic travel and flexible work arrangements.

Here are some of the cities that continue to attract investors in the short-term rental market while balancing tourism and regulations.

1. Atlanta, GA

Atlanta is still one of the most active tourism and convention markets in the southeastern United States. With attractions like the Georgia Aquarium, Mercedes-Benz Stadium, and the film industry, Atlanta hosts millions of tourists each year.

However, regulations were put in place in 2023 that require investors to only own two short-term rental properties. One of the properties has to be the owner’s primary residence. Additionally, investors must obtain a permit and pay an annual permit fee. Despite these restrictions, Atlanta’s year-round tourism and large convention industry still create consistent STR demand. 

2. Austin, TX

Austin continues to be a strong STR market thanks to major festivals such as SXSW and Austin City Limits, along with steady tech industry growth. Tourism and business travel keep occupancy rates strong throughout the year.

However, Austin maintains strict regulations on non-owner-occupied rentals. Most investors face the biggest restrictions when renting properties that are not their primary residence. For investors willing to navigate the regulatory framework, Austin’s strong tourism and technology economy continue to support the STR market.

3. Columbus, OH

Columbus has emerged as a growing short-term rental market due to its expanding population, large university presence, and increasing tourism tied to sports and business travel. Columbus appeals to investors because of its relatively affordable property prices compared with larger metropolitan areas, while still maintaining steady demand from visitors and university events.

4. Denver, CO

Denver is still an attractive city to tourists and those looking for relocation. The city is popular due to its proximity to the Rocky Mountains and the various outdoor activities available. 

In spite of this, Denver has strict regulations regarding STRs. The city permits STRs only in the primary residence of the host. Therefore, investors are not permitted to purchase a home with the intention of renting it out as an STR.

5. Miami, FL

Miami remains one of the most popular STR markets in the United States thanks to its beaches, nightlife, cruise tourism, and international visitors.

The city zoning rules determine where short-term rentals are allowed, and some residential zones restrict rentals shorter than six months. Investors must confirm that their property is located in an approved STR zone before listing it. Miami-Dade County also requires hosts to register and collect tourist development taxes.

Conclusion: What Investors Should Know About Short-Term Rental (STR)

Short-term rentals have opened new opportunities for real estate investors looking to generate flexible and potentially higher income from their properties. However, success in the short term rental market requires more than simply listing a property online. Investors must carefully evaluate location, local regulations, seasonality, and the level of management required to maintain consistent guest experiences and strong occupancy rates.

For those willing to take a more active role in property management, short term house rentals can provide advantages that traditional long-term leasing cannot offer. At the same time, understanding the risks is essential before entering the market. Learn more by signing up and visiting our blog.

Short Term Rental FAQs

What is considered a short term rental?

A short term rental is a property that is rented out for a short time, usually one night up to 30 days. The exact time frame may vary depending on local laws. Short term rentals include apartments, houses, vacation home rental, or even rooms. Short term rentals are usually used by travelers, business visitors, or individuals who require temporary accommodation.

Is real estate better than stocks?

There's no way to predict if real estate investing is better than investing in the stock market because no one can predict economic growth or declines. The best investment advice you can receive is to diversify your investments, putting money in both real estate and stocks to get the best of both worlds.

How much money can you make from a short-term rental?

No two investors make the same profit from investing in short-term housing rentals. The profits depend on many factors, including the area, the pent-up demand for housing, if there are any supply chain issues, and the average prices of rent in the area.

How much does an Airbnb property make per year?

The income from an Airbnb investment property depends on location, occupancy rate, and nightly pricing. According to AirDNA, the average Airbnb host in the U.S. earned about $14,000 per year in 2024, though properties in strong tourism markets can generate $30,000–$80,000+ annually. Actual profit will depend on expenses such as cleaning, management, maintenance, and local taxes.

Is short term rental real estate a good investment in 2026?

Yes, short term rental real estate can still be a good investment in 2026, especially in locations with strong tourism and favorable regulations. However, success depends on choosing the right market, managing the property actively, and planning for seasonal demand fluctuations. Investors who research local rules and demand trends are more likely to achieve consistent short term rental returns.