Vacation rental investors are spending more time on market research before buying due to cooling returns and tightening regulations. The short-term rental market has been a rollercoaster over the last five years, with returns spiking post-COVID-19, then dipping hard in 2023, before making a recovery last year and seeming to level off going forward.
Market Research is Crucial
The annual STR outlook research published by AirDNA provides useful top-level data on the health of the market as a whole. According to the report, the average return on investment (ROI) for short-term rentals (STRs) hit 10.3% by the end of 2025, which is well below the 30.8% ROI peak achieved in 2021 but still a healthy margin for most investors.
The report also highlights the STR premium, meaning the typical gap between mortgage repayments and expected property revenue per month, at around the $1,000 mark in late 2025, with this projected to remain fairly constant throughout 2026 and 2027, unless market conditions shift sharply.
Regulatory Outlook
However, the broad view doesn’t account for geographic variance. AirDNA’s granular data on the STR market in different parts of the country, as well as the regulatory outlook, which is changing in many states, means investor market research must be thorough. For instance, the report points out that property prices are falling in some markets that are traditionally associated with vacationing, dipping 10% in Punta Gorda, Florida, and 6.7% in Pigeon Forge, Tennessee.
The imposition of stricter regulations in certain jurisdictions creates additional costs and administrative obstacles to overcome for investors. In California, for example, Senate Bill 346 was passed in 2025 and came into force this year to target the estimated 75% of STRs that aren’t properly licensed and taxed, according to the authorities in the state.
Similar increases in scrutiny for the STR market are taking place in other states, including Texas. That’s why thorough market research is a must for all investors, as tougher rules can erode ROI.
Original reporting: KRDO (Colorado Springs metro) — read the source article.
