The best short-term rental markets are not a fixed list of cities you copy off a blog post. They are the markets that score well on five things you measure yourself: how durable the local regulation is, whether demand comes from more than one source, how fast supply is growing, what nightly revenue you get per dollar of purchase price, and whether you can actually operate and staff the place from where you live. Score candidate markets on those five, weight regulation heaviest, and you produce your own ranking instead of inheriting someone else's.
Last updated: 2026-09-18
That change in framing matters, because the usual question — "which market should I buy in?" — expects a name. The answer is a method. Run every candidate through the same tests, rank your own shortlist, and buy only where the numbers clear a threshold you set before you fell in love with the place.
Why published market rankings go stale
A ranked city list is a snapshot of a moving target, and the target moves fastest exactly where returns look best.
The problem is structural, not lazy writing. When a market posts strong revenue-to-price numbers, capital shows up. New operators buy, listing counts climb, occupancy softens, and nightly rates compress. The market that earned the number-one slot can be average by the time the next crop of buyers closes. You inherit the peak, not the opening.
Regulation compounds the lag. Once a neighborhood fills with investor-owned rentals, residents complain, councils schedule hearings, and rules tighten. Lists rarely capture a pending ordinance, a permit cap that passed last month, or an HOA that quietly banned stays under 30 days. Three cities, three different gates, and none of them fits in a ranked list's one-line summary. Nashville moved to a new online short-term rental permit application process effective March 11, 2026, per the city's own codes page. Austin licenses rentals of fewer than 30 consecutive days annually, through separate Type 1, Type 2 residential, Type 2 commercial and Type 3 applications, and the city says that starting July 1, 2026 it will ask platforms to remove unlicensed properties. San Diego runs four license tiers, capped at 1% of the city's housing units outside the Mission Beach planning area and 30% of dwellings inside it; as of September 11, 2026 the city reported 1,099 Tier 4 whole-home Mission Beach licenses issued with zero remaining and applications closed, against 799 still available in Tier 3.
There is a second-order effect worth naming. Lists concentrate buyers into the same three or four submarkets inside a city, which means your competition is not the metro listing count — it is the twelve identical two-bedroom units that closed the same quarter you did, all furnished from the same catalog, all discounting against each other in the shoulder season.
I have spent 18+ years in real estate, focused on short-term rentals since 2016, and I have trained more than 10,000 operators through CashFlow Diary. The pattern I see most often is not a bad property. It is a fine property in a market the buyer never scored — chosen because a ranking said it was hot.
Rules change. Verify every regulatory point on the city or county's own site, and with a local attorney, before you make an offer. This article is educational, not legal or tax advice.
The five criteria that decide a market
1. Regulatory durability. Not "is it legal today" but "will it still be legal in three years, and can I get a permit as a new entrant?" Read the ordinance, the permit portal, the zoning map for your target parcel, and the HOA or deed restrictions. Then read the trend: a city with settled rules that already survived a council fight is safer than a city where the first hearing is next month.
2. Real demand drivers, plural. Ask why guests come and whether they will keep coming. Durable drivers include a large hospital system, a university, a national park or lake, a convention corridor, a military base, or a year-round employer base. Fragile drivers include one festival, one stadium event, or one attraction under new ownership. Two or more independent drivers means a bad month in one segment does not empty your calendar.
3. Supply growth and saturation. Count active competing listings for your exact property type and bedroom count, not the whole metro. Then look at the direction of travel. Supply climbing faster than demand is the quiet killer of both occupancy and rate. Permit counts and residential building permit data give you a read on where new inventory is coming from.
4. Entry price to revenue. This is the yield signal: realistic annual gross revenue divided by all-in purchase price. A modest nightly rate on a cheap house often beats a premium rate on a house that costs three times as much. Compute it the same way in every market or the comparison is meaningless.
5. Your ability to operate it remotely. The market you cannot staff is not your market. Can you find and keep a cleaner, a handyman, and a backup for both? How fast can someone reach the property at 11 p.m.? A market three time zones away with one cleaning company is a different business than one you can drive to.
One more note on the fifth criterion, because it is the one operators skip. Remote operation is a labor question before it is a software question. Rate automation and smart locks help, but neither one strips a bed. Before I score a market above a 3 on operability, I want two cleaners who answer the phone, a handyman who will take a Sunday call, and a plan for the week both are on vacation. If I cannot describe who handles a 9 p.m. lockout, the market is not operable for me yet.
Score each 1 to 5 for every candidate. Regulation is both scored and used as a gate.
How to score a market and weight the result
Use a fixed rubric so two markets scored a month apart are still comparable. Here is the one I use.
Criterion | Weight | Score 1 | Score 3 | Score 5 |
|---|
Regulatory durability | 35% | Ban, moratorium, or cap with no permits available | Rules legal but under active review | Settled ordinance, permits available to new entrants, survived a challenge |
Demand drivers | 20% | One fragile driver | Two drivers, one seasonal | Three or more independent, year-round drivers |
Supply and saturation | 15% | Listing count rising fast, occupancy falling | Supply flat, occupancy flat | Supply constrained by permit cap or geography, occupancy holding |
Entry price to revenue | 20% | Gross revenue under 10% of all-in price | Gross revenue near 15% of all-in price | Gross revenue above 20% of all-in price |
Operability and staffing | 10% | No vetted cleaner, no local backup, hard to reach | One cleaner found, no backup | Two cleaners plus handyman identified, someone on site within an hour |
Multiply each score by its weight, add them, and you have a number out of 5. My own bar: I will not underwrite a property in a market scoring below 3.5 weighted, and I will not proceed at all if regulation scores 1 or 2, no matter how high the total. The revenue bands in the table are thresholds I use for comparison, not a promise of returns — your own numbers, taxes, and financing decide the outcome.
Write the score down with the date and the URLs you checked. Six months later you will not remember why a market scored a 4, and the ordinance may have changed.
Disqualifiers that end the search immediately
Some findings are not a low score — they end the evaluation that day, before you spend another hour on comps.
Disqualifier | How you find it | Why it ends the search |
|---|
Permit moratorium or hard cap with a waitlist | City licensing page or permit portal, including the issued-versus-remaining counts San Diego publishes by tier | You cannot buy your way into a closed list; your exit buyer faces the same wall |
Zoning bars short stays on the target parcel | Zoning map plus the ordinance's permitted-use table | A citywide "legal" answer does not apply to your specific lot |
HOA or deed restriction banning stays under 30 days | CC&Rs and the recorded deed, read before the offer | Private restrictions outlive any friendly city council |
Owner-occupancy or primary-residence requirement you cannot meet | Ordinance definitions of permit types | The permit you need is not available to a non-resident investor |
Single fragile demand driver | Driver list where one item carries the calendar | One closure, one schedule change, and occupancy collapses |
No staffing bench | Two attempts to hire a cleaner and a handyman come back empty | Every turnover becomes your personal emergency |
If a candidate hits any row in that table, stop. The discipline is in walking away early, while it only costs you an afternoon.
The seven-step market selection process
Run every candidate market through the same sequence, in this order. The order matters: the cheapest checks that can kill a market come first.
Step 1 — Build a candidate list from your own constraints
Start with what you can finance, reach, and staff. Five to eight markets is plenty. Constraints first means you never fall for a market you cannot serve.
Step 2 — Run the regulatory gate
Pull the city or county short-term rental ordinance and permit page for each candidate. Note permit types, caps, minimum-night rules, occupancy limits, and whether applications are open — San Diego, for one, publishes licenses issued and licenses remaining by tier, so "closed" is a number you can read instead of a rumor. Check the zoning designation for the neighborhoods you would actually buy in, and note the date you checked. Anything that hits the disqualifier table drops out here.
Step 3 — Map the demand drivers
List every reason a guest books in that market and mark each one durable or fragile. Name the employers, the hospitals, the campuses, the parks. If you cannot name at least two durable drivers, the market scores a 1 or 2 and usually does not survive the next step.
Step 4 — Measure supply and its direction
Count active listings matching your property type and bedroom count. Compare against last year if you have the data, and check residential building permit activity for new inventory. Rising supply against flat demand is a score of 1, whatever the current occupancy says.
Step 5 — Compute entry price to revenue the same way everywhere
For each surviving market, take a realistic nightly rate for your property type, multiply by the occupied nights you would actually book, and divide the result by all-in purchase price including closing, furnishing, and reserves. One formula, every market, no exceptions. Illustration, with the assumptions on the table: a $300,000 all-in house at $180 a night and 210 occupied nights grosses $37,800, which is 12.6% of all-in cost. That is a comparison figure, not a forecast of your profit — operating costs, debt service, and taxes come out of it.
Step 6 — Test operability before you commit
Call two cleaning companies and one handyman in the market. Ask their rates, their turnover capacity on a Sunday, and whether they take new clients. Two live answers is a pass. Silence is a score of 1.
Step 7 — Score, threshold, then underwrite the property
Fill in the rubric, apply the weights, and compare totals across surviving markets. Only then move to the deal itself and underwrite the specific property with your own numbers. A market that clears your bar can still contain plenty of properties that do not.
Who this method is not for
If you want a city named for you so you can buy this month, this is not your method. It takes a few evenings per market, and it will talk you out of places you already like. Some operators would rather move fast and fix problems later; in a market with a permit cap, that fix does not exist.
It also does not suit anyone unwilling to re-check. Regulation is the one criterion that can change between your offer and your closing. I re-read the ordinance the week before funding, every time. Whatever the ordinance says on the day you read it, confirm it locally with counsel — and treat tax questions, including how rental income and depreciation are handled, as a matter for your own CPA.
What the method does give you is a ranking you produced, with the date and sources attached, for the market that exists right now. Two operators using it land on similar shortlists because they are measuring the same five things, and both shortlists stay usable a year later, because criteria do not expire the way lists do.
Want an operator to underwrite your next deal with you? Start with a complimentary one-on-one diagnostic call and we will score your candidate markets and the property together.
Frequently Asked Questions
What makes a good short-term rental market?
A market is worth your money when regulation is settled and permits are open to new entrants, at least two independent demand drivers fill the calendar, supply is not growing faster than demand, annual gross revenue is a healthy share of all-in purchase price, and you can hire and keep a cleaner and a handyman there. Regulation is the gate. If it fails, the other four do not matter.
Where is Airbnb most profitable?
Profit follows the ratio, not the headline nightly rate. A cheaper house with a solid rate and a permit cap holding supply down can return more than an expensive house at a premium rate in a market adding listings every month. Score entry-price-to-revenue and supply direction for the specific markets you can finance and staff, then compare — the answer is different for a buyer with $200,000 than for one with $900,000.
How do I check short-term rental regulations before I buy?
Read four layers, in this order: the city or county ordinance including permit caps and minimum-night rules; the permit portal, to confirm applications are open to your permit type; the zoning designation for the exact parcel; and the HOA or deed restrictions. Then check whether the rules are tightening. Use the municipality's own pages, note the date, and confirm with a local attorney. This is educational, not legal advice.
How many markets should I evaluate at once?
Five to eight. Fewer and you have no basis for comparison; more and the regulatory reading gets skipped, which is the step that protects you. Most candidates drop out at the gate, so a list of six usually leaves two or three worth scoring in full.
Should I buy in the market where I live?
Start there if regulation allows it. Your home market scores highest on the criterion most operators underrate — you can be on site, you already know tradespeople, and you can fix a problem the same day. Go remote when the local ordinance or the price-to-revenue math rules your own city out, not because a list said somewhere else was hot.
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