How Do You Find Profitable Short-Term Rental Markets in 2025?
Finding profitable short-term rental (STR) markets requires more than gut instinct—it demands a data-driven approach that analyzes 12,000+ potential markets across the United States. With cities increasingly regulating Airbnb properties and competition intensifying, investors need a systematic framework to identify locations that deliver strong returns while maintaining regulatory compliance.
In this episode of The Real Estate Investing Club podcast, host Gabe Petersen sits down with Kenny Bedwell, founder of STR Insights and veteran short-term rental investor with properties spanning New York, Kentucky, North Carolina, Texas, Arizona, and Louisiana. Kenny shares his battle-tested five-step process for finding markets that consistently generate six-figure annual revenues.
Quick Answer: The 5-Step Framework for Finding STR Markets
To find profitable short-term rental markets, focus on properties within 3-4 hours of major metropolitan areas, ensure they fit your available capital budget, verify properties are generating $100,000+ annually, confirm favorable local regulations and community sentiment, and identify reliable local resources for cleaning and maintenance. This systematic approach narrows 12,000+ potential markets to high-performing opportunities.
Why Location Selection Is 90% of Short-Term Rental Success
Kenny Bedwell didn’t start as a short-term rental guru. He began as a data analyst at Citibank, working in the equities market before purchasing his first property—a house hack where he lived in one unit and rented the other as an Airbnb.
“The thing I found interesting about that investment was we were making three times what we could have made as a long-term rental,” Kenny explains. “And so that got my wife and I were like, Holy crap, we need to do more of these.”
But as cities like New York began banning or heavily regulating STRs, Kenny realized he couldn’t rely solely on markets he knew personally. The short-term rental industry has experienced explosive growth, with the U.S. market expanding to more than 2.4 million STR listings in 2024, representing 1.8 million unique rental properties. However, this growth has prompted increasing regulatory scrutiny across major metropolitan areas.
According to research from the National Bureau of Economic Research, when short-term rental regulations were introduced in Chicago, Airbnb listings fell by 16 percent. Understanding these regulatory dynamics is critical before deploying capital into any market.
Step 1: Identify Markets Within 3-4 Hours of Major Metro Areas
The first filter in Kenny’s framework focuses on geographic proximity to population centers. This isn’t arbitrary—it’s rooted in traveler behavior and booking patterns.
“We want to be within driving distance of a metro, right? So we’re looking three to four hours away from a major metro area,” Kenny explains. “The reason being is, people don’t want to fly somewhere to go on a long weekend.”
This strategy capitalizes on what the industry calls “drivable destinations”—locations that urban and suburban residents can reach for weekend getaways without the hassle and expense of air travel. Properties in these markets benefit from consistent weekend bookings throughout the year, not just during peak vacation seasons.
The drivable destination advantage becomes even more pronounced when you consider the broader vacation rental market trends. The global vacation rental market was valued at $89.32 billion in 2023 and is projected to reach $119.0 billion by 2030, growing at a CAGR of 3.7%. Within this growth, properties positioned near major metro areas consistently outperform remote locations due to higher occupancy rates and more diverse booking patterns.
Kenny uses specific examples to illustrate this principle: “So if you’re in the Tampa Bay area, you’re going to look in North Georgia, you’re going to look in North Carolina, Tennessee, and then you can also look at beach markets that are within that three to four hour radius.”
For investors analyzing markets systematically, AI-powered market research tools can dramatically accelerate the process of identifying these drivable destination opportunities.
Step 2: Align Investment with Your Available Capital
Once you’ve identified geographically promising regions, the second step requires honest financial assessment. Kenny emphasizes that this isn’t about what you wish you could spend—it’s about what capital you actually have access to right now.
“You need to figure out what’s your budget, right? What can you realistically buy today? Not what you hope to buy in six months or a year, but what can you buy today?” Kenny asks.
This step prevents the common investor mistake of falling in love with properties that require financing structures or partnership arrangements that don’t yet exist. It keeps your market search grounded in executable opportunities.
Kenny breaks down the capital requirements clearly: “If you have $100,000 liquid today, then you’re going to be able to buy around a $350,000 to $400,000 property because you’re going to put about 25% down. So you need around $100K for that.”
This calculation assumes traditional financing, which typically requires 25-30% down payment for investment properties. However, some investors leverage creative financing strategies including seller financing, partnerships, or private capital to expand their purchasing power.
Understanding your true capital position also means accounting for reserves. Short-term rentals require furnishings, initial marketing, professional photography, and operational capital to cover gaps between bookings during the first few months. A common mistake is allocating 100% of available capital to the down payment, leaving nothing for the crucial setup and stabilization phase.
Step 3: Verify Properties Can Generate $100K+ Annually
This is where Kenny’s data analyst background becomes invaluable. He doesn’t rely on optimistic projections or seller promises—he demands verified performance data.
“We’re looking for properties that can make six figures, right? So properties that can net over $100,000 a year,” Kenny states. “And the reason we use that benchmark is because if a property is making six figures, it means there’s enough meat on the bone to weather storms.”
The $100K threshold isn’t arbitrary. It provides sufficient cash flow to cover mortgage payments, property management fees, maintenance, insurance, property taxes, and still deliver meaningful returns to the investor. Properties generating less than this amount often leave investors in precarious positions where a few slow months can turn a promising investment into a cash drain.
Kenny uses AirDNA, a leading short-term rental data analytics platform, to verify market performance: “We’ll go on to AirDNA and we will look at, are there properties in this market that are currently making six figures? And we want to see multiple properties, not just one.”
This verification step is critical because it proves market viability. If multiple properties are consistently hitting six-figure revenues, you have evidence of sustainable demand rather than a one-off success story. According to the 2024 STR Benchmark Report, documented nights for large and medium cities averaged between 24-32 nights annually, though this varies significantly by market.
The global short-term vacation rental market was valued at $134.51 billion in 2024 and is projected to reach $256.31 billion by 2030, growing at a CAGR of 11.4%. However, this aggregate growth masks significant variations between markets, making property-level analysis essential.
For investors building diversified real estate portfolios, understanding how short-term rentals fit alongside other asset classes like mobile home parks or self-storage facilities provides important context for capital allocation decisions.
Step 4: Confirm Favorable Regulations and Community Sentiment
The regulatory environment can make or break your short-term rental investment. Kenny considers this step so important that unfavorable regulations immediately disqualify otherwise perfect markets.
“We’re then going to look at the regulations and we’re going to look at the community sentiment,” Kenny explains. “If the regulations are terrible or the community is very anti-short-term rental, even if the market’s making a lot of money, we don’t want to invest there because the risk is too high that the rug gets pulled out from under you.”
The regulatory landscape for short-term rentals has become increasingly restrictive. In 2025, municipal governments worldwide are implementing standardized rules aimed at managing STR impact on housing affordability and neighborhood character. These regulations often include strict licensing requirements, caps on rental days per year, and zoning restrictions.
Data from the Congressional Research Service indicates that STRs represent roughly 1.6% of total housing stock in the United States, yet they generate disproportionate regulatory attention due to concentrated impacts in specific neighborhoods and resort communities.
Kenny provides concrete examples of regulatory red flags: “Some places have very strict regulations. For example, in some counties in Georgia, you can only rent your property out for 90 days a year. That’s not a viable business model for us.”
Beyond formal regulations, community sentiment matters. Areas where residents are actively organizing against STRs or where local governments are considering new restrictions present significant risk. Even if current regulations are favorable, shifting political winds can dramatically alter the investment landscape.
According to analysis of Airbnb data, over the 12-month period following New York’s LL18 enforcement, guest-nights stayed would have been 238-466% higher without stringent regulations. Similar patterns emerged in Boston, New Orleans, and Philadelphia, where enforcement of STR regulations led to sharp declines in rental activity.
Investors should research local ordinances, attend city council meetings, and connect with existing short-term rental operators to gauge the true regulatory environment. Some markets that appear favorable on paper may have enforcement practices that create operational headaches.
Step 5: Secure Reliable Local Resources and Infrastructure
The final step addresses operational feasibility. Even the most profitable market with perfect regulations will fail if you can’t execute day-to-day operations effectively.
“The last thing we look at is, can we find good resources on the ground? Cleaning companies, handymen, property managers if you want to hire one,” Kenny notes. “If you can’t find these resources, it doesn’t matter how good the market looks on paper.”
Short-term rentals demand significantly more operational intensity than traditional long-term rental properties. Each guest turnover requires professional cleaning, inspection, and often minor repairs or replacements. Properties typically turn over 50-100+ times annually, compared to once a year or less for long-term rentals.
The quality of your local team directly impacts guest reviews, which drive future bookings and pricing power. A single negative review about cleanliness can cost thousands in lost revenue as your property drops in search rankings on booking platforms.
Kenny emphasizes vetting these resources thoroughly: “We’ll call cleaning companies, ask about their rates, their availability, their experience with short-term rentals. We’ll do the same with handymen and property managers.”
Many successful STR investors leverage virtual assistants to handle guest communication, booking management, and operational coordination, while relying on local teams for physical property needs. This hybrid approach provides scalability while maintaining quality control.
The importance of operational infrastructure extends to emergency response capabilities. When a guest calls at 2 AM about a broken HVAC system in July, you need reliable contractors who will respond promptly. Building these relationships before purchasing ensures you’re not scrambling to find resources during a crisis.
How STR Insights Helps Investors Navigate Market Selection
Kenny’s systematic approach led him to create STR Insights, a platform designed to streamline the market selection process for other investors.
“What we realized was we had built this really good system for ourselves, and there were a lot of other people who wanted to invest in short-term rentals but were completely overwhelmed by trying to figure out where to invest,” Kenny explains.
The platform aggregates data from multiple sources and applies Kenny’s five-step framework automatically, allowing investors to filter 12,000+ potential markets down to those meeting their specific criteria. Users input their capital budget, preferred geographic regions, and minimum revenue requirements, and the system identifies qualifying markets.
For investors evaluating multiple real estate strategies, understanding how short-term rentals compare to other commercial real estate opportunities helps inform optimal capital allocation across a diversified portfolio.
Common Mistakes STR Investors Make in Market Selection
Through coaching hundreds of investors, Kenny has identified recurring mistakes that derail otherwise promising STR investments:
Falling for Beauty Over Data: Many investors choose markets based on personal preference—places they’d enjoy visiting—rather than data-driven analysis. “Just because you love visiting Napa Valley doesn’t mean it’s a good STR market,” Kenny cautions. The best markets for investors are often secondary destinations with strong fundamentals rather than glamorous primary vacation spots with high competition and saturated supply.
Ignoring Seasonality: Some markets produce impressive summer revenues but go nearly dark in winter, creating dangerous cash flow gaps. Kenny advises analyzing month-by-month performance data to understand seasonal variations. Markets with year-round demand provide more stable, predictable returns than highly seasonal destinations.
Underestimating Regulatory Risk: Investors sometimes dismiss regulatory concerns, assuming current rules will remain favorable indefinitely. “We’ve seen investors buy in markets where the regulations looked okay, then six months later the city implements strict new rules that essentially kill the business model,” Kenny warns. Building a margin of safety by choosing markets with established, STR-friendly regulations provides crucial downside protection.
Skipping the Resource Verification Step: The temptation to rely on online booking platforms and “figure out” operations later proves costly. Without reliable cleaning and maintenance partners, properties quickly accumulate negative reviews that take months to overcome. “You can’t build a successful STR business without boots on the ground who care about your property,” Kenny emphasizes.
The Future of Short-Term Rental Investing
Despite regulatory headwinds in some markets, Kenny remains bullish on the asset class’s long-term prospects. The fundamental driver—consumer preference for unique, home-like accommodations over generic hotel rooms—continues strengthening.
According to industry data, the U.S. short-term vacation rental market is expected to grow at a CAGR of 10.6% over the forecast period. This growth is driven by changing consumer preferences, advancements in technology, and evolving travel patterns that favor experiential accommodations.
Recent data from Key Data’s Q2 2025 Index shows that U.S. short-term rentals outperformed hotels across every region, achieving an average revenue per available rental (RevPAR) advantage of nine percentage points over hotels. This performance advantage demonstrates continued resilience despite shorter booking windows and inflationary pressures.
“The investors who will succeed long-term are those who treat this as a real business, not a side hustle,” Kenny predicts. “They do the market research, they understand the numbers, they build systems, and they stay on top of regulatory changes.”
For investors considering short-term rentals as part of a broader commercial real estate portfolio, the asset class offers compelling advantages: lower capital requirements than multifamily or industrial properties, faster time to cash flow, and higher returns when executed properly. However, it also demands more active management than other passive income real estate strategies.
Taking Action: Your Next Steps
If Kenny’s framework resonates with you and you’re ready to explore short-term rental investing, here’s how to begin:
1. Define Your Capital Reality: Calculate exactly how much liquid capital you have available today, accounting for down payment, furnishing costs, and 3-6 months of operating reserves.
2. Identify Target Metro Areas: List major metropolitan areas within your preferred region. For each metro, map out destinations 3-4 hours away that could serve as weekend getaway locations.
3. Research Preliminary Data: Use platforms like AirDNA to identify markets where multiple properties consistently generate $100K+ annually. Create a shortlist of 5-10 markets for deeper investigation.
4. Investigate Regulations: For each shortlist market, research local STR ordinances, licensing requirements, and enforcement practices. Eliminate markets with prohibitive regulations or strong anti-STR sentiment.
5. Verify Operational Resources: Contact cleaning companies, property managers, and handymen in remaining markets. Assess availability, pricing, and STR experience.
6. Visit Shortlist Markets: Before making offers, visit your top 2-3 markets personally. Drive neighborhoods, assess property conditions, meet potential service providers, and develop a ground-level understanding of each market’s dynamics.
For investors pursuing off-market real estate deals or exploring alternative strategies like real estate development, the systematic approach Kenny demonstrates for STR market selection applies equally to other property types.
Final Thoughts: Data Over Emotion
The short-term rental market offers exceptional opportunities for investors who approach it strategically. Kenny Bedwell’s five-step framework provides a replicable system that removes guesswork and emotion from market selection.
“The biggest advantage you can give yourself is being unemotional about where you invest,” Kenny concludes. “Let the data tell you where to put your money, not your personal preferences.”
Whether you’re deploying capital into short-term rentals as a standalone strategy or as part of a diversified approach that includes mobile home parks, traditional rentals, or limited partner investments, the principle remains constant: systematic, data-driven analysis beats intuition every time.
The investors who will thrive in the evolving short-term rental landscape are those who commit to rigorous market selection, operational excellence, and continuous adaptation to regulatory changes. By following Kenny’s proven framework, you position yourself to find markets that deliver consistent six-figure returns while minimizing the risks that derail unprepared investors.
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