How to Find Profitable STR Markets: 5-Step Framework (2025)

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. “I saw some of these other cities start to ban or regulate short-term rentals,” he notes. “I knew the good times would not last that long.”

This realization forced him to develop a data-driven system for identifying new markets—a system that has since helped him build a portfolio generating hundreds of thousands in annual net income.

As Gabe emphasizes throughout the podcast: “As with all real estate, finding the right location, finding the right deal is 90% of everything. If you can get a good deal and a good location, then it will solve most problems you’re going to run into.”

Step 1: Target Drivable Markets Within 3-4 Hours of Major Cities

The first filter in Kenny’s system focuses on drive-time accessibility from metropolitan areas.

Why drivable markets matter: Properties within driving distance of major cities demonstrate greater economic resilience than fly-in destinations. When economic conditions tighten, travelers cut flights before they eliminate weekend getaways.

“Markets that are drivable tend to be a little more durable when it comes to the ebbs and flows in the economy,” Kenny explains. “When times are harder, things are more expensive, people cut flying first. Driving becomes the bedrock of less risk and safety.”

Defining Your Target Radius

Kenny recommends identifying markets within a maximum 3-4 hour drive from two or more major metropolitan areas. This might seem like a large radius, but it reflects actual consumer behavior.

“A weekend trip—people will drive a max three to four hours for a weekend trip,” Kenny notes. “Six hours, that’s a little bit far for a weekend trip.”

For example, if you’re analyzing opportunities near Seattle, you’d consider:

Properties accessible from both Seattle and Portland (another major metro)
Destinations like Leavenworth, the Oregon Coast, or Columbia River Gorge
Mountain communities, lake properties, and historic small towns within the 3-4 hour window

This geographic targeting immediately narrows your search from 12,000+ potential markets to a manageable subset with built-in demand drivers.

Pro tip: Focus on areas near national parks, state parks, getaway areas, and tourist attractions. “Every single metropolitan city has some sort of places that people get away to,” Kenny adds.

Step 2: Match Properties to Your Actual Available Capital

The second critical filter is brutally honest budget assessment—and Kenny warns against the most common mistake new STR investors make.

The capital mistake investors make: Overleveraging on the down payment and leaving no funds for furnishings, amenities, and property improvements that create competitive advantages.

“Your budget is dependent upon the actual capital that you have on hand to invest—the cash you have on hand, not what the bank pre-approves you for,” Kenny emphasizes. “We have to invest in amenities, furnishings, and design in order to compete and be ahead.”

Why STR Properties Need Extra Capital

Unlike traditional long-term rentals, short-term rentals compete in a hospitality market where guest experience is everything.

“Short-term rentals are not passive income. It’s all about creating an experience,” Kenny explains. “People want to stay at places that are nicer than their own. So you’ve got to have nice finishes, nice hardware, nice amenities, nice furnishings in your house.”

Budget Allocation Strategy

When Kenny evaluates a potential market, he considers:

Purchase price (using conservative financing, not maximum leverage)
30-40% additional capital for furnishings, amenities, and improvements
Emergency reserves for unexpected maintenance or market softness

For example, with $100,000 in available capital:

You might be pre-approved for a $1 million property with 10% down
But you’d have $0 left for furnishings, improvements, or reserves
Better strategy: Target a $250,000-$350,000 property with 20-30% down
Reserve $30,000-$40,000 for high-quality furnishings and amenities
Keep $20,000+ in reserves

“If you’re leveraging everything on the down payment, you have nothing left over to invest in being a top-performing property in the short-term rental industry,” Kenny warns.

Step 3: Verify Strong Revenue Performance ($100K+ Annually)

The third step validates that actual properties in your target market are generating the revenue you need to hit your return targets.

Revenue validation prevents: Investing in beautiful locations that don’t have sufficient demand, seasonal markets with inadequate year-round performance, or oversaturated markets where competition has driven rates down.

“Are there properties generating the revenue that I’m going to need for this to be a good deal?” Kenny asks. “I look for properties making $100,000 or more. If they’re making that number, that means there are people going there and they’re willing to pay money, and there might be some opportunity.”

How to Research Market Revenue

Kenny recommends several data sources for revenue research:

AirDNA (paid platform with comprehensive STR data)
STR Insights (Kenny’s platform offering free market research tools)
PriceLabs (pricing and revenue analytics)
Rabbu (market analysis and revenue projections)

“You can go in and plug in an address and it will tell you revenue of properties in those areas,” Kenny explains about these platforms.

The Gross Yield Formula

Kenny uses a simple but powerful metric: gross yield or gross ROI of 15-20%.

“If my budget’s $500,000, then I better be seeing properties grossing $100,000 in that market. That’s a 20% ROI,” he explains.

This formula works because:

Operating expenses (excluding mortgage) typically run 40-50% of gross revenue
A 20% gross yield provides cushion for debt service and still delivers strong cash flow
It’s a quick filter that doesn’t require complex underwriting for initial market screening

For his own acquisitions, Kenny targets even higher: “The properties I buy, I’m buying million-dollar-plus properties. They have to be—I have to see properties doing $200,000-$300,000.”

Why Gross Revenue Matters More Than You Think

Unlike traditional rental properties that sell based on comparable sales, Kenny reveals an important distinction: “Short-term rentals are not considered a commercial or separate asset class. They’re considered residential real estate.”

This means you can’t force appreciation through revenue improvements the way you can with commercial properties. “It doesn’t matter how much revenue this short-term rental can make. I can’t sell it based on a cap rate. It can only sell based on residential comps,” Kenny explains.

This reality makes initial market selection even more critical—you need strong cash flow from day one, since you’re building a cash flow machine rather than a value-add appreciation play.

Step 4: Understand Local Regulations and Community Sentiment

Regulation is where Kenny has learned his most expensive lessons—and where he urges investors to do thorough due diligence.

The regulation reality: Over the past five years, hundreds of cities have banned or severely restricted short-term rentals. New York City banned non-owner-occupied STRs two years ago. Seattle, Miami, and dozens of other markets have implemented caps, zoning restrictions, and registration requirements.

“I knew as I saw some of these other cities start to ban or regulate short-term rentals that the good times would not last that long,” Kenny reflects on his early New York investments.

The Two-Part Regulation Check

Kenny’s regulation research involves two critical steps:

1. Official Municipal Research

Call the local planning or zoning department directly
Ask specific questions about STR permits, caps, and requirements
Understand the application process and timeline
Clarify zoning restrictions and occupancy limits

“The first thing I do is I’ll go into ChatGPT and type in, ‘What are the regulations in this market?’ It’s gotten a lot better, more updated,” Kenny shares. “But the number one thing—you need to be willing to pick up the phone and call.”

2. Community Sentiment Assessment

Knock on neighbors’ doors before purchasing
Gauge local attitudes toward vacation rentals
Look for signs of anti-STR activism or community resistance
Assess whether STRs are welcomed or merely tolerated

“I will go knock on my neighbor’s door and say, ‘Hey, I’m going to run this as a short-term rental. Do you have any problems with that?’ If they say yes, I don’t buy the property,” Kenny states firmly.

Why Community Sentiment Trumps Legal Permission

Even in markets where STRs are technically legal, hostile community sentiment creates operational headaches and regulatory risk.

Kenny’s New Orleans hotel investment illustrates this principle: “One of the reasons why I love New Orleans as a hotel investment market is because they hate Airbnbs. A lot of metropolitan areas—New Orleans is a vacation market, but they hate Airbnbs because of the city and their policy.”

Rather than fight the current, Kenny adapted: “What do I do? I don’t go buy an Airbnb in New Orleans and go against the current. I go buy a hotel because that’s what they support.”

When Strict Regulations Create Opportunity

Interestingly, Kenny sometimes seeks out markets with complex regulations—because barriers to entry protect existing operators.

“Some of my properties and some of the deals I have where I got in, the returns are insane from all the hula hoops that I had to jump through,” Kenny reveals. “I had to get an environmental impact report on one of my properties. That’s been a residential home forever.”

The result? “A property I bought for $350,000 that nets $80,000 a year. Net—that’s profit, not gross.”

The lesson: High regulatory barriers deter competition and can create exceptional returns for investors willing to navigate the complexity.

Step 5: Verify Local Resources for Operations

The final step addresses operational reality: short-term rentals require local boots on the ground.

Why local resources matter: You can’t effectively manage STR properties remotely without reliable cleaning crews, maintenance contractors, and quality control systems. Guest reviews make or break STR businesses, and operational failures directly impact your revenue.

“With short-term rentals, we’re not going to clean the properties ourselves. You shouldn’t clean the properties yourself,” Kenny emphasizes. “You’ve got to have local boots on the ground that know what they’re doing and have the same level of standards—reviews make or break this business.”

The Sister Cleaner Problem

Kenny shares a cautionary tale: “If you go in a market and you hire a cleaner and you fire her and the only other cleaner available is her sister, that’s a problem.”

Before committing to a market, verify:

Multiple cleaning companies or independent cleaners available
Responsive maintenance contractors for plumbing, electrical, HVAC
Local property managers (even if you self-manage initially)
Quality control resources who can inspect properties between guests
Emergency response capability for guest issues after hours

“Local teams are really what makes or breaks this business,” Kenny concludes. “When something happens, you’re not going to be there to fix it or replace it. You’re going to have to rely on someone else.”

Finding the Right Agents

Within the resources category, real estate agents deserve special attention. Kenny’s deal-finding strategy relies heavily on agent partnerships.

“The secret is having good agents who understand short-term rentals,” Kenny explains. “When I call an agent: Do they own short-term rentals? Do they manage short-term rentals? What’s their experience selling short-term rentals?”

Bad agents focus on irrelevant factors: “I don’t care if it’s in a good school district or not. That’s not why I’m buying the property.”

Great agents understand STR-specific factors:

Visibility (can the property be seen from the road?)
View quality and photogenic angles
Proximity to attractions and activities
Neighborhood character and parking availability
Local regulation compliance

“Some of the best deals I’ve bought have been on the market for over 100 days. They’re just not positioned correctly. The photos are terrible. The listing agent was a complete dunce,” Kenny reveals. “If you have an agent who’s like, ‘I’ve been to this property, it’s actually really nice, it’s in a really cool area, it’s got amazing views I can take photos of’—those relationships pay off.”

The Picture-Perfect Principle: Why Design and Photography Matter

Once you’ve identified the right market and acquired the right property, execution becomes everything. Gabe articulates a principle every STR investor should understand:

“What I would say is it has to be picture perfect. When I look through Airbnbs, if the pictures don’t look nice, I just don’t care. I’m on to the next one. If the furnishings aren’t nice, if the exterior isn’t nice, I’m not even looking at it.”

This reality drives Kenny’s emphasis on reserving capital for furnishings and design. But it goes deeper than aesthetics—it’s about targeting the right guest avatar.

The Niche Targeting Strategy

Kenny credits Mike Michalowicz’s book “The Pumpkin Plan” with transforming his STR business from good to exceptional.

“When you market to everyone, you’re marketing to no one. The more specific and targeted you can get, there’s more money to be made,” Kenny explains, referencing the book’s core principle.

The book uses pumpkin farming as a metaphor: championship pumpkin growers plant many seeds, then identify the highest-potential pumpkins and eliminate the rest, focusing all resources on the winners.

Applied to STRs, this means:

Identifying your ideal guest demographic
Designing every element specifically for them
Creating amenities that appeal to that demographic
Ignoring everyone else

Case Study: The Bourbon Trail Property

Kenny’s highest-performing property demonstrates this principle perfectly.

Property details:

Location: Kentucky Bourbon Trail
Purchase price: $1,000,000
Investment: $450,000 (including improvements)
Annual net income: $175,000
Bedrooms: 9
Bathrooms: 7

Target guest: Bourbon enthusiasts, typically older adults

Design choices aligned to target:

Two hot tubs (not one)
Darker, moody color palette
All king beds (no bunk beds)
Adult-friendly games and entertainment
Sophisticated finishes

“Our bourbon trail property—we target who’s going to the bourbon trail. Not families, right? It’s people going to drink bourbon,” Kenny explains. “What are our amenities? We have two hot tubs, not one. It’s adult-friendly games. The theming, the design—it’s darker colors, it’s moody. There’s more king beds. There’s no bunk beds in that property.”

Case Study: The Dallas Family Property

By contrast, Kenny’s Dallas property targets families:

Multiple bunk beds
Bright, cheerful design
Kid-friendly amenities and games
Safety features for children
Family-oriented layout

“Our Dallas property is family friendly. There’s a ton of bunk beds because we know we’re going to host kids and that’s what families want,” Kenny notes.

“When that clicked for me, that’s when I went from finding properties that net $50K to properties that net well over $100,000 a year,” Kenny reflects on implementing the niche strategy.

Managing Guest Reviews: The 4.95+ Strategy

In the STR world, review scores aren’t just important—they’re existential. Kenny maintains exceptionally high standards, targeting 4.95+ average ratings.

“We want a 4.95 or more. We have a really high standard,” Kenny states.

The Rating Scale Reality

Many guests misunderstand Airbnb’s rating system, assuming it works like hotel stars. Kenny educates them proactively.

“A lot of people in Airbnb think a five-star review means it’s a five-star hotel. It’s not the same rating system,” Kenny explains. “A five star is great. A four star is bad. That’s how drastic it is.”

Getting a four-star review with a comment saying “great stay” is actually a problem: “I am pissed off because there had to be something wrong for it to be a four star. I get penalized if it’s a four-star. It has to be a five.”

The Review Priming System

Kenny’s team uses a multi-touchpoint communication strategy to prime guests for five-star reviews:

Booking confirmation: “Thank you for booking our place. We’re excited that you’re going to come stay and we’re going to provide you a five-star stay.”
Pre-check-in message: “We’re excited to host you and have a five-star stay.”
In-property reminders: Stickers, magnets, and printed materials explaining the rating system
Post-stay review request: Direct ask for the five-star review

“We’re literally priming them. When we ask them, it’s not even awkward. They know it’s coming,” Kenny explains.

Rapid Response to Issues

The second component of the review strategy is operational excellence with rapid problem resolution.

“Making sure if anything is wrong, being able to fix it or replace it fast,” Kenny emphasizes. “We’re really, really good at that.”

This requires:

24/7 guest communication capability
Pre-vetted contractor relationships
Backup equipment and supplies
Empowered local team to solve problems immediately

“Inevitably a four-star does come in and you can’t be emotional about it. You just gotta dust yourself off and keep going,” Kenny acknowledges. But the system minimizes these occurrences.

Short-Term Rentals vs. Boutique Hotels: Understanding the Difference

As Kenny’s portfolio matured, he began diversifying into boutique hotels—a natural extension that many successful STR investors eventually consider. But the two asset classes serve fundamentally different purposes.

Kenny’s Hotel Definition

“I define boutique hotels essentially as fancy motels,” Kenny says with a laugh. “I think boutique hotels is a trendy word for a renovated motel because that’s pretty much what people do. They take motels and turn them into nicer motels.”

While Kenny acknowledges this is somewhat tongue-in-cheek (and hotel purists will note technical differences), the functional point stands: boutique hotels occupy the middle ground between traditional hotels and vacation rentals.

The Critical Distinction: Valuation Models

The most important difference isn’t operational—it’s financial.

Short-Term Rentals:

Valued as residential real estate
Sale price based on comparable residential sales
Cannot be sold based on cap rate or income approach
Revenue improvements don’t directly increase sale value
Strategy: Maximize cash flow

Boutique Hotels:

Valued as commercial real estate
Sale price based on net operating income and cap rates
Revenue and NOI improvements directly increase property value
Strategy: Force appreciation through operational improvements

“Short-term rentals are not considered a commercial or separate asset class. They’re considered residential real estate,” Kenny explains. “It doesn’t matter how much revenue this short-term rental can make. I can’t sell it based on a cap rate. It can only sell based on residential comps.”

“Whereas a hotel, if I force revenue higher or improve that hotel and make it produce higher and give it a higher cap rate, I can absolutely change the worth and the value of that property,” he continues.

Case Study: The New Orleans Hotel

Kenny’s New Orleans boutique hotel illustrates the power of commercial valuation:

Purchase details:

Purchase price: $1.4 million
Renovation investment: $800,000
Annual net income: $70,000

At first glance, this looks inferior to Kenny’s $1 million Kentucky property netting $175,000. Why would he make this investment?

The appreciation play:

Post-renovation appraised value: $4 million
Forced appreciation: $1.6 million ($4M value minus $2.2M all-in cost)
Cash-out refinance: ~$1 million returned to Kenny
Timeline: 2 years

“It’s about the appreciation. I could care less about the cashflow,” Kenny explains. “It was about the million-dollar check that was written to me at the reposition.”

“I can’t do that in cashflow in two years,” he adds, comparing to STR cash flow timelines.

Which Strategy to Choose?

Kenny’s portfolio approach incorporates both:

Choose STRs when:

You want immediate, strong cash flow
You’re building passive income streams
You can identify undervalued markets or properties
Regulatory barriers protect your position
You excel at hospitality operations

Choose boutique hotels when:

You want to build equity through forced appreciation
You can execute value-add renovations
You have operational expertise to improve NOI
You’re comfortable with commercial financing
You can handle more complex management (staff, systems, etc.)

“Short-term rentals are all about cashflow and hotels are all about appreciation,” Kenny summarizes. “I’m really good at making short-term rentals [profitable], which we’ve talked about. I’m like, I kind of want to be rewarded for that in other ways.”

Learning from Failures: Kenny’s Biggest Mistakes

Kenny openly shares two costly mistakes that shaped his current due diligence process.

Mistake #1: The Arizona Land Deal

“I’ve spent thousands of dollars. I bought land in the middle of the desert in the middle of nowhere [Arizona] and I can’t STR. I can’t do anything with it. I just own land because I didn’t call the county,” Kenny admits.

The lesson: “I waited to do it. I was like, ‘Oh, it’ll be fine. They won’t—you know, it’s not a big deal. I heard it’s fine.’ Pick up the phone. Don’t take someone else’s word for something. Don’t take ChatGPT’s word, even though I said I use ChatGPT.”

Mistake #2: The Buffalo Parking Disaster

Kenny’s second major mistake involved a beautiful downtown Buffalo property that seemed perfect on paper.

The problem: No dedicated parking for a 16-guest property.

“There was no parking and I didn’t think about that. I was like, ‘Oh, we’re going to host 16 people,’ and there’s only on-street parking. So what happens when all the parking is taken? There’s nothing reserved,” Kenny explains.

The result: “Got terrible guest reviews, really hurt our business. What were we thinking? We didn’t have the guest avatar in mind.”

The property was quickly sold at a loss.

The lesson: Always consider the guest experience holistically. Parking might seem mundane, but for a large-group property, it’s essential. “Who and why are they coming? What things are they going to want?” Kenny asks now before every purchase.

Gabe adds his perspective: “Parking is something that I would not think about buying a short-term rental, but it makes a lot of sense. If you’re packing that place tight with guests, then they need to be able to get there and park their car.”

Additional Due Diligence: What the Pros Check

Beyond Kenny’s five-step framework, both he and Gabe emphasize additional due diligence steps that separate successful investors from those who struggle.

Call the Police Department

Gabe shares his own due diligence process: “What I specifically do is I call the police station. I ask them for what kind of calls you get in this area. Is it prone to property crime? That kind of stuff.”

This simple call can reveal:

Neighborhood safety issues not visible in crime statistics
Seasonal problems (spring break chaos, event-related disturbances)
Local attitudes toward vacation rentals
Whether STR guests create police calls

Talk to Property Managers

Even if you plan to self-manage, calling local property management companies provides valuable intelligence:

What they charge (indicates market norms)
Whether they’re accepting new clients (indicates market health)
What they see as challenges in the market
Their perspective on regulations and enforcement

Visit the City Planning Department

Beyond calling about regulations, an in-person visit to planning or zoning offices can reveal:

Pending regulation changes
Application backlogs or processing times
Official attitudes toward STRs
Unwritten expectations or requirements

“Call the cities, call property managers, call the city development, see what they want in the area that you’re buying,” Gabe advises. “You’re going straight to the source and you’re getting it from the people who are actually making the regulations.”

Capital Reserves: The One Lesson Repeated Across Every Episode

Gabe notes that one lesson appears in nearly every podcast episode, and Kenny’s experience confirms it again.

“Everybody at the end of the show, I’ll ask what’s the biggest lesson you learned. And that specific lesson has been repeated so many times across the shows: you need to go into a deal with more capital—cash on hand—than you think you’re actually going to need, because things always go wrong,” Gabe explains.

Kenny agrees enthusiastically: “Story of my life.”

The principle applies universally:

Renovation budgets run over
Furnishings cost more than estimated
Unexpected repairs emerge during operations
Market softness requires rate discounting
Marketing and initial occupancy ramp-up takes longer than projected

“You always need to fix something. And cash does solve all problems in real estate. Cash will solve the problem. I can’t think of a problem that won’t be solved by cash,” Gabe adds.

For STR investors specifically, Kenny recommends:

Minimum 30% reserve beyond down payment and closing costs
Furnishing budget of $25,000-$50,000 for a typical 3-4 bedroom property
Operating reserves of 3-6 months of expected expenses
Marketing budget for professional photography, initial Airbnb ads, and listing optimization

Using AI and Data Tools for Market Research

Kenny leverages modern technology extensively in his market research, though he cautions against over-reliance.

ChatGPT for Initial Research

“The first thing I do, believe it or not, I’ll go into ChatGPT and type in, ‘What are the regulations in this market?’ And it’s gotten a lot better. It’s a lot more updated,” Kenny shares.

ChatGPT (or alternatives like Perplexity) excel at:

Summarizing local regulations quickly
Identifying tourism drivers and attractions
Providing seasonality insights
Highlighting compression events (festivals, conferences)
Aggregating public information

Gabe adds his experience: “AI, especially I like to use Perplexity for this one, it will scan the municipality’s website and it’ll tell you where development is—if there’s any big projects coming on.”

Data Platforms for Revenue Research

Kenny recommends several platforms for validating market revenue:

AirDNA: Industry-standard paid platform with comprehensive data
STR Insights: Kenny’s free platform for market analysis
PriceLabs: Revenue projections and dynamic pricing
Rabbu: Market analysis and investment modeling

“You can go in and plug in an address and it will tell you revenue of properties in those areas,” Kenny explains.

The Limits of AI and Data

Despite his data background, Kenny emphasizes that tools provide starting points, not final answers.

“The number one thing—you need to be willing to pick up the phone and call,” Kenny insists. “I always call. I always before—and I’ll call municipalities. I’ll talk to someone. I’ll learn. I’ll get the understanding and the sentiment and know what the rules are.”

Data tools can’t capture:

Upcoming regulation changes
Community sentiment and political trends
Enforcement reality versus written rules
Local market dynamics and seasonal quirks
Quality of local service providers

“Don’t take ChatGPT’s word, even though I said I use ChatGPT. Pick up the phone,” Kenny emphasizes.

The Northeast Opportunity: Kenny’s Favorite Market Region

When Gabe asks Kenny to identify his single most exciting market region, his answer surprises many listeners.

“I love the New York Metro area—New York, Philadelphia, Boston. They’re all within a two-hour, three-hour driving distance of each other and all of those markets around there just access to—I think it’s over 13-15 million people that can access these places within three to four hours,” Kenny explains.

“There’s just so much opportunity there, but people are afraid of it because they see, they hear taxes, or they think of regulation or whatever. And I’m just like, look for those opportunities where everyone else is running from.”

Why High-Barrier Markets Create Opportunity

Kenny’s contrarian approach focuses on markets other investors avoid:

High property taxes (New York, New Jersey)
Complex regulations (permit requirements, inspections)
Environmental restrictions (Adirondacks, Catskills)
High up-front costs (renovation requirements, impact studies)

“Some of my properties and some of the deals I have where I got in—the returns are insane from all the hula hoops that I had to jump through,” Kenny reflects.

His $350,000 New York property that nets $80,000 annually required an environmental impact report “on a property that’s been a residential home forever.”

“I will fill out as many environmental impact reports as you want me to do if I can net those kind of numbers,” Kenny jokes.

The Self-Storage Parallel

Gabe draws a parallel to self-storage investing: “Somebody I know who’s in self storage actually looks for cities that are hard to build in because he says the harder it is, the less competition you have for building.”

The principle applies across real estate: barriers to entry protect existing operators and justify premium pricing. Cities with three-year permit processes naturally limit supply, supporting higher occupancy and rates for those willing to navigate the complexity.

Final Thoughts: Building a Sustainable STR Business

Kenny’s journey from data analyst to multi-state STR investor to boutique hotel owner illustrates the evolution many successful real estate entrepreneurs follow.

Key takeaways for aspiring STR investors:

Start with data, finish with relationships: Use data to identify promising markets, but rely on local knowledge and relationships to execute successfully.
Budget for excellence: Reserve significant capital for furnishings, design, and amenities. Mediocre properties generate mediocre returns.
Understand you’re in hospitality: Short-term rentals aren’t passive rental properties—they’re experiential hospitality businesses requiring active management and optimization.
Respect regulations and community: Fighting against hostile markets wastes energy. Find markets where your business is welcomed, or adapt your strategy (like buying hotels instead of STRs).
Target specific guests: The niche strategy (inspired by “The Pumpkin Plan”) separates good properties from exceptional ones. Design everything for your ideal guest avatar.
Maintain obsessive review standards: In the STR world, anything below a 4.95 rating is problematic. Prime guests for five-star reviews and solve problems instantly.
Think beyond STRs: As you master STR operations, consider boutique hotels for appreciation plays and commercial valuation benefits.
Do the due diligence others skip: Call municipalities, knock on neighbors’ doors, verify local resources. The calls you don’t make cost more than the time they take.

As Kenny reflects on his biggest lesson: “Don’t be afraid to pick up the phone and call people, especially cities or municipalities about the rules and regulations. I’ve had that burn me twice and it was just idiotic.”

For real estate investors looking to enter the short-term rental space, Kenny’s five-step framework provides a proven roadmap for identifying markets that deliver exceptional returns while avoiding the regulatory and operational pitfalls that derail less systematic approaches.

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