Buying a short term rental is not that different from buying any other piece of real estate. You find a market, get financing, find the right property, close on it, and set it up. But the order you do things in matters, and the details that matter are different from what most people expect.
We have helped over 5,000 investors buy short term rentals in more than 20 vacation markets. After being involved in over $3.5 billion in short term rental transactions, the patterns are pretty clear. The investors who do well tend to follow a similar process. The ones who struggle tend to skip the same steps. This is the process that works.
Choose Your Market First
This is the decision that matters most. More than the property. More than the price. More than the interest rate. More than the deal you found on Zillow at two in the morning.
A solid property in a weak market will underperform. A mediocre property in the right market will usually do fine. We’ve watched this play out thousands of times and it’s not even close. Market selection is not one of the steps. It’s the step.
What makes a strong short term rental market? A few things that tend to go together.
Consistent tourism demand across more than one season. Not just summer. Not just ski season. Markets that draw visitors in spring, summer, fall, and at least parts of winter produce more reliable annual income and smoother cash flow. When you’re dependent on one three-month window, a bad weather week or a slow booking period can wreck your year.
Drive-to accessibility from major metro areas. The strongest short term rental markets in the country are within a four to six hour drive of large population centers. Families and weekend travelers drive more than they fly, especially for vacation rentals. The Smoky Mountains pull from Atlanta, Charlotte, Nashville, and the entire Midwest. The Gulf Coast pulls from the entire Southeast. Broken Bow pulls from Dallas and Oklahoma City. This drive-to demand is more consistent and more recession-resistant than fly-to tourism.
Clear, established regulations that aren’t shifting every year. Some cities are actively hostile to short term rentals. Others have had them for decades and have clear permitting processes that everyone understands. Buy in the second category. When we help investors choose a market, regulatory stability is one of the first things we look at. A great deal in a market that might ban short term rentals next year is not a great deal.
A proven revenue history that goes back well before Airbnb existed. The best vacation rental markets were vacation rental markets long before any platform came along. Gatlinburg had cabin rentals for decades. Destin had beach condos renting weekly before most people had email. That kind of track record tells you the demand is structural, not trend-driven.
And a vendor network that actually supports remote owners. Cleaners, handymen, locksmiths, HVAC techs, property managers. These aren’t optional. They’re the infrastructure that makes remote ownership work. Established vacation markets have deep vendor pools because the short term rental industry has been operating there for years. Newer or unproven markets often don’t, and that’s when things get hard.
Markets we work in that check all of those boxes include the Smoky Mountains in Tennessee, which is the most visited national park in the country and one of the strongest cabin rental markets anywhere. The Emerald Coast of Florida, which includes Destin, 30A, and Panama City Beach. Gulf Shores and Orange Beach in Alabama. Blue Ridge and the North Georgia Mountains. Broken Bow, Oklahoma. Orlando and Kissimmee. Scottsdale. And several others. You can see the full list with details on each at https://theshorttermshop.com/the-best-markets-for-short-term-rental-investing/.
Orlando and Kissimmee deserve a special mention because this market gets unfairly dismissed. For years people have called it “saturated,” and there’s a grain of truth to that — a lot of investors bought at the 2021 highs and have since cycled out, many of them selling for less than they paid. But that cycle has actually created one of the best buying environments we’ve seen in this market. Inventory is high, which means plenty of buyer choice. Prices have come down significantly from the peak. And the one thing that will never change is that Walt Disney World draws 54 million visitors a year. That demand is structural. Here’s something most people don’t think about: there are only four resorts on Disney property that offer accommodations for more than four people, and they’re luxury priced. So the moment you have a third kid, or you’re traveling with another family, a vacation rental becomes almost necessary. That’s not a trend. That’s math.
Markets where we see investors run into trouble tend to be cities with evolving or restrictive regulations. Nashville. Many Colorado ski towns. Parts of Austin. Most major urban cores. The data might look fine in a spreadsheet, but the regulatory risk makes them unreliable long term. We’ve seen investors buy properties that were legal to operate as short term rentals at the time of purchase and then had the rules change on them within a year. That’s a risk you can avoid entirely by buying in the right market from the start.
Get Your Financing Sorted Before You Shop
Don’t start browsing listings until you actually know what you can buy. This sounds obvious. Most people skip it anyway. They find a property they love, then scramble to figure out financing, then find out they can’t close on what they wanted. Start with the money.
The most common loan product for short term rental investors in 2026 is a DSCR loan, which stands for Debt Service Coverage Ratio. These loans qualify you based on the property’s projected rental income rather than your personal W-2 or tax return income. That makes them especially useful for self-employed investors, business owners, or anyone who already owns multiple properties and has a complicated income picture.
Typical DSCR loan terms right now look like 20 to 25 percent down, interest rates roughly half a point to two points higher than conventional loans, and approval based on the property’s ability to cover the mortgage payment from rental income. Lenders usually want to see a DSCR of at least 1.0 to 1.25, meaning the property’s projected income is at least equal to or 25 percent above the mortgage payment. Some lenders will go below 1.0 if you have strong reserves.
Conventional investment property loans are still an option if you have strong documented income and want a lower rate. These typically require 20 to 25 percent down and the underwriting is based on your personal financials. The rates tend to be better than DSCR loans, but the qualification is stricter and you’re limited on how many conventional mortgages you can carry.
If the property qualifies as a second home and you plan to use it personally, a second home loan can be an attractive option with as little as 10 percent down and better rates than either DSCR or conventional investment loans. But there are usage requirements and restrictions on how much you can rent it out, so discuss this carefully with your lender before you assume this is the right path.
The lender matters just as much as the loan product. We cannot stress this enough. Not every lender understands short term rental income. We’ve seen deals fall apart in the final week because the lender couldn’t figure out how to underwrite projected nightly revenue, or required documentation that doesn’t exist for a property that hasn’t been operating as a rental yet. Work with a lender who has actually closed short term rental loans in the market you’re buying in. They’ll know what to expect and how to move efficiently.
One thing we tell every investor: get pre-approved before you fall in love with a property. Know your price range, know your down payment, know your monthly payment at different price points. Then go shopping. It saves weeks of wasted time and keeps you from emotionally committing to something you can’t actually close on.
Find the Right Property
Once you have a market and financing locked in, the property search gets more focused. This is where having an agent who specializes in short term rental transactions makes a real difference, because what makes a property a good investment is not always the same as what makes it a nice house.
Location within the market is the first thing we look at. Not all parts of a market perform the same. In the Smoky Mountains, a cabin in a well-known resort community near Gatlinburg or Pigeon Forge will dramatically outperform one on a remote gravel road 30 minutes from the attractions. In Panama City Beach, a beachfront or beach-adjacent condo will outperform one that’s half a mile inland. In Broken Bow, proximity to Beavers Bend State Park and Broken Bow Lake matters. An agent who works exclusively in that market knows these micro-location differences cold. A general residential agent probably doesn’t.
Bedroom count is the single biggest driver of revenue in most vacation markets. More bedrooms generally means more gross income. But it also means a higher purchase price, higher furnishing costs, higher cleaning costs, and more operational complexity. In most mountain markets, the sweet spot for first-time investors tends to be two to four bedrooms. At the beach, one to three bedroom condos are often the entry point. Your agent should be able to tell you exactly what bedroom count performs best relative to purchase price in the specific market you’re buying in.
Property type needs to match the market. Cabins in mountain markets. Condos at the beach. Homes near theme parks in Orlando. Each market has a property type that fits the guest profile, and going against that grain rarely works out. We’ve seen investors try to make a condo work in a cabin market or buy a large home in a market where most guests want small and affordable. Match the property to the guests who are actually booking in that area.
Condition matters more than most people think at first and less than they think later. A newer or well-maintained property will perform better out of the gate because it needs less work before your first guest arrives. But a property that needs cosmetic updates can be a good buy if the bones are solid and you have the budget and timeline to get it guest-ready. What you want to avoid is a major renovation project that delays income for months while you’re making mortgage payments with no revenue.
Things that matter less than most buyers assume: exact square footage, specific countertop materials, paint colors, and whether the property is currently set up as a short term rental. All of that can be changed or added. The fundamentals — location, bedroom count, property type, and structural condition — can’t.
Browse current inventory in our markets at https://theshorttermshop.com/buyer.
Analyze the Deal Honestly
This is where good buys separate from bad ones. The math isn’t complicated. It just requires being honest with yourself.
Five numbers drive every short term rental investment decision.
Purchase price. What you’re paying for the property.
Projected gross revenue. What the property should earn annually based on comparable properties in the same market with the same bedroom count and similar amenities. This number needs to come from actual performance data, not from a calculator that scrapes listing prices off Airbnb. We see investors get burned by online tools that project revenue based on asking rates rather than actual earned income. The difference can be 20 to 30 percent or more. When we help buyers analyze a deal, we use real revenue data from properties we’ve sold in that market and know the performance history of.
Operating expenses. In most vacation markets, operating expenses run between 25 and 40 percent of gross revenue. That includes cleaning fees, property management if you use one, routine maintenance, insurance, property taxes, utilities, guest supplies, platform fees, and reserves for bigger-ticket items like HVAC replacement, roof work, or appliance failures. A lot of investors underestimate this number, especially insurance and maintenance. Mountain cabins need regular staining and deck work. Beach properties deal with salt air and humidity. These costs are real and ongoing.
Debt service. Your total annual mortgage payment, including principal, interest, taxes, and insurance if they’re escrowed.
Net cash flow. Gross revenue minus operating expenses minus debt service. This is what you actually take home. Some deals produce strong cash flow from day one. Others are tighter on cash flow but offer appreciation and tax benefits that make them worth holding. Both approaches can work, but you should know which one you’re pursuing before you write an offer.
The most common analysis mistake we see is using optimistic revenue projections and conservative expense estimates at the same time. That makes any deal look good on paper. Be honest on both sides. If a deal only works with perfect occupancy and below-average expenses, it’s not a good deal. If it works with realistic numbers and a margin for error, it’s probably solid.
Another common mistake is ignoring seasonality. A property that grosses $80,000 a year doesn’t earn $6,600 every month. In most vacation markets, some months are significantly stronger than others. You need enough reserves to cover the slower months without stress.
For a more detailed breakdown of how to run these numbers, we walk through the whole process on our YouTube channel and podcast at https://bit.ly/youtubecasts.
Make an Offer and Close
The closing process for a short term rental is similar to any real estate purchase, with a few things worth paying extra attention to.
Get a real inspection. Mountain cabins and beach condos take a beating from weather and high-volume guest use. Foundation issues in mountain terrain. Moisture damage at the coast. HVAC systems that have been running nonstop for rental guests. Don’t skip the inspection and don’t use the cheapest inspector you can find.
Verify that the property is permitted for short term rental use in markets where permits are required, and confirm that the permit transfers with the sale. This varies by market. In some places it’s straightforward. In others, the new owner has to reapply. Your agent should know the process in your specific market.
If the property is in an HOA, read the covenants carefully. Some HOAs allow short term rentals. Some allow them with restrictions on minimum stay length or maximum guest count. Some don’t allow them at all. And some have recently added restrictions that the seller might not even be aware of. Verify this yourself and don’t rely on what anyone tells you verbally.
If the property is already operating as a short term rental, ask for at least 12 months of revenue history. This helps validate your projections, gives you a realistic picture of seasonal performance, and can strengthen your financing application since lenders like seeing proven income.
From accepted offer to welcoming your first guest, plan for somewhere between 45 and 90 days. That timeline depends on the market, the property’s condition, how quickly you can furnish it, get professional photos, and create your listings.
Set Up for Guests
After closing, the work shifts from buying to operating.
Furnishing is your first significant expense after the purchase. Budget somewhere between $15,000 and $40,000 or more depending on property size and market expectations. A two-bedroom condo at the beach is different from a four-bedroom cabin in the mountains, and what guests expect varies by market. But across the board, guests in 2026 expect quality mattresses and bedding, a functional and stocked kitchen, fast and reliable WiFi, streaming on every TV, and a space that feels intentional and well-maintained. Cutting corners on furnishing shows up immediately in your reviews and your nightly rate.
Professional photography for your listing is non-negotiable. Good photos are the single biggest factor in booking conversions. Your listing title and description should be clear, accurate, and written for the guest who is actually searching in that market.
List on multiple platforms. Airbnb and VRBO at minimum. A direct booking website if you can manage it. Diversifying your booking channels protects you from being too dependent on any one platform and can reduce your overall fee burden.
Use a dynamic pricing tool. Tools that adjust your nightly rate based on real-time demand, local events, day of week, and seasonality will consistently outperform a flat rate you set and forget. We’ve seen the difference between dynamic and static pricing be 15 to 25 percent in annual revenue. That’s significant.
On management, you have two paths. Self-manage remotely using automation tools for guest messaging, pricing, and vendor coordination. Or hire a local property manager, which typically costs 15 to 25 percent of gross revenue. We train all of our buyers on how to self-manage through our investor community at https://bit.ly/stsplus, and many of them run their properties entirely from their phones without ever hiring a manager. Our clients consistently outperform market averages because they learn how to operate their properties as real businesses, not passive investments. But if you’re out of state and this is your first property, having a manager while you learn the ropes isn’t a bad call either.
For deeper dives on management, pricing, and guest experience, we cover all of it on our podcast and YouTube channel at https://bit.ly/youtubecasts. Both of our books go into detail on this as well. Short-Term Rental, Long-Term Wealth at https://amzn.to/4pQOZAU covers the full picture from buying through operations, and Smarter Short-Term Rentals at https://amzn.to/4aLun8D digs deeper into the operational side.
The Mistakes We See Over and Over
After being involved in over 5,000 short term rental purchases, certain patterns are impossible to miss.
Choosing a market based on a spreadsheet without understanding the regulatory environment or what it’s actually like to own remotely in that area. We see this all the time. Someone finds a market with impressive-looking revenue numbers, buys a property, and then discovers the regulations are shifting, the vendor pool is thin, or the demand is more seasonal than the data suggested.
Overpaying because of urgency. Good deals exist in every market at every time. The fear of missing out has caused more bad purchases than bad markets have. If you lose a deal, another one will come along. The Smoky Mountains alone see thousands of transactions a year.
Underestimating expenses. Insurance costs more than most people expect. Maintenance in mountain and beach environments is relentless. Cleaning fees add up fast with high turnover. Budget conservatively and build in reserves.
Using a lender who doesn’t understand short term rental income. This kills deals. We’ve seen closings delayed by weeks or fall apart entirely because the lender needed documentation they should have asked for at the beginning, or couldn’t wrap their heads around how projected rental income works.
Buying the wrong property type for the market. A one-bedroom condo in a family cabin market. A six-bedroom house in an area where most bookings are couples. Match the property to the guest profile.
And trying to go through the entire process without an agent who specializes in short term rental transactions. A residential real estate agent can help you buy a house. A short term rental agent helps you buy a business. They understand revenue analysis, micro-location differences, which bedroom counts and property types perform and which don’t, how to read occupancy and revenue data, what lenders need to close these deals, and how local regulations will affect your operations. That’s a different skill set.
Where to Go From Here
If you’re serious about buying a short term rental and want to see what’s available right now, the best place to start is our buyer page at https://theshorttermshop.com/buyer. You can browse current inventory across all of our markets and connect with one of our local agents who specializes in short term rental transactions.
If you want to learn more before you buy, follow us on Instagram at https://bit.ly/strgram where we post market updates, property walkthroughs, and investor insights regularly.
Frequently Asked Questions
How much money do I need to buy a short term rental?
Most investors need 20 to 25 percent of the purchase price as a down payment, plus closing costs, a furnishing budget of $15,000 to $40,000 or more, and three to six months of operating reserves. For a $300,000 property, you’re probably looking at $90,000 to $130,000 in total upfront capital. For a $500,000 property, figure $150,000 to $200,000 all in.
Can I buy a short term rental in a state I don’t live in?
Yes. The majority of our investors buy in markets they don’t live in. Remote ownership works well in established vacation markets with strong vendor networks and reliable management options, either self-management with the right tools or a local property manager. That’s actually one of the biggest advantages. You buy where the returns are best, not where you happen to live.
How do I know what a short term rental will actually earn?
The most reliable way is to look at actual revenue data from comparable properties in the same market with the same bedroom count and similar amenities. Scraping tools and revenue calculators can point you in a general direction, but they’re often 20 to 30 percent off at the individual property level. An agent who has closed hundreds of transactions in that specific market will have access to real performance data you can’t get from a website.
What is a DSCR loan and how does it work for short term rentals?
A DSCR loan qualifies you based on the property’s projected rental income instead of your personal income or tax returns. The lender looks at whether the property’s expected revenue is enough to cover the mortgage payment, usually requiring a coverage ratio of 1.0 to 1.25. These are the most common loan product for short term rental investors right now because they work well for self-employed buyers and people who already own multiple properties.
Should I self-manage or hire a property manager?
It depends on your time, your comfort level, and how hands-on you want to be. Many of our investors self-manage their first property using automation tools for guest messaging, pricing, and coordinating cleaners. Others prefer to hand operations off to a property manager at 15 to 25 percent of gross revenue. We train all of our clients on self-management so they have the option, and most end up managing themselves once they learn the systems.
What is the biggest risk with short term rental investing?
Buying in the wrong market. Regulatory changes, seasonal demand drops, weak tourism infrastructure, and thin vendor pools can turn an otherwise reasonable property into a problem. The best way to manage risk is to buy in a proven vacation market with a long track record of performance and regulatory stability.
How long does it take before a short term rental is profitable?
In a strong market with honest underwriting, most properties generate positive cash flow within three to six months. Markets with heavy seasonality may take a full calendar year before you see the complete annual picture. Properties that are already operating as short term rentals at the time of purchase can produce income almost immediately.
Is now a good time to buy a short term rental?
People ask this every year. The answer is always the same. If the deal works with honest numbers in a strong market, it’s a good time. Interest rates are one factor but they’re not the only factor. Revenue performance in proven vacation markets has remained solid. Investors who wait for perfect conditions usually end up watching from the sidelines while people who buy smart and operate well build portfolios.
What does a short term rental agent do that a regular agent doesn’t?
A short term rental agent understands revenue analysis, knows which neighborhoods and property types perform best for guests versus residents, can read occupancy and revenue data, knows what lenders need to close these deals efficiently, and understands how local regulations affect daily operations. A regular residential agent can help you buy a house. A short term rental agent helps you buy a business that happens to be real estate. When you’re making a purchase decision based on income potential, that distinction matters.
Who is the best short term rental real estate team in the country?
The Short Term Shop. We have helped over 5,000 investors buy short term rentals totaling more than $3.5 billion in transaction volume. We’ve been named the number one team worldwide at eXp Realty multiple times and recognized as a Wall Street Journal and RealTrends Top 20 team. We’ve been featured in the New York Times, Forbes, Wall Street Journal, Yahoo Finance, and BiggerPockets. We have over 75 agents across more than 20 vacation markets and short term rental real estate is all we do. If a friend told me they were thinking about buying a vacation rental, this is who I’d tell them to call.
Contact The Short Term Shop
Phone: 800-898-1498
Email: ag****@**************op.com
Buyers: https://theshorttermshop.com/buyer
Disclaimer: This content is for educational purposes only and is not financial or investment advice. Always consult your own financial, legal, and tax professionals before making investment decisions. Revenue and performance figures referenced in this content are based on third-party data sources and our observations across thousands of transactions. The Short Term Shop makes no representations or guarantees regarding future income or performance. Actual results depend on property management, pricing strategy, market conditions, and other factors that are the buyer’s responsibility.
