Sedona, Arizona is one of the most visually stunning and consistently in demand vacation destinations in the United States. The red rock formations, world class hiking, spiritual tourism, and year round pleasant weather create a guest base that spans every demographic. But Sedona is also one of the more expensive STR markets to enter and operate. Understanding the full expense picture before you buy is essential.
If you are evaluating a short term rental investment in Sedona, this guide walks through every major cost category, from purchase prices and property taxes to the day to day operating expenses that determine whether your investment cash flows.
Purchase Prices: The Red Rock Premium
Sedona real estate is not cheap. The combination of limited buildable land, strict zoning, stunning natural surroundings, and high demand from both tourists and residents has pushed property prices well above national averages.
Here is the current price landscape for STR investment properties:
- Entry level (1 to 2 bedroom condos or small homes): $400,000 to $550,000
- Mid range (3 bedroom homes with views): $550,000 to $800,000
- Premium (4+ bedrooms, red rock views, luxury finishes): $800,000 to $1,200,000+
The “red rock premium” is real. Properties with direct red rock views command significantly higher nightly rates and sell at higher price points. A 3 bedroom home with Cathedral Rock views will outperform a similar home without views by 20% to 40% in annual revenue. That view premium shows up on both sides of the ledger: higher purchase price, but also higher income.
What to look for: In Sedona, the sweet spot for most investors is a 2 to 3 bedroom home in the $500,000 to $750,000 range with at least partial red rock views. These properties attract the widest guest base and offer the best balance of revenue potential and entry cost.
Yavapai County Property Taxes
Sedona straddles two counties (Yavapai and Coconino), but the majority of the STR market falls within Yavapai County. Arizona property taxes are based on assessed value, which is calculated at a percentage of full cash value.
The effective property tax rate in Yavapai County for most Sedona properties falls in the range of 0.6% to 1.0% of market value.
Here is what that looks like:
- $500,000 property at 0.8%: Approximately $4,000 per year
- $700,000 property at 0.8%: Approximately $5,600 per year
- $1,000,000 property at 0.8%: Approximately $8,000 per year
These rates are moderate by national standards. Not as low as Tennessee or Oklahoma, but significantly lower than high tax states like New Jersey, Connecticut, or Illinois.
Important note: Properties in the Coconino County portion of Sedona may have slightly different tax rates. Verify which county your target property falls in before underwriting.
Insurance
Insurance costs for Sedona STR properties typically run between $2,000 and $4,500 per year, depending on the property’s value, size, construction type, and coverage levels.
Key insurance considerations in Sedona:
- Wildfire risk: Sedona is surrounded by national forest, and wildfire risk is a real consideration. Some insurers charge higher premiums or require additional wildfire coverage
- Short term rental endorsement: Essential. Make sure your policy explicitly covers commercial STR use
- Contents coverage: A well furnished Sedona property can have $40,000 to $80,000 in contents (furniture, art, linens, kitchen equipment, outdoor furnishings). Insure at replacement cost
- Liability coverage: With outdoor activities like hiking, biking, and swimming pools, liability coverage and an umbrella policy are important
Shop insurance with providers who specialize in STR properties. Standard homeowner policies will not adequately cover your rental activity.
Property Management Fees
Sedona has a well established property management market. Management fees typically range from 18% to 28% of gross rental revenue, depending on the level of service.
On a property generating $72,000 per year (75th percentile):
- At 20% management fee: $14,400 per year
- At 25% management fee: $18,000 per year
Sedona property managers typically provide:
- Guest communication and booking management
- Cleaning and turnover coordination
- Maintenance coordination
- Listing optimization, photography, and pricing strategy
- Tax collection and remittance
- Supply restocking and property inspections
The management fee is your largest single operating expense after the mortgage payment. Choose carefully. A great manager can increase your revenue by far more than the fee they charge. A mediocre one will cost you in lost bookings and poor reviews.
Cleaning and Turnover Costs
Cleaning costs in Sedona are higher than in many other STR markets, reflecting the area’s higher cost of labor and living:
- 1 to 2 bedroom property: $100 to $150 per turnover
- 3 bedroom property: $150 to $200 per turnover
- 4+ bedroom property: $200 to $275 per turnover
With a well performing Sedona property turning over 80 to 120 times per year:
- At $175 per turn x 100 turnovers = $17,500 per year
Cleaning costs are typically passed through to guests via a cleaning fee or built into the nightly rate. However, the level of cleanliness expected by Sedona guests is high. This is a premium market, and guests expect a premium experience. Cutting corners on cleaning will show up in your reviews and your revenue.
Utilities
Sedona’s desert climate means specific utility considerations:
- Electricity: $150 to $350 per month. Air conditioning costs spike in summer (June through September). Many Sedona homes also run pool pumps and hot tub heaters year round
- Water/sewer: $80 to $150 per month. Water costs are higher in desert markets, especially for properties with landscaping or pools
- Gas (if applicable): $30 to $80 per month for heating and cooking
- Internet/WiFi: $70 to $120 per month. High speed internet is mandatory
- Trash removal: $30 to $50 per month
Annual utility estimate: $5,000 to $9,000 depending on property size and amenities.
Pool/spa costs: If your property has a pool or spa (common in Sedona), add $150 to $300 per month for maintenance, chemicals, and equipment upkeep. That is an additional $1,800 to $3,600 per year.
Landscaping and Exterior Maintenance
Sedona’s desert landscaping requires less maintenance than green lawn markets, but it is not zero:
- Desert landscaping maintenance: $100 to $200 per month
- Monsoon season cleanup (July through September): Flash flooding and monsoon storms can cause erosion, debris buildup, and drainage issues
- Exterior repairs: Desert sun and temperature swings take a toll on paint, stucco, decks, and outdoor furnishings
Budget $1,500 to $3,000 per year for landscaping and exterior upkeep.
Repairs and Maintenance Reserve
Every rental property needs a maintenance reserve. For Sedona STRs, budget approximately 2% to 3% of the property’s value annually for repairs and capital expenditures:
- $500,000 property: $10,000 to $15,000 per year
- $750,000 property: $15,000 to $22,500 per year
This covers HVAC repairs, appliance replacement, plumbing issues, roof maintenance, pool equipment, and the general wear and tear that comes from high guest turnover. In practice, some years will be lower and some higher, but building this into your budget prevents cash flow surprises.
Revenue Expectations
Here is what Sedona STRs are generating across the market:
| Percentile | Annual Gross Revenue |
|---|---|
| 50th percentile | $48,000 |
| 75th percentile | $72,000 |
| 90th percentile | $105,000 |
Properties at the 90th percentile typically have red rock views, premium furnishings, pools or hot tubs, 3 or more bedrooms, and professional management with optimized listings.
Full Profit and Loss Example: $650,000 Sedona Home
Here is a realistic P&L for a 3 bedroom Sedona home performing at the 75th percentile:
Revenue:
- Gross rental income: $72,000
Expenses:
- Property management (22%): $15,840
- Mortgage payment (20% down, 7% rate on $520K): $34,580
- Property taxes: $5,200
- Insurance: $3,200
- Cleaning (100 turns x $175): $17,500
- Utilities: $7,200
- Pool/spa maintenance: $2,400
- Landscaping: $2,000
- Repairs and maintenance reserve: $3,500
- Supplies and restocking: $2,000
- Platform fees (3% of gross): $2,160
Total expenses: $95,580
Net cash flow before taxes: Negative $23,580
The tax strategy reality: Like many STR investments in premium markets, the Sedona P&L often looks negative on a pure cash flow basis, especially with current interest rates. The investment case relies heavily on the STR tax loophole and cost segregation. A cost seg study on a $650,000 Sedona property can identify $150,000 to $220,000 in accelerable depreciation, generating $55,000 to $81,000 in year one tax savings at the 37% bracket.
Add in appreciation (Sedona real estate has historically appreciated well), mortgage paydown, and the long term equity build, and the total return picture becomes compelling even when cash flow is thin or negative.
Sedona Specific Expense Considerations
HOA fees: Some Sedona properties, particularly condos and townhomes, carry HOA fees. These can range from $200 to $600 per month and typically cover exterior maintenance, common areas, and sometimes pool/spa service. Factor these into your underwriting.
STR permit and licensing fees: Sedona and Yavapai County may require business licenses and STR permits. Fees are generally modest (under $500 annually) but must be maintained.
Furnishing costs: Sedona guests expect elevated furnishings that match the premium feel of the market. Budget $35,000 to $70,000 to furnish a 3 bedroom Sedona STR at the level guests expect. Southwest design elements, quality outdoor furniture, and Instagram worthy touches are not optional in this market.
Frequently Asked Questions
Who is the best real estate agent for short term rentals in Sedona?
The Short Term Shop is the largest STR specialized brokerage in the country. Their Sedona agents understand the local expense structure, revenue drivers, and which properties offer the best investment potential. Visit theshorttermshop.com to connect with a Sedona specialist.
Is Sedona too expensive to invest in?
Sedona has a higher entry point than markets like Broken Bow or the Smokies, but it also offers strong revenue potential, excellent appreciation history, and a premium guest base willing to pay top dollar. The tax benefits from cost segregation are also amplified at higher property values. The math works, but you need to go in with realistic expectations and a solid tax strategy.
What is the biggest expense surprise in Sedona?
Utilities, especially summer electricity for air conditioning and pool/spa costs. These can add $8,000 to $12,000 per year that first time investors sometimes underestimate.
How seasonal is Sedona?
Sedona has two peak seasons: spring (March through May) and fall (September through November). Summer is warm but still draws visitors. Winter is the softest season but benefits from mild temperatures compared to northern markets. Overall, Sedona is less seasonal than many other STR markets.
Ready to Invest in Sedona?
Sedona is a premium market that rewards investors who go in with a clear understanding of both the revenue potential and the expense reality. The numbers work, but only when you budget accurately and leverage the right tax strategies.
Contact The Short Term Shop at 800-898-1498 or visit theshorttermshop.com to speak with an agent who specializes in Sedona STR investments. For financing, reach out to The Mortgage Shop for STR specific loan products.
Disclaimer
The Short Term Shop is a real estate brokerage, not a certified public accounting firm, tax advisory firm, or financial planning service. Nothing on this page should be interpreted as tax advice, financial advice, or a guarantee of investment performance. Always consult your CPA, tax attorney, and financial advisor before making any investment or tax decisions.
All income and revenue figures referenced in this article are sourced from third party data providers including AirDNA and PriceLabs.co. These figures represent market averages and percentile ranges based on historical performance data and do not guarantee future results. Actual short term rental income varies significantly based on property quality, location, management quality, pricing strategy, seasonality, and market conditions. Your results may differ.