Short-term vacation rentals remain a solid investment for many landlords and property managers—as long as you know where to buy. As the market has matured and become saturated in some places, owners have also had to contend with more statewide and municipal-level regulations.

These conditions have forced STR investors to analyze more data than ever before in their search for profitable properties. To give you a head start in your search, Property Reach has compiled a list of both STR-positive states and states where the landscape is relatively difficult.

The State of the US Short-Term Rental (STR) Market in 2026

The novelty of the short-term rental market has, in many respects, subsided for many consumers. As the U.S. STR market matures, the U.S. market specifically is expected to experience steady but not explosive growth. These trends are positive signs for STR property owners who saw a sharp drop in demand over the past three years after a strong uptick post-pandemic.

As for the larger real estate market, the record-high median sales prices of 2022 seem like distant memories. The national median sales price has fallen 2.5% year over year and now sits at $403,200. Buying also seems to have picked up, in no small part due to lowered interest rates.

Would-be STR property owners are noticing the increased affordability of U.S. homes, which is sure to lead to greater competition in 2026 and in the near future.

States where Vacation Rental Returns are Solid

The attractiveness of STR properties can (and often does) vary wildly within the same state. As a result, ranking the 50 states by short-term vacation rentals involves the consideration of several factors, including each state’s current laws on STR management, available housing, and median home sales price.

Even looking at the average return can be deceiving, as one or two large metros can present a distorted picture of the state’s full offerings. Below are the states where potential STR property owners can find profitable vacation rentals in numerous areas of the state, and not just in one hotspot where competition is likely to be fierce.

Data from Realtor.com, AirDNA, Houfy, and The Motley Fool were used to compile the lists you see below. States are listed in no particular order.

1. Texas

Even after incoming migration has slowed somewhat in the Lone Star State, it’s difficult to find a better place to set up an STR property. Population growth remains strong, anchored by a steady job market and the absence of a state income tax. Although Dallas, Houston, and Austin attract the most attention, Texas contains many more attractive metros for STR properties, including Port Arthur, Abilene, and Waco.

Another positive trait is the state’s preemption law. Statewide preemption laws, in the context of the STR market, are designed to prevent municipalities from enacting strict restrictions or outright bans on such property listings. STR owners and managers can then operate in a more predictable ecosystem without the looming threat of new municipal rules.

Statewide preemption law: Yes
Average home value: $301,155

2. Indiana

Although not included in many national conversations concerning top vacation spots, Indiana's affordability, lack of STR competition, and investor-friendly laws make it too attractive not to include on this list. The state has plenty of lakes, state and national parks, and recreational opportunities, and its largest metro is among the nation's fastest-growing metros.

Statewide preemption law: Yes
Average home value: $253,197

3. Arizona

The Grand Canyon State has long been friendly to landlords, offering a predictable operating environment and a long-standing STR preemption law. The mild winters support year-round tourism, especially in Phoenix and Scottsdale. Landlords also enjoy relatively short timelines for filing evictions and handling lease violations.

Statewide preemption law: Yes
Average home value: $423,325

4. Tennessee

The combination of a strong statewide preemption law, gorgeous mountain views, and perhaps one of the hottest destinations for bachelorette trips (Nashville) makes Tennessee a strong candidate for the best STR state. The state’s eastern edge consistently produces strong STR returns for property owners, as Gatlinburg and Pigeon Forge are top locales for vacationers across the country.

Statewide preemption law: Yes
Average home value: $333,020

States where STR Returns are Crumbling

Some states have given municipalities permission to enact heavy restrictions on STR properties. Many of those states are also contending with high property values that price out many would-be homebuyers.

While it’s certainly possible to find diamonds in the rough, the following states’ STR markets are not easily navigable, relatively speaking.

1. California

Many of California’s municipalities have implemented especially harsh restrictions on STR properties. Santa Monica, for instance, requires STR properties to be the owner’s homestead and restricts the number of nights the properties may be occupied. Combine that with the state’s high sales prices, and many investors think twice before going into the Golden State.

Statewide preemption law: No
Average home value: $774,932

2. New York

Speaking of aggressive STR regulations, it's impossible not to mention the Empire State. New York City's rules make it impossible for a large percentage of property owners to list on Airbnb and Vrbo. While the rest of the state has some decent areas, the lack of a statewide preemption law makes New York a risky STR investment.

Statewide preemption law: No
Average home value: $505,237

3. Colorado

Although Colorado is experiencing steady population growth, its STR market is less bright. The high demand for vacation rentals among the state’s skiing destinations has led many cities to cap the number of STR properties, and more regulations may come to pass in the November 2026 elections. Demand has also driven home prices higher, making it difficult for prospective owners to get a foothold.

Statewide preemption law: No
Average home value: $543,626

4. Hawai'i

The barrier to entry in Hawai'i’s STR market is perhaps the nation’s highest. The state already has the most expensive property; add to that a number of restrictions and fierce competition, and you have a notoriously difficult market.

Statewide preemption law: No

Average home value: $832,071

Resources for Learning More

As much as statewide restrictions inform prospective investors, they can only reveal so much. Demand for vacation rentals remains sky-high in southern California, for instance, and the right properties can yield strong returns.

Use the following resources to drill down into the most attractive metros, cities, and neighborhoods:

• Airbnb's proprietary analyzer tool that can estimate earnings based on a property's location
• Vrbo's performance and rankings tools that suggest adjustments to your STR properties
• AirDNA's website—specifically blog posts
• Houfy's guide to STR regulations by state

Selective STR Buying Wins the Day for Investors

It’s more important than ever to analyze the permitting process for STR properties by state, metro, and municipality. Regulations are becoming the norm in many places, and stubbornly high home prices make due diligence essential for investors wanting to maximize profits.

This story was produced by PropertyReach and reviewed and distributed by Stacker.