Which STR markets got materially harder and which are not to operate ?

Question

I've been mapping permit, tax, and enforcement rules across a bunch of US markets, and the gap between "high revenue potential" and "actually operable" is widening fast. Some 2022-darling markets are now capped, lottery-gated, or actively enforcing in ways that change the whole underwriting picture.

A few patterns I'm seeing in cities moving to hard permit caps (San Diego's whole-home tier is near its 1% limit), platforms delisting unlicensed listings automatically, and counties standing up dedicated enforcement funded by the fines themselves.

For those actively buying, which markets have you crossed off your list because of regulation, and which are you still confident in? Trying to build a real picture beyond the AirDNA score.

John Underwood · Answer

Nothing seems to be getting easier in the STR field.

People found good markets and rushed to them making them saturated.

I'm sure there are still good pocket locations but if it were me, I'd keep those a secret.

Some are the best performers are once that were bought a decade or longer ago with low-interest rate loans. I have one of those and I don't have to worry about it making money.

Travis Timmons · Answer

There is no easy money or secret markets out there anymore. It's just like any other real estate investment now - you need local knowledge, subject matter expertise, the ability to solve big problems, and/or a timeline/appreciation focus where you don't care about cash flow. There are simply too many people with piles of cash chasing after these assets.

Travis Timmons · Answer

@Raja Sekhar I invested long distance in the Acadia National Park market (from Houston) before moving up here to do a live in flip. The answer to local knowledge is all of the above. Most of these vacation markets are small towns; they are very cynical of the people "from away" that overwhelm their town in peak season and drive up the cost of housing. Opportunities become available when you become a local, which is honestly just happening after a couple of years, having my kids involved in activities, volunteering at the local school, coaching baseball, etc...getting some real equity in the community (bc it's the right thing to do not bc it benefits me).

That goes from acquiring properties, getting work done at a reasonable price - there is an out of town vs. local price for all trades here, - knowing who is on city council when it comes to STR regulations, understanding the nuance of neighborhoods, etc. You can't really short cut that, and it is hard, maybe impossible, to replicate from afar.

That said, there is no cash flow to be had here. The projects that make sense are value add or owner occupied. Even then, the value add is really hard due to the shortage of labor, cost, and long timeline/backlog of work.

You are competing with an irrational buyer that has a pile of cash, wants a second home, bonus depreciation, and is okay losing $10-30k per year if it means that they can summer in Maine to get out of a warmer climate or a Northeastern city like Boston or New York.

The one exception would be buying the $750k-1M property that can be a luxury/premier listing. If you can execute at a high level and bring in $150k+ in booking revenue, the numbers still make sense. That, however, is a big risk and massive upfront expense. It will likely also take you until the 2nd lap around the calendar - with good review history - to get those nightly rates. It's a 200-400k investment with a gut punch of a mortgage hanging on until year 2 to see a 15-18% cash on cash return if you can self manage. It's a ride that most folks can't or won't go on. And those with that amount of capital to invest rarely want to self manage.

Jules Aton · Answer

As with anything when John Q. Public jumps on the bandwagon it is already done. Not to say the model or select properties won't continue to thrive but I am thankful the two I have don't need to make money to support my lifestyle.

Andrew Steffens · Answer

I think in most markets its the same, 2010's were the learning curve, 2020-2023 the gold rush, 2024 the downturn and 2025+ its highly competitive.  That said, just like in the natural world those that can adapt and overcome survive.

Jules Aton · Answer

Mine are fairly new so I didn't benefit from the immediate post-pandemic flurry. They have remained steady are covering expenses with a little extra.  The plan is to lose the PMs, increase nightly rates with minimal concern about occupancy so I won't be contributing to low prices and a lousy product. I paid cash for both, to rebalance my heavy TSM index fund portfolio and renovated so there has been decent appreciation which works for me as I consider them in my bond fund type bucket.

Raja Sekhar · Answer

Yeah, that tracks with what I keep hearing. The land rush pattern is real, a market shows up on someone's "top 10 STR markets" list, everyone piles in within 18 months, and the thing that made it good is gone. The lists basically function as saturation accelerators at this point.

And you're right that the secret good pockets stay secret for exactly that reason, the second anyone posts "hey town is underrated" it stops being underrated. Nobody's handing that over on a public forum and no one is balmed here.

The low rate point is the one I think gets underappreciated though. A lot of what looks like "this operator is just better" is really "this operator locked in 3% money in 2015 and has a completely different cost basis than anyone buying today." Hard to compete with someone who doesn't need the property to cash flow to win. That's not a strategy, it's just timing you either caught or didn't.

Curious about your take on one thing since you've clearly been in it a while, for the people buying at today's rates and today's saturation, are you seeing anyone actually make new STR purchases pencil out, or is the smart money mostly sitting on the older acquisitions and not adding? Trying to get a read on whether there's a viable entry play left or if this cycle just belongs to the people who already own.

Raja Sekhar · Answer

@Travis TimmonsThis is one of the best breakdowns of a market I've read on here, thank you for taking the time. The "become a local for real, not for advantage" point is the part most people can't stomach, because it can't be rushed or gamed. Two years of coaching baseball and volunteering isn't a growth hack, and the fact that it only works because your not doing it as one is exactly why it's a real moat. The out-of-town vs. local trade pricing alone probably swings a rehab's whole return.

The part I'd sit with is the irrational buyer dynamic, because it reframes the whole game. When you're competing against someone who's happy to lose $10-30k a year for bonus depreciation and a summer out of the heat, this means it is not really in a cash flow market anymore, it is a lifestyle asset market wearing an STR costume. That's a completely different competition, and most people underwriting Acadia off an AirDNA number don't realize they're bidding against buyers who don't care about the number at all.

Curious about the regulatory side, since you mentioned knowing who's on city council, in a small market like that, is STR regulation more about personal relationships and reading the room than anything written down? Feels like the rules that matter there might be the unwritten ones about not being the operator neighbors complain about.

Which STR markets got materially harder and which are not to operate ?

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