The U.S.’s Best Short-Term Rental Markets for Investing (2026)

Over the past decade, vacation rentals have become one of the hottest trends in real estate. The market size of the U.S. short-term rental (STR) industry was estimated at $72 billion in 2025, and is projected to grow at an impressive 7.4% compound annual growth rate (CAGR) from 2026 to 2030.

This surge in demand has many investors thinking about buying vacation homes to generate steady rental income.

If you’re looking to get started or expand your existing portfolio, it pays to research the strongest short-term rental markets ahead of time. Location can make or break your returns, so you’ll want to target areas with solid rental demand, strong occupancy rates, and affordable purchase prices.

Fortunately, AirDNA recently released its Best Places to Invest in Short-Term Rentals in 2026.

We’ve pulled the key takeaways, added a bit of our own analysis, and rounded up the top U.S. markets to buy vacation rental property in 2026.

Don’t see the form to download our investment guide? Click here.

What do we mean by the best short-term rental markets?

There are different ways to define the best places for short-term rentals, but for most investors, it comes down to profitability. In its report, AirDNA focused on four main factors:

• Rental demand
• Revenue growth
• Government regulations
• Investability

AirDNA defines investability as how profitable a property is expected to be compared to its price. This is measured using the capitalization or “cap” rate, a simple metric that helps investors compare markets and spot the best opportunities.

While AirDNA doesn’t share exact cap rates for its top markets, we’ve done our own calculations to give you a clearer view of how each location performs and ranked them accordingly.

How to calculate cap rate for vacation rentals

If you’re new to real estate investing, the cap rate is one of the key metrics to understand. It’s calculated by dividing a property’s net operating income by its current market value. While it’s not the only way to measure success, it’s an important indicator when comparing vacation rental markets.

Cap rate formula:

Cap Rate = Net Operating Income (NOI) / Current Market Value (CMV)

To find your net operating income, subtract your operating expenses from your total rental revenue:

NOI = real estate revenue – operating expenses

If you’re unsure what your expenses might be, Mashvisor suggests using the 50% rule. However, for our cap rate calculations, we used 45% as operating expenses will vary widely across markets.

As AirDNA didn’t include expense data for its top markets, we applied the 45% to estimate cap rates and give you a consistent comparison across locations.

What cap rate indicates the best vacation rental markets?

So, what’s the magic number when it comes to cap rates? As with most things in real estate, it depends.

Generally, a higher cap rate points to a stronger potential return, but it can also signal higher risk. The key is finding the balance between the two. A “good” cap rate isn’t one-size-fits-all; it depends on your comfort with risk, your investment goals, and the local market.

That said, most experts suggest aiming for a cap rate between 5% and 10%. Lower cap rates around 1–2% can still turn a profit, but they’re usually seen in high-demand, competitive areas like major cities with mature short-term rental markets.

On the flip side, high cap rates may look attractive on paper but may come with more volatility, better suited for investors willing to take bigger swings.

It’s also worth noting that cap rates can vary widely even within the same city. Looking only at a city’s average can give a misleading picture. For instance, in New York City, the cap rate in Times Square sits around -1.76%, while nearby Queens averages 1.54%. That’s why the best investment decisions come from digging into neighborhood-level data rather than broad city numbers.

The best places to buy vacation rental property in 2026

The vacation rental market never stands still. What was hot last year has shifted, and 2026 brings a new set of front-runners. These are the top short-term rental markets this year in the order of estimated cap rates.

Market	Cap Rate	Medium Home Price	Occupancy Rate	Average Daily Rate	Annual Revenue
Jackson Mississippi	15.95%	$84,672	57.00%	$118	$24,550
Abilene, Texas	14.01%	$201,493	82.00%	$171.50	$51,330
Akron, Ohio	11.66%	139,633	61%	$133	$29,612
Montgomery, Alabama	11.64%	143,500	59%	$141	$30,364
Port Arthur, Texas	10.38%	$124,353	67%	$96	$23,477
Springfield, Illinois	10.09%	$159,667	62%	$129.4	$29,283
Charleston, West Virginia	9.8%	158,399	59%	$131	$28,211
Lebanon, Pennsylvania	8.68%	$281,650	60%	$203	$44,457
Lake Charles, Louisiana	8.41%	$212,333	59%	$150.70	$32,453
Saint Paul, Minneapolis	6.84%	$289,137	58%	$169.9	$35,968

1. Jackson, Mississippi

• Cap Rate: 15.95%
• Median Home Price: $84,672
• Occupancy Rate: 57%
• ADR: $118
• Annual Revenue: $24,550

Jackson, Mississippi tops the list for 2026, offering the highest cap rate of our list at 15.95%, a strong indicator of cash flow potential. Its median home price of just $84,672 is on the lower side. However, its 57% occupancy rate makes it an attractive entry point for investors.

2. Abilene, Texas

• Cap Rate: 14.01%
• Median Home Price: $201,493
• Occupancy Rate: 82%
• ADR: $171
• Annual Revenue: $51,330

Abilene, Texas earns its spot among the best-performing short-term rental markets with a 14.01% cap rate and the highest occupancy rate on our list at 82%. The city’s affordable median home price of $201,493 makes it a strong value play for investors looking to enter the short-term rental market.

3. Akron, Ohio

• Cap Rate: 11.66%
• Median Home Price: $139,633
• Occupancy Rate: 61%
• ADR: $133
• Annual Revenue: $29,612

Akron, Ohio delivers strong short-term rental performance with a 11.66% cap rate and an impressive 61% occupancy rate, among the highest on the list. With annual revenues of about $29,612 and a low median home price of $139,633, Akron offers a balanced mix of affordability and steady returns.

4. Montgomery, Alabama

• Cap Rate: 11.64%
• Median Home Price: $143,500
• Occupancy Rate: 59%
• ADR: $141
• Annual Revenue: $30,364

Montgomery, Alabama offers a strong cap rate of 11.64% and relatively low investment point with a median home price of $143,500. If you’re looking for an affordable location for your first short-term rental, Montgomery is an excellent choice.

5. Port Arthur, Texas

• Cap Rate: 10.38%
• Median Home Price: $124,353
• Occupancy Rate: 67%
• ADR: $96
• Annual Revenue: $23,477

Port Arthur, Texas offers a solid balance of affordability and performance, featuring a 10.38% cap rate and a relatively low median home price of just $124,353. The city’s strong local economy and deep-water port offer stable short-term stay rentals throughout the year.

6. Springfield, Illinois

• Cap Rate: 10.09%
• Median Home Price: $159,667
• Occupancy Rate: 62%
• ADR: $129.4
• Annual Revenue: $29,283

Springfield, Illinois delivers dependable investment potential with a 10.09% cap rate and a median home price of $159,667, making it accessible for first-time investors. Its 62% occupancy rate and average daily rate of $129.40 generate steady annual revenues around $29,283. The city is home to the Abraham Lincoln Presidential Library and Museum and is a major stop along Route 66, resulting in consistent tourism demand.

7. Charleston, West Virginia

• Cap Rate: 9.80%
• Median Home Price: $158,399
• Occupancy Rate: 59%
• ADR: $131
• Annual Revenue: $28,211

Charleston remains a competitive short-term rental market, posting a 9.80% cap rate and an affordable median home price of $158,399. With an average daily rate of $131 and annual earnings near $28,211, it offers strong value in a growing metro area. Steady demand is fueled by the city’s thriving tourism, healthcare, and cultural sectors.

8. Lebanon, Pennsylvania

• Cap Rate: 8.68%
• Median Home Price: $281,650
• Occupancy Rate: 60%
• ADR: $203
• Annual Revenue: $44,457

Lebanon, Pennsylvania stands out with a 8.68% cap rate and a median home price of $281,650, combining moderate costs with a reliable 60% occupancy. Its average daily rate of $203 supports annual revenues of over $44,457. With an extensive history, Lebanon offers steady short-term rental demand as tourists visit one of its many attractions.

9. Lake Charles, Louisiana

• Cap Rate: 8.41%
• Median Home Price: $212,333
• Occupancy Rate: 59%
• ADR: $150.70
• Annual Revenue: $32,453

Lake Charles offers strong revenue potential, with an average daily rate of $150.70 and annual revenue of $32,453. While its cap rate of 8.41% reflects higher property values, its 63.3% occupancy rate highlights consistent demand. Known for its Mardi Gras celebrations, Cajun cuisine, and white-sand beaches, the area draws steady tourism demand.

10. Saint Paul, Minnesota

• Cap Rate: 6.84%
• Median Home Price: $289,137
• Occupancy Rate: 58%
• ADR: $169.90
• Annual Revenue: $35,968

Saint Paul offers attractive returns with a 6.84% cap rate and an average daily rate of $169.90, generating annual revenues just above $35,968. As the capital of Minnesota, it’s home to the state government, major corporate headquarters and healthcare, creating consistent demand for short-term rentals.

Legislation and taxes

Offering some of the strongest returns in the country, these 10 markets stand out as prime locations for short-term rental investments in the U.S.

Before diving in, make sure to review local short-term rental regulations and understand the taxes, licensing fees, and property tax rates that apply in your chosen market. Each state and city has its own rules that can impact profitability.

Once you’ve done your due diligence, you’ll be ready to begin your rewarding journey into real estate investing and vacation rental ownership.

Over to you

Purchasing a vacation rental is just the start of an exciting journey. While owning a short-term rental can be a profitable venture, success goes beyond the closing date; effective management is key.

With Lodgify, you can simplify every aspect of running your property. Start a 7-day free trial and discover how to manage bookings, sync with top platforms like Airbnb and Vrbo, and even build your own direct booking website, all from one easy-to-use dashboard.

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