Every short-term rental investor is chasing the same thing: a market where the numbers work today and still work in three years. For most of the last two years, that’s been getting harder, as financing was expensive, the obvious tourist markets were crowded, and pricing power was eroding. That’s shifted. Financing has gotten cheaper, and the data on where the actual returns are concentrating tells a very different story than “buy where people vacation.” Here’s what the numbers actually show, and how to use them.
TL;DR
- 2026 is a more accessible year to buy: mortgage rates near 6.1% (down from ~7% in early 2025) and a widening STR earnings-to-financing cushion make more markets pencil out.
- The highest-yield 2026 markets aren’t vacation towns; they’re driven by military bases, energy and industrial activity, hospitals, government offices, and universities, which produce steadier, less seasonal demand than tourism alone.
- Across AirDNA’s top 10 markets, average yield is 13.7%, average annual revenue potential is $40.5K, and average home price is roughly $296,000, which is a far more accessible entry point than traditional vacation-market pricing.
- Gross yield, cap rate, and cash-on-cash return are three different numbers that answer three different questions. Conflating them is one of the fastest ways to misjudge a deal.
- Regulation isn’t a side detail: it determines whether a property can legally operate at all, and it varies enormously by city, not just by state.
- Once you’ve picked a market, distribution becomes the operational bottleneck; a dedicated channel manager connects your PMS to the platforms your specific market’s guests are actually booking on.
The 2026 window: why the timing actually matters
Is 2026 a good year to buy a short-term rental? By the numbers, yes, and better than any year since 2022. Mortgage rates have dropped from around 7% in early January 2025 to roughly 6.1%, and they’re expected to hold near that level. That alone doesn’t turn a bad property into a good one, but it lowers the bar for what counts as a viable investment.
There’s a second, less obvious piece of good news: 2026 is actually forecast to be a slower-growth year for demand, occupancy, and average daily rate. That sounds like bad news until you consider what it means in practice, such as fewer bidding wars, more motivated sellers, and more time to underwrite properly instead of racing to close before someone else does. Performance is expected to reaccelerate in 2027, which means the strategic move in 2026 is buying well, not buying fast.
The real story: it’s not the beach towns winning in 2026
What kind of markets are actually producing the best short-term rental returns in 2026? The common thread is durable, non-leisure demand, including military installations, energy and industrial activity, hospital systems, state government, and universities, often with tourism sitting as a secondary layer rather than the main driver.
The highest-yield opportunities right now are coming from somewhere else entirely: cities where a transient workforce, medical travel, or government and military visitation creates booking demand that has nothing to do with vacation season, and everything to do with a payroll calendar.
That distinction matters for risk, too. A market built on tourism lives and dies by season and sentiment. A market built on a hospital system, an Air Force base, or an energy corridor tends to fill rooms on a Tuesday in February just as reliably as a Saturday in July. It’s a fundamentally different, and in 2026, often better-performing, kind of demand.
Operators using an all-in-one approach can connect Rentals United directly to their existing PMS, extending distribution to 90+ channels and specialist listing sites without changing how they already operate.
The top 10 U.S. markets for short-term rental investing in 2026
The figures below come from AirDNA’s 2026 Best Places to Invest report, which scores markets using its BPTI Score, a composite of demand, revenue growth, and investability, built specifically from homes that are actually for sale right now, not general market averages. Regulations weren’t part of the score itself, but AirDNA excluded any market with primary-residence-only rules or on-site host mandates before ranking began, so every market below is at least operationally viable for a non-owner-occupied rental.
| Market | Avg. Home Price | Annual Revenue Potential | Gross Yield | Occupancy | Primary Demand Driver |
|---|---|---|---|---|---|
| Port Arthur, TX | $243,000 | $35,000 | 14.4% | 77.6% | Oil refining, shipping port, LNG construction |
| Abilene, TX | $336,000 | $55,000 | 16.4% | 77.2% | Air Force base, AI infrastructure, healthcare, education |
| Downtown Saint Paul, MN | $331,000 | $45,000 | 13.5% | 64.1% | State government, corporate HQs, hospitals, events |
| Charleston, WV | $228,000 | $32,000 | 14.1% | 62.9% | State government, hospital system, chemical/energy industry |
| Springfield, IL | $262,000 | $35,000 | 13.2% | 66.0% | State government, heritage tourism, state fair |
| Lake Charles, LA | $287,000 | $37,000 | 12.7% | 60.6% | Petrochemical/LNG workforce, major port |
| Montgomery, AL | $342,000 | $42,000 | 12.2% | 62.6% | Government, healthcare, education |
| Akron, OH | $297,000 | $39,000 | 13.1% | 62.4% | Hospitals, universities, corporate HQs, national park proximity |
| Lebanon, PA | $265,000 | $42,000 | 15.7% | 59.2% | National Guard training center, regional tourism |
| Jackson, MS | $366,000 | $44,000 | 11.9% | 64.4% | State government, medical center, university |
(Top 10 average: ~$296,000 home price, ~$40,500 annual revenue potential, 13.7% gross yield.)
A closer look at four markets that make the “non-obvious demand driver” pattern concrete:
1. Abilene, Texas
Posts the highest yield in the entire ranking, and it isn’t close: 16.4%, with RevPAR up 49% year-over-year, which is the fastest growth on the list. Dyess Air Force Base alone employs close to 9,000 people, and Abilene Christian University, the Hendrick healthcare system, and the Stargate AI infrastructure project add three more independent sources of demand. That diversification shows up directly in the numbers: Abilene holds above 75% occupancy for ten months of the year, dipping to 50–65% only in the coldest winter months. On regulation, the picture is genuinely mixed; one source states hosts need a city permit, while another says no STR-specific law currently exists. So confirming directly with the City of Abilene before buying isn’t optional.
2. Port Arthur, Texas
Takes the top overall BPTI spot on the strength of the largest oil refinery in the U.S., a major shipping port, and a new LNG terminal under construction that’s bringing in thousands of contractors and engineers who all need somewhere to stay (portarthurlng.com).
Booked listings grew 23% in the past year, which is the clearest sign that demand here is still climbing, not plateauing. Regulation is unusually clear for a market this size: a 2025 ordinance requires hosts to register, hold a permit, and remit the city’s 7% hotel occupancy tax, with an online registration portal and active enforcement already in place (citizenportal.ai).
3. Lebanon, Pennsylvania
Is the case for not overlooking the Northeast. At $265,000, it’s one of the more affordable markets on the list, positioned between Hershey and Lancaster, so it picks up travelers who want the region without paying premium lodging rates in the headline towns. The real driver, though, is Fort Indiantown Gap, one of the busiest National Guard training centers in the country, supporting roughly 20,000 Guard personnel and more than 120,000 additional trainees annually. That’s a massive, recurring, non-seasonal source of lodging demand. Registration runs through the City of Lebanon’s Department of Public Safety, with standard safety and licensing requirements.
4. Lebanon, Pennsylvania
At $265,000, it’s one of the more affordable markets on the list, positioned between Hershey and Lancaster, so it picks up travelers who want the region without paying premium lodging rates in the headline towns. The real driver, though, is Fort Indiantown Gap, one of the busiest National Guard training centers in the country, supporting roughly 20,000 Guard personnel and more than 120,000 additional trainees annually. That’s a massive, recurring, non-seasonal source of lodging demand. Registration runs through the City of Lebanon’s Department of Public Safety, with standard safety and licensing requirements.
5. Charleston, West Virginia
Pairs one of the lowest buy-in prices on the list ($228,000) with a 14.1% yield, driven by state government activity, the Charleston Area Medical Center (the state’s largest hospital, with over 5,000 employees), and a lingering “Chemical Valley” industrial base that keeps engineers and energy workers moving through the market. There’s no statewide STR license requirement and no centralized city ordinance yet, though hosts still need to collect state and possibly local occupancy tax (details via proper.insure). This is worth confirming directly with the city, since “no ordinance yet” can change quickly.
The remaining six markets follow the same pattern with their own twist: Downtown Saint Paul proves a dense urban core can still pencil out, with 165 homes for sale as of December 2025 and demand split across state government, corporate headquarters, and two hospital systems. Springfield, Illinois and Jackson, Mississippi both lean on state-capital government travel layered with heritage tourism. Lake Charles, Louisiana has the tightest supply on the list, only 41 homes for sale, thanks to steady petrochemical and port-driven demand. And Akron, Ohio carries the most active listings of any market here (757), a sign of a proven, liquid market rather than an emerging one, powered by hospitals, universities, and corporate headquarters rather than its Cuyahoga Valley National Park proximity alone.
Gross yield vs. cap rate vs. cash-on-cash: three numbers, three different questions
If you’re wondering what is the difference between gross yield, cap rate, and cash-on-cash return? Each answers a different question, and a market that looks strong on one metric can look mediocre on another.
Let’s break them down.
Gross yield (annual revenue divided by purchase price) is the fastest, roughest cut. It’s what AirDNA’s table above shows, and it ignores expenses entirely, which is exactly why it should never be the last number you check.
Cap rate goes a step further: net operating income (revenue minus operating expenses) divided by current property value. Because it strips out financing, it’s the standard way to compare properties independent of how each buyer pays for them. Lodgify’s analysis of these same ten markets used a flat 45% expense ratio (since AirDNA doesn’t publish per-market expense data) to estimate cap rate. This is a reasonable planning assumption, though real expense ratios vary by market and property type. Applying that method to AirDNA’s own Abilene numbers is a clean way to see the gap in action: $55,000 in annual revenue, minus 45% in expenses, leaves roughly $30,250 in NOI. Divided by the $336,000 home price, that’s a cap rate of about 9%, which is a full seven points below the 16.4% gross yield on the same property. Most experts consider a cap rate between 5% and 10% solid; below that (1–2% is common in dense, high-demand major cities) can still be profitable but leaves little room for error, while much higher cap rates usually signal higher risk alongside the higher return.
Cash-on-cash return narrows the question further: annual pre-tax cash flow (NOI minus your actual mortgage payments) divided by the actual cash you put in, such as down payment, closing costs, and reserves, not the full purchase price. This is the number that reflects leverage, which is why two investors buying the identical property with different financing can land on very different cash-on-cash figures. Experienced short-term rental investors typically target a double-digit cash-on-cash return specifically because it needs to compensate for the operational risk of running hospitality rather than a passive lease.
One more nuance worth carrying into any of these calculations: city-level averages can hide enormous variation block to block. In New York City, for example, cap rate has been estimated at around -1.76% in Times Square versus roughly 1.54% in nearby Queens. The same city results in two wildly different numbers. Neighborhood-level data will always tell you more than a city average, in any market on this list or off it.
None of these numbers work if you underestimate what actually comes out of gross revenue before it becomes NOI. Channel commissions typically consume a meaningful share on their own, and new entrants consistently underestimate how much that distribution cost reshapes cash flow. Furniture depreciation, turnover cleans, and rising utility costs compound quietly in the background.
In climate-risk zones, insurance premiums have climbed enough to reshape a property’s entire long-term viability, not just its quarterly numbers. Pricing all of this in before you make an offer, and not after you own the property, is what separates a professional operator from a speculative buyer.
5 steps to evaluate any 2026 short-term rental opportunity
Whether or not the market you’re considering made this list, the same evaluation framework applies:
- Audit local zoning laws and recent city council activity. As Abilene shows, even sources can disagree on current rules; go to the primary source (the city or county website) before you underwrite anything.
- Analyze seasonal occupancy data, not a peak-season snapshot. Markets like Abilene and Port Arthur hold occupancy above 75% because their demand isn’t seasonal. That’s a meaningfully different risk profile than a beach town that lives on three summer months.
- Calculate true operational overhead, including the costs that don’t show up until after closing. The gap between gross yield and cap rate above is exactly this step, made concrete.
- Assess property management infrastructure, since automation directly affects margins at scale, especially in markets with mixed guest types (business travelers, medical visitors, leisure guests) who book through different channels.
- Project multi-channel revenue potential instead of modeling around a single platform. Vrbo, Booking.com, and direct channels capture meaningful share that an Airbnb-only model leaves behind, and that gap widens in markets with government, medical, or corporate demand.
Relying on a single booking platform exposes any new investment to real algorithmic and suspension risk, and building manual multi-channel connections yourself is slow and error-prone. Rentals United provides reliable API connections to all major channels, giving new investments diversified revenue from day one. Additionally, a channel manager that scales with the portfolio removes the friction of managing availability across very different traveler demographics, whether that’s a Guard trainee, a hospital visitor, or a weekend leisure guest.
Conclusion
The best short-term rental markets for 2026 aren’t where conventional wisdom says to look. The data points toward cities built on durable, non-seasonal demand (military bases, energy corridors, hospitals, government offices, and universities) trading at a fraction of traditional vacation-market prices, at a moment when financing costs have finally eased. Getting the market right is step one; getting the underlying numbers right (gross yield, cap rate, and cash-on-cash are not interchangeable) is step two. And once capital is deployed, a distribution layer connected directly to your property management system is what turns a smart acquisition into a channel reach advantage that runs in the background instead of a manual project.
FAQ
Do the best 2026 short-term rental markets have to be beach or ski towns? No; in fact, none of AirDNA’s top 10 highest-yield 2026 markets are traditional beach or ski destinations. The strongest performers are driven by military bases, energy and industrial activity, hospitals, government offices, and universities, which produce steadier, less seasonal demand than tourism alone.
What’s the difference between cap rate and cash-on-cash return? Cap rate is net operating income divided by property value, and it ignores how the property is financed; it’s the standard way to compare deals independent of leverage. Cash-on-cash return divides annual pre-tax cash flow (after mortgage payments) by the actual cash invested, so it reflects financing directly. The two numbers can differ significantly on the same property.
How do local zoning laws impact short-term rental profitability? Strict municipal zoning can cap your maximum operating days per year, and a limit as low as 90 bookable days is enough to break most revenue models outright. Rules also change fast and sometimes conflict between sources, as seen with Abilene, TX, so confirming directly with the city before buying is a required step, not optional due diligence.
What’s a healthy cash-on-cash return for vacation rentals in 2026? Most investors target somewhere between 10 and 15 percent. That range exists to offset the operational risk and seasonal demand swings that come with running hospitality, rather than a simple long-term rental, and it’s a different number from cap rate, which typically runs 5–10% on a solid deal.
Do I need to replace my PMS to reach more booking channels? No. A dedicated channel manager integrates directly with your existing property management system — connecting to 60+ platforms and extending your distribution to 90+ channels — without forcing a costly software migration.
How do hidden operating costs affect rental yields? Unplanned expenses like spiking insurance premiums and local lodging taxes eat directly into net operating income. This is precisely the gap between a market’s advertised gross yield and its real cap rate; forecasting these neighborhood-specific costs before you commit capital is what separates an accurate projection from an optimistic one.