A short-term rental investment is when you buy or convert a property to rent it out for brief stays, typically under 30 days, on platforms like Airbnb or Vrbo, with the goal of earning income from nightly bookings.

And in 2026, the smartest STR investments aren’t where you’d expect.

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Forget Destin beaches and Vail ski slopes. AirDNA's latest analysis reveals small and mid-sized cities across America offer investors the strongest returns, CNBC reports (1). Port Arthur, Texas, claims the top spot, while cities like Saint Paul, Minnesota, and Springfield, Illinois dominate a list of unexpected winners.

"When we look at the types of markets that continually come up top of the list, it's not your traditional beach or mountain markets," Jamie Lane, chief economist at AirDNA, told CNBC. "It's a trend that shows people want to travel and see rural areas around the country, which started during the pandemic and has still continued” (1).

Here’s a closer look at which markets made the list, and what makes them stand out for investors right now.

AirDNA's methodology looked beyond simple revenue projections to evaluate what actually makes a market profitable. The company analyzed thousands of homes currently for sale, calculating potential annual rental income relative to listing price (1), essentially measuring return on investment rather than gross revenue alone.

The analysis also factored in occupancy rates, booking frequency, revenue growth trends and the strength of existing rental properties based on performance data from Airbnb, VRBO and Booking.com (1).

Based on these metrics, AirDNA identified these markets with their estimated average annual revenue before expenses, like mortgage, taxes, insurance and maintenance (1):

Port Arthur, Texas: $35,000

Abilene, Texas: $55,000

Downtown Saint Paul, Minnesota: $45,000

Charleston, West Virginia: $32,000

Springfield, Illinois: $35,000

Lake Charles, Louisiana: $37,000

Montgomery, Alabama: $42,000

Akron, Ohio: $39,000

Lebanon, Pennsylvania: $42,000

Jackson, Mississippi: $44,000

The pandemic created an STR boom, but many once-hot markets now face oversaturation. Meanwhile, local governments have implemented tighter regulations. Higher mortgage rates (around 6% now versus pandemic-era lows of 2.21% in 2021) have fundamentally changed the investment math, according to Freddie Mac data (2).

If you're considering buying or converting a property, know that location has become the single biggest driver of profitability. Investing in the wrong market could mean slim margins or losses.

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The critical factor is revenue relative to purchase price. For example, a $150,000 Port Arthur home generating $35,000 annually offers 23% gross yield versus an 8% yield from a $1 million Destin condo generating $80,000.

"Just because an area has high revenue potential, that doesn't necessarily mean it's a good investment," Lane explained to CNBC. "We have to look at that in relation to the cost of the home” (1).

These markets benefit from stable, year-round demand. Port Arthur serves oil workers and tourists exploring Gulf Coast marshlands. The city's STR inventory grew 23% from 2024 to 2025, with 78% occupancy (1).

Abilene ranked second, partly due to OpenAI's Stargate data center opening there. The city's STR inventory grew 15% year-over-year, with 77% occupancy (1).

Unlike seasonal beach markets, cities driven by business travel maintain steadier year-round bookings. These markets also face less competition than oversaturated vacation destinations.

Local governments have strengthened regulations significantly. Most jurisdictions now require permits with registration numbers displayed. Operators face state and local lodging taxes — averaging 13.5% nationally according to the American Hotel & Lodging Association's lodging tax study (3).

Then there's mortgage rates. In real numbers, 7% interest on a $150,000 property with 20% down means about $860 monthly — $10,300 annually before taxes or insurance. That's 29% of Port Arthur's estimated revenue gone to mortgage alone.

And don't forget about insurance. STR insurance typically costs 25% more than standard homeowners policies, according to the Insurance Information Institute (4). Full-service property management charges can be 20% to 30% of revenue, according to AirDNA (5).

On top of these things, new listings may struggle to achieve expected occupancy rates initially, due to limited reviews and lower search visibility. Not surprisingly, "listings with a lot of 5-star reviews are able to bring significantly more reservations than similar listings with mediocre reviews, (6)" as Summer OS notes.

Not all short-term rental markets are created equal. Investors who focus on data-driven markets with strong occupancy and reasonable prices position themselves for success. So, it's crucial to evaluate and understand your market's complete story before investing. Here's how:

1. Research local regulations by contacting city planning departments directly. Confirm STR legality and understand permit requirements.

2. Run conservative projections assuming 60% occupancy. Short-term rental operating costs typically range from 30–70% of gross revenue, according to Global Property Guide (7), so subtract at least 30% for management and expenses. Model current mortgage rates.

3. Study competition on sites like Airbnb and VRBO. Dozens of similar listings with limited reviews signal possible oversaturation.

3 Verify demand drivers. Temporary factors like construction projects don't sustain long-term viability. Look for stable factors like established industries, medical facilities or regional attractions.

4. Calculate break-even by dividing annual costs by your average nightly rate. Understanding required booking nights shows your margin for error.

As travel trends shift and investment math tightens, the old playbook is no longer a guarantee of profits. In 2026, the strongest short-term rental returns aren’t coming from postcard destinations — they’re emerging from overlooked cities quietly outperforming the usual hotspots.

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CNBC (1); Freddie Mac (2); American Hotel & Lodging Association (3); Insurance Information Institute (4); AirDNA (5); Summer OS (6); Global Property Guide (7)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.