Thinking of diving into the short-term rental market in 2025? With changing travel trends, evolving work habits, and improved financing options, this could be your best year yet to start or expand your STR portfolio. But where should you look — and how should you fund the deal? Let’s dig into the top-performing markets and what you need to know to invest smartly.

Looking at the Data

Each year, new pockets of opportunity open up across the U.S. for short-term rental investors. In 2025, the most profitable markets tend to offer a combination of strong nightly rates, low competition, favorable regulations, and year-round demand. These aren't just your usual beach towns and ski resorts—think mid-sized cities with growing tourism or access to national parks, events, or business hubs.

Many of these markets are seeing a steady uptick in occupancy and average daily rates (ADR), giving investors a strong path to both cash flow and appreciation. The key is finding where the numbers make sense — not just emotionally, but financially.

Why STR Financing Isn’t One-Size-Fits-All

Just because the property is right doesn’t mean the financing will be. Traditional lenders may balk at STR projections, and underwriting for vacation rentals is still an emerging niche. That’s why understanding the various financing routes — including DSCR (Debt Service Coverage Ratio) loans, local banks, and portfolio lenders — is crucial.

DSCR loans are especially popular for STRs because they focus on the property's income potential rather than the buyer’s personal income. They can offer flexibility and faster approvals, but rates and terms vary, and not all lenders will value STR income the same way.

For those looking to expand quickly or scale across markets, building a relationship with a vacation rental-friendly lender can mean the difference between staying stuck and scaling fast.

Setting Yourself Up for Success

Regardless of where you invest or how you finance, success in STRs depends on preparation. That means:

• Running your numbers: Base your projections on conservative occupancy estimates and realistic nightly rates. Tools like AirDNA and STR-friendly calculators can help.

• Understanding regulations: Local ordinances can make or break a short-term rental. Make sure STRs are legal and that you understand licensing, zoning, and tax rules.

• Preparing for seasonality: Know when the highs and lows hit your market. Successful STR operators plan for the off-season and know how to keep occupancy up year-round.

• Having reserves: STRs can be lucrative, but they also come with higher costs — cleaning, furnishings, and unexpected repairs. Set aside a reserve fund to protect your cash flow.

The short-term rental landscape in 2025 is brimming with opportunity, but winning in this space requires more than luck or location. You need a game plan — one built on solid data, smart financing, and the right systems to manage your property profitably.

Whether you’re buying your first STR or adding to your growing portfolio, focus on sustainable cash flow, compliance, and customer experience. Done right, a well-financed STR in a profitable market could be one of your best real estate plays this year.