Three Major Mistakes People Make In Short-Term Rental Investing
Avery Carl, founder of The Short Term Shop and The Mortgage Shop, has helped over 5,000 clients become short term rental investors.
The short-term rental market in the U.S. is booming. The market was worth an estimated $72 billion in 2025 and is expected to surpass $125 billion by 2033.
I’ve been helping people buy, sell, finance and manage short-term rentals since 2017. My team and I have closed over $4 billion in short-term rental transactions across 20-plus markets. What I’m seeing right now in high-volume vacation markets is that it’s a great time to be a buyer. Around 80% of the properties I come across in these markets are either empty vacation homes or short-term rentals. That kind of inventory gives buyers leverage. If a seller won’t come down on price, there’s usually a comparable property a few streets over where the seller will. You don’t have to fall in love with the first deal you see.
High-income earners and business owners who buy short-term rentals can also benefit from a tax code strategy that results in significant tax savings. Typically, a property is depreciated for tax purposes over 27.5 years. However, a 2025 law restored short-term rental owners’ ability to use 100% bonus depreciation to accelerate this process in the first year of ownership, enabling owners to offset their non-passive income, including W2 or other business income.
Because of all this, I’m seeing interest in short-term rental investing surge, especially among high-income earners and business owners. There’s never been more information available about how to get started. The problem is that most of it is noise, and it’s getting harder to tell who actually knows what they’re talking about. These are the three biggest misconceptions I see people making as they build their short-term rental portfolios..
1. You need to buy in an ‘undiscovered’ market.
People often overthink where they should buy a short-term rental. They psych themselves out when they look at real estate in popular vacation destinations, thinking, “There are too many vacation rentals at this beach. I want to buy where there is no competition.”
That’s the opposite of what I tell my clients, and it’s the opposite of how I invest. You want to buy where people are already going on vacation. Where there’s already demand. There’s a reason you see a ton of vacation rentals in beach and mountain towns. Those places have the tourism infrastructure to support them. Try running a vacation rental somewhere without reliable cleaners, handymen or a guest base. It doesn’t work.
Don’t let fear of competition hold you back from buying in a market that hosts millions of tourists every year. Look at it this way: You only have to snag about 100 of those groups a year to be successful. You’re not competing with the entire higher market of short-term rentals. You’re just competing for a small fraction of properties with your bedroom count in your area.
2. There’s one ‘right’ way to do short-term rental investing.
It’s easy to get caught up in all the noise you encounter on social media, with different influencers insisting you need to do X, Y or Z to succeed. Be discerning about who you listen to. Have they done what you want to do, where you want to do it? Are they trying to sell you something or profit from making you feel insecure? Only take advice from people who have bought in the same asset class and market you’re interested in. If an influencer specializes in real estate in the Rocky Mountains and you’re looking to buy in the Bay Area, it’s probably not a good fit.
I strongly believe that there is more than one way to be successful as a short-term rental investor—and you know more than you think you do. The best education you can give yourself as a new vacation rental investor is to be a vacationer in the market you want to buy in. You have been a guest yourself, so you understand what guests are looking for in terms of location, space, amenities, design and decor. Your local knowledge is incredibly valuable. This is a very basic insight that people often overlook.
I bought my first short-term rental in the Smoky Mountains in Tennessee after renting cabins there with a group of friends. If you grew up spending summer vacations on the Florida coast, and it means something to you, lean into that reason. What time of year do people visit this area? Who are they traveling with? What do they want to do when they get there?
3. You should take rental history at face value.
People new to short-term rental investing often believe that a property’s rental history is the most important factor in a purchase. But the rental history is just one data point among many that you need to weigh. To understand the bigger picture, subscribe to data services, or call local property managers and ask for projections on properties you’re looking at.
Recognize that the rental history may be more of a reflection of the property manager than the property itself. Look at the listing. Are the photos blurry? Can you tell whether the furniture is falling apart or the amenities are outdated? How much effort would it take for you to clean up the listing and the property?
Here’s a real example. I saw a four-bedroom property near the beach listed for $1 million with a rental history of $23,000 a year. On paper, that looks like a disaster. But I already own a three-bedroom in the same neighborhood that does $110,000 a year. The four-bedroom was bigger with a better layout. I knew the income potential was there. I ended up losing that one because the seller wouldn’t negotiate, but I bought a nearly identical place a block away for significantly less that now brings in over $100,000 a year in rental income.
Information overload is a real danger for new investors. You can easily get pulled in too many directions and try to implement too many strategies at once. My advice is to keep learning, but run your own race. Don’t lose sight of the reason that you want to buy in this market in the first place—the “why” behind all your other decisions.
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