Starting a short-term rental business in buzzy destinations like Destin, Florida or Vail, Colorado has a lot of appeal, but a new report says that some of the small and mid-sized cities across America might be the better place to start.
In January, AirDNA released a report that ranks the best places to invest in short-term rentals and it found that small cities and rural areas saw a 16% increase in short-term rental listings, while mid-sized cities grew by 10.3%.
“You have to look at the geographic diversity,” Jamie Lane, SVP of Analytics and Chief Economist at AirDNA, tells CNBC Make It. “There’s an opportunity for investment across the United States, and it’s not isolated to one region, but it can take digging into different markets.”
To rank the cities, AirDNA analyzed over 540,000 properties currently for sale as of January 1, 2025, and calculated the potential rental income for each property relative to its listing price.
Some of the other factors considered included growth in revenue per short-term rental listing in the past year and the number of nights rentals were booked.
“As you dig into these best places to invest, they tend to be areas without a lot of hotel inventory,” Lane said. “We’ve seen occupancies or average daily rates that short-term rentals can earn continue to increase as people look for new areas to travel to.”
Illinois and Ohio both had minimal home value appreciation, and each state has two cities ranked on AirDNA’s top 10 list.
“There are areas in these markets in particular that tend to have big industries like healthcare that have been very positive towards short-term rental demand,” Lane says. “Doctors, nurses and even patients help drive the demand for temporary housing in these areas.”
Peoria, Illinois is the best place to invest in short-term rentals
Average revenue potential: $31,131
AirDNA ranked Peoria, Illinois, as the best place to invest in short-term rentals. The short-term rental listing growth from 2023 to 2024 in the Midwestern city is 21.1%, while the gross yield is 15.3%. Peoria also has an occupancy rate at 58.9%.
Peoria is a place where the average listing is earning more today than it did last year, Lane says.
“The market is still undersupplied and more supply keeps coming in. That supply is able to get absorbed in the market,” he adds.
“People are staying in those rentals, and we’re not seeing any negative impact on the existing operators.”
Peoria, Illinois
Davel5957 | Istock | Getty Images
Peoria is considered to be relatively cheap and has below-average costs for things like transportation and utilities, according to U.S. News and World Report.
It also has the highest property taxes in the country compared to the market value of homes, according to a 2024 SmartAsset report. Homeowners pay 2.64% of the value of their homes in annual property taxes, the highest in the country.
The median amount spent in property taxes for owner-occupied homes was $4,455 a year and the median home value in Peoria was $168,900.
The 10 best places to invest in short-term rentals
- Peoria, Ill.
- Fairbanks, Ala.
- Akron, Ohio
- Columbus, Ga.
- Crescent City, Calif.
- Shreveport, La.
- Page, Ariz.
- Rockford, Ill.
- Dayton, Ohio
- Frankfort, Ky.
Fairbanks, Alaska, ranked as the No. 2 best place to invest in a short-term rental.
The average revenue potential is $49,459, while the gross yield is 15.1% and the occupancy rate is 66.5%.
Fairbanks, Alaska
Walter Bibikow | Digitalvision | Getty Images
Lane says Fairbanks has multiple demand drivers. In the summer, there’s a lot of tourism, specifically geared toward the national parks in the state. There are also a lot of different industries in the city.
“The oil and gas markets are big, so you have a lot of workers coming in for multiple months, and that’s where short-term rentals can be very popular for workers,” he says.
“The temporary housing can be sort of provided by the short-term [rental] industry and essentially having it available to rent out for months at a time as opposed to someone having to stay in a hotel or companies bringing in trailers.”
Fairbanks is the second-largest city in the state of Alaska. In the winter months, it is a hot spot for people who want to see the northern lights.
The city is home to the University of Alaska Fairbanks and has an international airport.
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