AirDNA reports under-the-radar markets yield 10% to 14% return for short-term rentals

AirDNA reported that under-the-radar vacation rental markets in the United States produced average annual yields between 10% and 14% in 2026. This metric, which measures the relationship between average annual short-term rental revenue and the average home purchase price, has emerged as a critical benchmark for operators trying to maintain profitability during a period of high mortgage rates.

As traditional vacation destinations experience rising acquisition costs and inventory saturation, investors are shifting their focus toward smaller regional hubs and suburban municipalities. By identifying areas where home prices remain relatively low but local demand drivers remain stable, operators can secure stronger cash flows relative to their initial capital investment. Understanding how this yield is calculated, and what operational variables influence it, is essential for anyone managing or investing in short-term rentals today.

How the metric works

The short-term rental yield is a financial metric that compares the gross annual revenue generated by a property to its underlying asset value or purchase price. It is calculated by taking the average annual short-term rental revenue and dividing it by the average home price in a given market. The resulting percentage represents the gross return on investment before accounting for operational expenses, taxes, insurance, and financing costs. Because it focuses on the relationship between real estate value and rental income, it serves as a reliable indicator of capital efficiency across different geographic regions.

This metric behaves dynamically based on two primary variables: real estate acquisition costs and rental performance. When home values in a market rise faster than the average daily rates and occupancy levels can support, the yield compresses. Conversely, when home values remain affordable while rental demand remains steady or increases, the yield expands. For investors, a higher yield indicates that a market offers a more favorable ratio of revenue potential to entry cost, making it easier to cover mortgage payments and generate positive cash flow.

According to AirDNA, the top-performing smaller markets in the United States delivered yields between 10% and 14% in 2026. For example, Rockford, Illinois, achieved a 14% average yield, supported by an average home value of just over $300,000 and an average annual revenue potential of roughly $42,000. In Akron, Ohio, the average yield reached 13%. Other markets analyzed by AirDNA displayed varying entry costs and revenue potentials that achieved similar yields. Houghton, Michigan, recorded an average home value of $266,555, while Michigan City, Indiana, recorded an average home value of $482,304. Across the ranked locations, potential average annual revenues spanned from $27,833 to $50,046, demonstrating how different combinations of home prices and rental incomes can yield comparable returns.

How it was measured

The yield figures and market rankings were compiled and analyzed by AirDNA, a short-term rental data and analytics firm. The company released its report on the Best Under-the-Radar Airbnb Locations in the U.S. of 2026 on a Monday, sharing the results with Realtor.com. To perform the analysis, AirDNA researchers utilized data from short-term rental bookings on Vrbo and Airbnb.

To isolate smaller, under-the-radar vacation rental markets, AirDNA researchers applied several strict filters to their dataset. First, they limited their analysis to geographic areas that contained between 400 to 1,000 active listings. Second, they required that candidate markets demonstrate positive year-over-year inventory growth. Third, they required rising annual revenue per available room, or RevPAR, which measures a property's ability to fill its rooms at a competitive average rate. Finally, the researchers ranked these qualified markets by yield, which was calculated as the average annual short-term rental revenue relative to the average home price. The final list highlighted 17 locations that met these criteria while also lacking active regulatory bans or stringent restrictions on short-term rentals, and having 20% or fewer listings that are professionally managed.

What moves this number

The primary driver of the yield metric is the balance between local housing affordability and consistent, recurring demand. When mortgage rates remain high, the cost of financing makes expensive real estate acquisitions difficult to justify. In this environment, markets with lower average home values provide a lower barrier to entry, allowing investors to make a decent down payment and still achieve favorable financial projections. According to Linda Rollins, a senior research analyst at AirDNA, these affordable entry points are critical to making the numbers work for new investments.

On the revenue side of the equation, yield is moved by specific, localized demand generators that attract visitors throughout the year. AirDNA economist Bram Gallagher noted that each top-performing smaller market benefits from a reliable source of recurring demand. In the Midwestern United States, many markets draw steady traffic from proximity to national parks and outdoor recreation areas. For instance, Gary and Michigan City, Indiana, sit near the Indiana Dunes, while Akron, Ohio, is located near Cuyahoga Valley National Park. Proximity to these natural attractions became a major demand driver during the COVID-19 pandemic and has remained a durable draw for repeat visitors.

In other regions, military installations and industrial activity anchor local demand. In the South and West, family members attending basic training graduations at Fort Sill near Lawton, Oklahoma, provide a steady stream of short-term bookings. Similarly, traveling contract workers on temporary assignments for four to six months drive demand in Midland, Texas, due to its oil fields, and in Abilene, Texas, due to its data centers. In Rockford, Illinois, sports tourism serves as a major driver, with youth and amateur tournaments at venues like Mercyhealth Sportscore One and Two bringing in teams and families for multi-night stays, alongside demand from traveling medical professionals in the healthcare sector.

To illustrate how these dynamics function in practice, Linda Rollins of AirDNA utilized her firm's data to purchase a $400,000 four-bedroom short-term rental in the Akron suburb of Stow, Ohio, in late 2025. Located a 10-minute drive from Cuyahoga Valley National Park, the rental launched in December 2025. Rollins and her husband expect the property to earn $70,000 annually, which is $5,000 ahead of her initial projections, demonstrating how niche demand drivers can support strong revenues in affordable suburban corridors.

The impact of regulatory costs

While gross yield calculations focus on the relationship between purchase price and rental revenue, the actual net yield realized by an operator is heavily influenced by local regulatory environments and compliance costs. Municipalities across the United States are increasingly implementing rules that add administrative and financial burdens to short-term rental operations, which can directly compress profit margins.

For example, in Hillsborough County, Florida, county commissioners unanimously approved a new short-term rental ordinance scheduled to take effect on January 1. Under these new rules, short-term rental owners are required to register their properties and pay a $200 annual registration fee for each rental unit. The ordinance also mandates that owners designate a representative who can respond to problems at the property and grants county code enforcement the authority to conduct inspections when complaints are filed. While supporters argue these measures are necessary to address issues such as parties and occupancy violations, property managers like Hannah Schultze of Schultze Property Solutions have pointed out that such regulations place additional costs on responsible owners who are simply trying to protect their investments.

“But do not confuse the bad actors with the thousands of ordinary property owners who are simply trying to make a living, protect their investment and have a place to call home in Florida,”

Furthermore, rapid inventory growth within a localized area can alter the competitive landscape and affect occupancy rates. In the Bay Crest Park neighborhood of Hillsborough County, resident Leigh Ann Wrona noted that the number of short-term rentals grew from “maybe 20 before” to “over a hundred, I think, or 126 now.” This dramatic increase in listing density can lead to supply saturation, making it more difficult for individual hosts to maintain high occupancy levels and stable average daily rates, ultimately threatening the yields that initially attracted investors to the area.

The influence of booking channels

Another critical factor that moves the revenue component of yield is the channel mix an operator uses to secure bookings. Relying solely on major online travel agencies can reduce net revenue due to the substantial guest service fees and platform charges associated with those marketplaces. These fees increase the final cost to the traveler, which can limit demand or force hosts to lower their base nightly rates to remain competitive.

To combat this compression, many hosts are turning to direct-booking strategies. Emerald Coast By Owner, a vacation rental marketplace focused on the Gulf Coast, recently launched an integration with Hospitable, a vacation rental management platform. This integration allows hosts to directly connect their property descriptions, photographs, amenities, rates, and calendar availability from Hospitable to the booking network. Because Emerald Coast By Owner does not charge travelers a traditional guest service fee, booking directly can help guests save up to 20% on their vacation rental compared to major platforms that add service fees.

For hosts, these savings can be used strategically to either lower the total price to attract more bookings or maintain their base rates while capturing a larger share of the traveler's total spend. By diversifying their marketing channels and reducing their dependence on a single marketplace, operators can protect their margins. This is particularly valuable for professional property managers who handle multiple properties and need to streamline their administrative workflows while maximizing their net rental income.

What to watch

As the short-term rental market continues to adjust to high interest rates and shifting traveler preferences, operators should monitor several key indicators to protect and optimize their yields.

• Monitor local municipal and county commission agendas for proposed short-term rental ordinances, registration fees, or zoning restrictions that could increase compliance costs.
• Audit your booking channel distribution to determine if integrating a direct-booking channel could help bypass platform service fees and improve net margins.
• Track the ratio of professionally managed listings in your target market to identify signs of supply saturation that could downwardly pressure occupancy and rates.
• Analyze local demand drivers, such as regional sports facility schedules or national park visitor trends, to ensure your pricing strategy matches peak visitation periods.