Short-term rentals (Airbnb) — the regulatory wildcard
Vacation rentals can generate 1.5–3× the gross of long-term rentals — but operating costs are higher, vacancy is higher (50–70% occupancy is normal), management runs 20–35% of gross, and regulatory risk is the biggest single threat to the entire investment thesis.
New York banned most short-term rentals effective September 2023. Honolulu, Santa Monica, Paris, Barcelona, and many others have major restrictions. Before buying anything in this strategy: verify current rules, verify the trajectory of those rules (is the city tightening or loosening?), and verify you could fall back to long-term rental if STR became impossible.
Operating differences vs. long-term: cleaning between guests (typically passed through), much more frequent wear and tear, higher utilities (you cover them), seasonal demand, intensive listing/photo/pricing optimization. Co-host or full-service STR management: 20–35% of gross income, versus 8–12% for long-term.
Tax angle: if you materially participate in the STR (average stay ≤7 days, you do meaningful work) the losses can offset W-2 income — the so-called "STR loophole." That can be a significant tax shield at high marginal rates.