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Short-term rentals (STRs) once seemed like a gold rush opportunity in major metros. Platforms like Airbnb and Vrbo helped property owners turn spare rooms, condos, and even brownstones into income streams. In popular neighborhoods of New York, Los Angeles, or Chicago, hosts could often count on a steady stream of travelers willing to pay top dollar for a few nights’ stay.
But 2025 looks different. With stricter regulations, changing travel patterns, and rising operating costs, many investors and homeowners are asking the same question: Are short-term rentals still worth it in big cities?
Financing the Short-Term Rental Dream
Before diving into profitability, it’s worth looking at the front end: how properties are financed. STR buyers often approach lending differently than traditional long-term landlords. The volatility of nightly bookings and seasonal swings means lenders may underwrite these properties with extra caution.
Comparing investment property loan options can help buyers weigh the pros and cons of financing STRs versus steadier long-term rentals. Knowing your borrowing costs and loan flexibility is essential before entering a market where regulations can change overnight.
The 2025 Landscape for STRs
Big cities remain high-demand destinations, but the economics of STRs have shifted. Here are a few realities owners face today:
- Evolving Regulations: New York City’s Local Law 18 essentially bans many traditional STRs under 30 days unless hosts are registered and present in the unit. Los Angeles enforces strict caps on rental days. Other cities impose hefty fines for noncompliance.
- Occupancy Volatility: Major events, like conventions, festivals, or sports tournaments, still create booking spikes. But off-season occupancy can be soft, especially with more competition from hotels that are now aggressively pricing.
- Rising Costs: Guests expect hotel-level cleanliness, which means higher cleaning fees and frequent turnovers. On top of that, platforms tack on service charges, and local governments collect occupancy and lodging taxes.
- Shifts to Midterm Rentals: With regulations limiting short stays, many owners pivot to 30–90 day rentals aimed at traveling nurses, consultants, or students. These often outperform nightly bookings by offering more stability with less wear and tear.
Breaking Down Profitability
So how do you know if an STR still makes sense? A simple break-even framework can help:
- Estimate occupancy realistically
- Calculate fixed costs
- Add variable costs
- Include compliance costs
- Compare to long-term rents
In many metros, landlords find that a well-priced long-term lease or midterm rental can provide steadier returns without regulatory risk.
Comparing STRs to Traditional Leases
Consider the following when comparing a short-term rental to a traditional lease:
- Short-term rentals can generate higher gross income but require more hands-on management and are more exposed to policy shifts
- Midterm rentals hit a sweet spot in some markets by reducing turnover and operating costs while commanding higher rates than yearlong leases
- Traditional leases offer stability, predictable income, and fewer headaches with compliance or guest management
For example, a Harlem brownstone owner renting a garden apartment long-term might enjoy steady income at 90% occupancy with minimal effort. That same unit as a short-term rental could double gross revenue in peak months, but might sit empty during slower seasons and face legal hurdles.
When STRs Still Make Sense
Despite challenges, STRs aren’t dead. They still work well in certain contexts:
- Properties near convention centers or stadiums with consistent event calendars
- Units in cities with clear, host-friendly regulations
- Investors who specialize in hospitality and treat STRs like micro-hotels
- Owners who are willing to pivot seasonally between nightly and monthly bookings
Final Thoughts
In 2025, short-term rentals in big cities are less of a guaranteed cash cow and more of a calculated risk. Success depends on careful due diligence, like knowing local laws, running conservative financial models, and planning for fluctuations in demand.
For many urban property owners, STRs can still be worth it, but only when the premium over traditional leasing justifies the extra work and risk. In other cases, midterm or long-term rentals may offer a better balance of income and peace of mind.
The bottom line: STRs aren’t “over,” but they require sharper strategy, stricter compliance, and realistic financial planning to remain profitable in today’s urban markets.
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