How Sean Rakidzich Picks STR Markets in 2026: A 5-Filter System
TL;DR
Sean Rakidzich uses a 5-filter system to identify profitable short-term rental (STR) markets in 2026, eliminating 95% of ZIP codes before property tours.
The system prioritizes regulation compliance, rent-to-revenue ratio, event thickness, supply slope, and exit optionality, with the rent-to-revenue ratio being a critical filter that disqualifies many cities.
Sean recommends focusing on markets with thick, distributed demand and stable regulatory environments to ensure long-term profitability and adaptability. By Sean Rakidzich, 155-property operator. Strategy session at rakidzich.com/book.
Market at a Glance
| Tier | Signal | Action |
|---|---|---|
| Green | Clear permit path, no cap, stable for 3+ years | Proceed to math |
| Yellow | Permit exists, cap under discussion | Only buy, never lease |
| Orange | Owner-occupied only, or primary-residence rule | Skip unless you live there |
| Red | Active ban or pending vote within 90 days | Do not enter |
- Regulation first. No permit path, no deal. Skip cities with pending caps.
- Rent-to-revenue ratio. Monthly rent must be under 25% of projected monthly STR gross.
- Event thickness. A market needs at least 20 demand peaks a year, not one.
- Supply slope. Active listing growth under 8% year over year beats raw demand.
- Exit optionality. If STR gets banned tomorrow, can the unit cover rent on a mid-term lease?
The Regulation Filter Runs Before Any Math
Rakidzich starts every market review by pulling the city code. Not a Reddit thread. The actual ordinance PDF. If a city has an active cap, a pending referendum, or a zoning overlay that blocks non-owner-occupied rentals, the ZIP is dead on arrival.
He has watched operators lose six-figure build-outs in Dallas, New Orleans, and Honolulu because they trusted a leasing agent over the municipal record. The pattern is the same each time. Someone signs a 24-month lease in February. The city council votes in June. By September the listing is delisted and the rent keeps coming due.
The counter-move is boring and effective. Read the code. Call the permit office. Ask when the next council agenda drops.
The Three Regulation Tiers
| Tier | Signal | Action |
|---|---|---|
| Green | Clear permit path, no cap, stable for 3+ years | Proceed to math |
| Yellow | Permit exists, cap under discussion | Only buy, never lease |
| Orange | Owner-occupied only, or primary-residence rule | Skip unless you live there |
| Red | Active ban or pending vote within 90 days | Do not enter |
For a broader view of how rules shift mid-cycle, the primer at navigating updated short-term rental regulations walks through the 2025-2026 wave city by city.
The Rent-to-Revenue Ratio Kills Most Cities
The rent-to-revenue ceiling Rakidzich uses on every rental arbitrage deal. Above this number, margin collapses the moment occupancy drops 5 points.
How He Pulls the Revenue Number
He does not use a single data source. He pulls three, then takes the median. Industry dashboards give him the top-down. AirROI gives him a free cross-check. And he manually samples 20 active listings in the target ZIP that match bedroom count and bathroom count.
The manual sample is the step most new operators skip. A dashboard tells you the ZIP average. The sample tells you what the top quartile is actually earning, because that quartile is where your listing will live if you operate well.
Event Thickness Beats a Single Demand Peak
A market with one giant weekend a year is a trap. Nashville on CMA weekend, Louisville on Derby, Indianapolis on the 500. Those peaks price the rest of the year out of proportion, and operators overpay on rent because they anchor on the peak.
Thick demand protects you from one bad quarter.
Event Thickness Audit in 30 Minutes
- Pull the convention calendar. Every city with a convention bureau publishes next year's events. Count dates over 5,000 attendees.
- Add the university schedule. Move-in, move-out, homecoming, graduation, parents weekend, and home football games. That is 8 weekends minimum.
- Layer the hospital system. Travel nurse contracts, residency interview season, and medical conferences often run 30+ nights a year.
- Check the wedding venues. Search venue Instagram for booked weekends. Wedding towns pull consistent 2-night stays May through October.
- Map peaks across the calendar. If peaks cluster in one month, you have a seasonal trap. If they spread across 9 months, you have a thick market.
Supply Slope Matters More Than Current Supply
Current count is a snapshot. Slope is the story.
The Saturation Signal
Exit Optionality Is the Insurance Policy
This means he avoids tourist-only towns where the local economy cannot support $2,800 a month in rent without the STR premium. Park City satellites, Gulf Shores side streets, and remote mountain ZIPs all flunk the exit test. Urban cores, medical hubs, and university towns pass.
The best STR market is the one that still pencils if you are forced to turn it into a long-term rental on 60 days notice.
Exit optionality is why he keeps circling back to secondary cities. Knoxville, Chattanooga, Columbus, Richmond, and Oklahoma City all have diversified rental demand. If the STR ordinance tightens, the unit finds a corporate tenant or a graduate student in under 45 days.
The 2026 Shortlist Pattern
Run all five filters and the 2026 shortlist starts to look predictable. Mid-size cities with a major hospital system, a Division I university, a convention center over 200,000 square feet, and a clear permit path. These are not glamorous markets. They are boring markets that pay.
Rakidzich's current favorites cluster in the Midwest and the Sunbelt second tier. The glamour markets, the Miamis and the Austins and the Nashvilles, are priced for operators with institutional cost structures. You are not that operator.
Pick boring. Pick boring twice.
Markets on Rakidzich's active shortlist at any given time. Not 40. Depth beats breadth when you are the one answering messages at 11 p.m.
What the Shortlist Cities Share
- Population between 250,000 and 900,000 in the metro
- Median rent under $1,800 for a two-bedroom
- At least one Fortune 500 headquarters or major hospital system
- STR ordinance passed more than 3 years ago with no active amendment
- Active listing growth under 8% year over year
Running the Filter as a New Host
If you are new, the filter feels slow. That is the point. Rakidzich has watched hundreds of new operators skip the regulation read, sign a lease in a hot market, and discover the permit path six weeks in. The fastest way to lose money in this business is to enter the wrong market fast.
Spend two weekends on the filter before you spend a dollar on a deposit. The opportunity cost of a slow screen is zero. The opportunity cost of a bad lease is $40,000.
Your First Market Screen
- Pick three candidate cities. Start with places you can drive to in under six hours. Site visits matter.
- Download each ordinance. Read the permit fee, the cap structure, and the zoning overlay. Call the permit office to confirm.
- Run the rent-to-revenue ratio. Use three data sources, take the median, and require 25% or better.
- Count the demand peaks. Twenty or more weekends above 85% occupancy, or skip the market.
- Check the exit number. Pull long-term and mid-term rental comps. Require 85% rent coverage.
- Shortlist the survivors. You will have one or two cities left. That is the right answer, not a failure.
For the broader new-host checklist that sits upstream of market selection, work through the 2026 new-host playbook before you commit.
A Concrete Example From a Recent Meetup
At a small operator meetup in Columbus last spring, an attendee named Priya walked through her screen for a two-bedroom in the Short North. Rent was $2,150. Her median revenue projection pulled from three sources landed at $4,900. That is a 43% rent-to-revenue ratio. The deal failed the filter on the spot. She found a unit eight blocks east for $1,750 rent
Frequently Asked Questions
How does the regulation filter runs before any math work?
He starts every market review by pulling the actual city code ordinance PDF rather than relying on informal sources like Reddit threads. If a city has an active cap, pending referendum, or zoning that blocks non-owner-occupied rentals, the location is immediately eliminated from consideration. He verifies permit paths by calling the permit office and checking council agendas to avoid losing money on leases signed before regulations change.
How does the rent-to-revenue ratio kills most cities work?
This filter divides monthly rent by projected monthly gross revenue to ensure the rent stays under 25% of the income. If the ratio exceeds 28%, there is not enough margin left to cover cleaning, utilities, software, and operational time. A ratio higher than 25% means the deal loses profitability immediately if occupancy drops slightly.
How does event thickness beats a single demand peak work?
He avoids markets that rely on a single giant weekend event because this causes operators to overpay rent based on temporary peak pricing. Instead, he seeks markets with at least twenty demand peaks a year where occupancy reliably clears 85%. This ensures consistent revenue throughout the year rather than relying on sporadic high-demand events.
How does supply slope matters more than current supply work?
Rakidzich prioritizes active listing growth under 8% year over year over raw demand metrics. This ensures that the market is not becoming oversaturated with new inventory that could drive down rates. He looks for supply slope stability rather than just high current demand numbers.
How does exit optionality is the insurance policy work?
This filter asks whether the unit can cover rent on a mid-term lease if short-term rentals are banned the next day. It serves as an insurance policy to ensure the investment remains viable even if the STR model becomes illegal. Without this safety net, an operator risks being stuck with high rent and no legal way to operate.
About the Author
This analysis is by Sean Rakidzich, an 11-year short-term rental operator who manages 155 Airbnb properties generating $1M+/month in revenue. Sean has trained 5,000+ students across 76 countries with $1.4B+ in collective student results and is the author of The Revenue Manager's Handbook.
For Sean's framework on Sean Rakidzich uses a 5-filter system to identify profitable short-term rental (STR) markets in 2026, eliminating 95% of ZIP codes before property tours, see his full content library at rakidzich.com or book a 30-minute strategy session at rakidzich.com/book.
Affiliate disclosure: Some links on this page (anything starting with rakidzich.com/p/) are affiliate links. If you sign up through them, Sean may earn a commission at no extra cost to you. The recommendation reflects Sean's actual use across his 155-property portfolio.