Main Facts
Every major travel blog, investor forum, and real estate pitch deck leans on the same predictable rotation of short-term rental (STR) destinations. Mentions of Gatlinburg, Tennessee; Joshua Tree, California; Scottsdale, Arizona; and the Great Smoky Mountains dominate the conversation. These markets have become the default vision-board material for aspiring Airbnb and VRBO hosts.
However, a comprehensive national analysis by short-term rental analytics platform BNBCalc cuts through the noise of popular imagination to see what raw market data actually dictates. Analyzing 462 cities across all 50 states—with each market backed by a minimum sample size of 50 active properties drawn from a dataset of 10 million listings—researchers ranked the top-yielding city in every state based on gross yield.
The findings upend conventional wisdom. Instead of glitzy mountain towns or saturated coastal resorts, the top of the national leaderboard is dominated by unglamorous, high-revenue-efficiency mid-market cities. Sandusky, Ohio, claimed the number one spot nationwide, while other working-class and secondary markets like Detroit, Michigan; Abilene, Texas; Gulfport, Mississippi; Montgomery, Alabama; and Shreveport, Louisiana, outpaced traditional vacation hotspots in pure revenue-to-price efficiency.
Yet, this shiny surface metric comes with a stark warning. When modeled against today’s high-interest-rate environment, roughly half of these top-in-state winners fail to break even on a conventional mortgage. The data proves that while high gross yields can be found far away from the traditional tourist traps, turning those percentages into actual cash flow requires rigorous, address-level due diligence that goes far beyond a simple state-by-state ranking.
Chronology: How the Study Was Conducted and Analyzed
To understand how these off-the-beaten-path markets emerged, it is necessary to examine the methodology behind the data collection.
- Phase One – National Data Aggregation: BNBCalc pulled data from over 10 million Airbnb and VRBO listings across 2,400 global markets, zeroing in on 462 U.S. cities where local sample sizes reached a threshold of at least 50 analyzed properties per market, segmented by bedroom count.
- Phase Two – Gross Yield Calculation: Researchers calculated the modeled gross yield for each city. This was determined by dividing the annual short-term rental revenue by the city’s median home value for the same bedroom count. Quality control filters were applied to discard anomalous properties or markets lacking a sufficient base of independent hosts, preventing a single luxury listing from skewing citywide averages.
- Phase Three – State-by-State Filtering: The absolute best-performing city in each of the 50 states was isolated, creating a unique cross-country comparative list of top local markets. Notably, Kansas City appeared twice—once on each side of the state line—with the Kansas side yielding superior metrics.
- Phase Four – Financial Stress Testing: Analysts applied real-world macroeconomic assumptions (including a 20% down payment, a 30-year fixed mortgage at a 7% interest rate, and operating expenses accounting for 37.5% of revenue) to the median state winner to test the real-world viability of these high-yield markets.
- Phase Five – Localized Regulation and Comps Audit: Investigators cross-referenced findings with city-level zoning laws, occupancy tax requirements, and hyper-local neighborhood comparisons to demonstrate how municipal regulations directly impact bottom-line profitability.
Supporting Data: The Numbers Behind the Rankings
To evaluate real estate investments objectively, real estate strategists often rely on gross yield—annual revenue divided by purchase price—because it strips away variables like individual financing structures and personal tax situations. However, understanding the raw data requires looking at both the top performers and the laggards.
The Top Performers to Watch
- Sandusky, Ohio (Ranked #1 Overall):
- Gross Yield: 15.35%
- Sample Size: 181 properties
- Median Home Value: $145,150
- Market Drivers: Cedar Point amusement park heavily drives the seasonal calendar. With 48% independent hosts, the market has not yet been entirely corporatized, offering individual operators room to compete.
- Detroit, Michigan:
- Gross Yield: 15.10%
- Sample Size: 506 properties
- Median Home Value: $137,024
- Market Drivers: A deep sample size that proves affordability, though citywide averages mask extreme street-by-street variances, demanding granular address-level research.
- Kapolei, Hawaii:
- Gross Yield: 15.06%
- Sample Size: 337 properties
- Median Home Value: $597,065
- Annual Revenue Generated: $109,736 (the highest raw revenue figure in the study)
- Market Drivers: A resort-zoning anomaly within Oahu rather than a broad market trend, highlighting how local legislation dictates viability.
- Abilene, Texas:
- Gross Yield: 15.05%
- Sample Size: 315 properties
- Median Home Value: $194,996
- Market Drivers: Featuring 58% independent hosts, Abilene benefits from steady, non-seasonal year-round demand driven by local institutions rather than cyclical tourism.
The Bottom of the Barrel
- Lewes, Delaware (Ranked Dead Last Among State Winners):
- Gross Yield: 5.43%
- Sample Size: 212 properties
- Median Home Value: $540,439
- Takeaway: Delaware’s top available market yields under 6% gross, proving that having a "top city" in every state does not equate to having a viable investment deal. Coastal tax and purchase price premiums choke out rental returns.
Official Perspectives and Market Implications
The most eye-opening takeaway from the BNBCalc analysis is what happens when a healthy-sounding gross yield meets macroeconomic reality.
Consider the median winner across all states: a property valued at $251,338 generating $27,671 in annual revenue, resulting in a gross yield of 10.91%. When an investor puts down 20% ($50,267) and finances the remainder at a 7% interest rate over 30 years, annual debt service consumes $16,052. Factoring in operating expenses at 37.5% of revenue—covering cleaning, utilities, insurance, property taxes, and ongoing maintenance—takes another $10,376.
This leaves the investor with a net annual cash flow of approximately $1,241. On a cash-on-cash return basis, that translates to a meager 2.5% return—underperforming a standard high-yield savings account without the headaches of clogged toilets or guest complaints. Furthermore, if the investor lives out-of-state and hires a professional property manager who takes a standard 20% cut of gross revenue ($5,534), the property shifts into a net annual loss of about $4,292.
Reverse-engineering these financial assumptions reveals that covering standard debt service and operating costs requires a minimum gross yield of roughly 10.5% before generating a single dollar of profit. Out of the 50 state-winning cities analyzed, only 26 clear this threshold; the remaining 24 fail to break even under conventional financing terms at current interest rates.
The Crucial Role of Regulation
Local laws can single-handedly make or break an investment. Kapolei, Hawaii, serves as a prime cautionary tale. While Honolulu strictly bans short-term rentals in standard residential neighborhoods with long minimum-stay rules, Ko Olina (situated within Kapolei) is designated as a resort zone where short-term rentals are legally permitted. The 15.06% gross yield exists solely because of where the zoning map’s boundary lines fall. Citywide data cannot tell an investor which side of the street a specific address sits on, making regulatory due diligence the single most critical step in the acquisition process.
Similarly, municipalities like Atlantic City, Baltimore, Detroit, and Myrtle Beach have repeatedly overhauled their short-term rental frameworks. In these markets, regulatory shifts are not mere footnotes—they are the primary determinants of profitability.
Strategic Recommendations for Investors
Navigating these complex market dynamics requires shifting away from generic national rankings and adopting a rigorous, address-first approach. Industry experts recommend a multi-step due diligence process before committing capital:
- Start at the Address, Not the City: Citywide averages blur the lines between thriving neighborhoods and distressed blocks. Using granular analytics tools to evaluate specific property addresses provides accurate revenue projections, average daily rates (ADR), occupancy percentages, and hyper-local comparable sales.
- Filter Comps by Realistic Budgets: Adjust comparable rental filters to match the exact property type, bedroom count, and amenities that fit your budget within a target market to see if projected revenues hold up.
- Examine Monthly Seasonality: Review the shape of the annual calendar to identify low-demand trough months. Investors must ensure their cash reserves can comfortably cover debt service during the off-season.
- Evaluate Long-Term Rental Backstops: Analyze what the property could command as a traditional long-term rental or through programs like Section 8. If municipal authorities pass restrictive short-term rental bans in year three, a viable long-term rental floor protects the asset from catastrophic loss.
- Verify Municipal Ordinances Directly: Never rely solely on software projections for legal compliance. Spend time reviewing municipal websites, business tax rates, registration fees, and inspection guidelines directly with local city officials.
- Factor in Tax Strategies Early: For W-2 earners who meet material participation requirements, short-term rental losses can potentially be used to offset active income rather than being classified as passive losses. Leveraging tools like cost segregation studies and bonus depreciation can dramatically shift year-one financial outcomes, often outweighing pure operating cash flow.
Ultimately, high-level yield lists should serve solely as a compass to point investors toward unglamorous, high-efficiency markets like Sandusky or Abilene rather than a guarantee of success. True investment viability is forged not by looking at national averages, but by spending a Saturday running address-specific comps, checking local ordinances, and modeling conservative financial structures before ever making an offer.
