Thinking of starting an Airbnb? Avoid these 5 states
Thinking of starting an Airbnb? Avoid these 5 states
Whether your next game of short-term rental roulette involves a last-minute party crew, a high-maintenance vacationer, or a stubborn guest who , running Airbnb properties can be a wild ride. With all those variables in play, where you invest matters just as much. Because starting an Airbnb in one of the country鈥檚 worst states can turn an already unpredictable scenario into a losing battle.
According to Airbnb, the While that figure is nothing to thumb your nose at, it鈥檚 not exactly quit-your-job money either. For many hosts, that income comes with plenty of elbow grease, uncertainty, and surprises along the path to hard-earned rental income.
Though nobody ever claimed that short-term rentals like Airbnb were a set-it-and-forget-it endeavor, plenty of hosts underestimate just how much work it takes to make them profitable. Understanding your market and looking at your rentals honestly can make all the difference.
If you鈥檙e thinking of starting an Airbnb, has developed this list of five states to avoid. And if your state lands on this list, not all hope is lost; it just means you鈥檒l need to approach your rental strategy a little differently.
State-specific factors we considered when making this list
When putting together this list of the worst states to start an Airbnb, we looked at several key factors that shape whether a property actually makes money or just looks good on paper.
Short-term rental restrictions: Some states and cities require strict permits, impose caps or (STRs), and make it harder to operate legally without constantly jumping through hoops.
State and city tax burden: Between lodging taxes, local fees, and state cuts, a chunk of your nightly rate evaporates quickly and can shrink profits more than most first-time hosts expect.
Market saturation: If there are several Airbnbs already in your neighborhood, you鈥檒l fight for bookings. The result is lower prices and an emptier calendar than anticipated.
STR market volatility: Demand can swing wildly with seasons, regulations, and travel trends, turning what once looked like steady income into far less predictable monthly cash flow.
Purchase price vs. STR income potential: High home prices paired with average nightly rates can kill returns, especially when mortgage payments outpace what your Airbnb actually brings in.
We also considered factors such as HOA rules, insurance costs, local sentiment toward STRs, and enforcement consistency across cities. With all of that in mind, let鈥檚 break down the five worst states to start an Airbnb.
5 worst states to start an Airbnb
No. 1: New York
New York tops this list of worst states to start an Airbnb, and it is not even close. To be clear, we鈥檙e mainly focusing on New York City here, where about 45% of New Yorkers live, and short-term rental demand is endless. Enter 2023, when Local Law 18 effectively , making it one of the toughest places to host a short-term rental (legally, at least).
On top of the ban on rentals under 30 days, owning property anywhere in NYC is downright expensive, with average home values pushing $1 million a piece. Not to mention, property taxes can climb as high as 2.5% to 3% in some New York counties, STR permits are notoriously difficult to obtain, and tenant-friendly laws all combine to make running an Airbnb in New York questionable at best.
As for ways to grit your teeth and make your Airbnb dream a reality in The Empire State, there simply isn鈥檛 much to get excited about. New York already has one of the highest income tax rates in the country, and regulators are actively . For most STR investors, New York is simply not worth the trouble.
No. 2: Hawai'i
With nearly flocking to the Hawaiian islands every year, the Aloha State may seem like an ideal place to tap into the nonstop demand and start an Airbnb. Not so fast. For starters, many locals are fed up with STRs driving up already-high housing costs, and the pushback is organized and getting stronger. In 2025, Maui passed a ban that will eventually .
With average home prices in Hawai'i approaching $800,000, getting a foot in the door is already a stretch. To boot, cushy resorts dominate the islands鈥 best locations, seasonality creates lulls in demand, and high operating costs eat into cash flow. Taken together, these factors can make margins disappear before an STR host鈥檚 very eyes.
While starting an Airbnb might sound like a great way to fund a laid-back island lifestyle, doing so would be a pretty bold move. Sure, you could make it work with deep pockets, strong , and the right property in the right neighborhood. But for most investors, Hawai'i is a market you might want to stay far, far away from.
No. 3: California
California earns its spot on this list of the worst states to start an Airbnb with little debate. As the saying goes, nothing is certain except death and high taxes in California. That鈥檚 a paraphrase of the original quote, but the point still rings true. Between the nation鈥檚 and inflated operating costs, STR hosts in America鈥檚 most populous state often feel the walls closing in.
Barely edging out Hawai'i, California also ranks as the in the country to buy a home. Pair that with patchwork regulations that vary wildly by city, permitting headaches, and ever-rising home insurance costs, and you鈥檙e looking at a real estate investment that will be tough to justify.
If you鈥檙e still wondering if you can make an Airbnb work in California, it depends on where you plan to operate, how strict local laws are, and how much competition you face in your specific market. While this is not a hard 鈥渘o鈥 like New York, California isn鈥檛 exactly a walk in the park either.
No. 4: Colorado
Between 300 days of sunshine a year, Denver cementing itself as a major American city, and endless mountain access, demand in the Centennial State is undeniable. But while , it may not be the best place to get your Airbnb business off the ground. Strict local rules, limited permits, and harsh seasonality should give STR hosts serious pause.
If your dream is to buy a quaint Colorado cottage in a mountain town with quick access to ski resorts, you might want to keep that dream on ice. Towns like and have already cracked down on short-term rentals, while others are likely to follow suit. Even in , operating an STR can come with more red tape than it鈥檚 worth, thanks to primary residence rules and strict licensing requirements.
While not all of Colorado is subject to restrictive laws, seasonal demand swings, or permit limitations, becoming an Airbnb host here requires a sharp eye for local rules, good timing, and a bit of trial and error. After all, when you factor in Colorado鈥檚 low property tax rates, steady (though slowing) population growth, and strong tourism demand, you might stand a puncher鈥檚 chance after all.
No. 5: Nevada
At first glance, renting out an Airbnb in Nevada might seem like a no-brainer. With a , year-round t-shirt weather, and its reputation as one of the , the Silver State checks a lot of boxes for new and experienced hosts alike. So why wouldn鈥檛 you want to start a short-term rental business here?
The big catch comes down to Clark County鈥檚 strict short-term rental rules and permitting requirements. Home to Las Vegas, the county houses roughly 70% of Nevada鈥檚 permanent residents, and that does not account for the tens of millions of tourists who visit every year. To operate legally, hosts here must navigate endless zoning restrictions, licensing caps, distance requirements between rentals, and ongoing compliance checks.
If you鈥檝e made it this far and are still ready to roll up your sleeves and compete with Caesars, MGM, and Wynn, you鈥檙e going to need a top-tier property, a penchant for filling out paperwork, and a rock-solid game plan from day one. Making money as an Airbnb host isn鈥檛 impossible here, but margins can be thin, and competition is relentless.
What to do when starting an Airbnb doesn鈥檛 make sense
If the numbers are not adding up or the rules feel stacked against you as you consider a STR, it may be time to rethink the strategy and explore more stable, lower-stress options like:
Mid-Term Rentals (MTRs)
If the STR juice is not worth the squeeze, a might be your best next move. MTRs typically last 30 days to six months, sitting comfortably between hectic nightly turnovers and long-term leases. These sweet spot rentals offer more stability, fewer turnovers, and less regulation pressure, while still giving you flexibility and solid income potential.
, professionals on temporary assignments, remote workers testing out a new city, and homeowners displaced by renovations often need flexible, furnished housing for a few months. If you can offer these tenants a clean, turnkey mid-term rental at a competitive price, you can opt out of the churn-and-burn STR-hosting lifestyle and embrace life as an MTR landlord.
Long-Term Rentals (LTRs)
Whether you鈥檙e new to real estate investing or looking to , finding a long-term renter might be the answer. The game here is simple: Find great tenants, lock them in for a year (or longer), and forego furnishing rentals and seasonal turnovers. For millions of landlords across the US, long-term rentals are a simple, stress-free way to .
With long-term rentals, your pool of potential tenants opens up significantly. Families, young professionals, and anyone else looking to put down roots are all in play. Not to mention, many will stay for years, even decades, if your property is the right fit. Compared to MTRs and STRs, this is the most hands-off option of the three, offering landlords steady income potential with far fewer moving pieces.
Sell your rental property and reinvest in a better market
Sometimes, the best move is knowing when to move on. If you find yourself operating in one of the worst states to start an Airbnb, selling and reinvesting in a stronger market could make a lot of sense. And no, making this move does not necessarily mean leaving your state. Often, a better rental market is just a few towns over.
Whether your tenants are a group of college buddies in town for the weekend, a digital nomad staying for the season, or a family looking for a stable place to live, the right market will make everything easier. If you鈥檙e burned out on STRs and are ready to pivot, start by exploring the .
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