What is a short-term rental?

Published Date: February 23, 2024

Two people with suitcases head to their short-term rental.
Short-term rental definitionA short-term rental is a furnished living space available for short periods, from a few days to six months. They are considered an alternative to a hotel. 
You’ve probably seen vacation home listings on Airbnb or VRBO, but what exactly is a short-term rental? A short-term rental, or vacation rental, is a furnished living space available for short periods. Though you can book most vacation rentals for a few nights or weeks, each state has its own qualifiers for short-term rental properties. We’ll share the pros and cons, and additional considerations potential owners should bear in mind.

Understanding short-term rentals

Over the last 10 years, vacation rental brands like Sonder and Airbnb have exploded in popularity. Staying in short-term rentals is so common that many companies allow employees to expense their stays — just like a hotel room.Homeowners choose a short-term rental strategy for income potential, marketing automation, flexibility and tax benefits. Short-term rentals require less commitment than their long-term counterparts. A vacation rental can work well if the homeowner wants to also enjoy the home themselves. Seasonality, however, can also play a part in whether a rental will be in demand — meaning owners might have to give up personal stays during the most popular times of the year. Owners are also responsible for cleaning, coordination and maintenance to keep the short-term rental property in guest-ready condition.

How short-term rentals work

Many people who buy a second home or vacation property generate income by renting out their home when they’re away. On the other hand, homeowners can also buy investment properties to generate short-term rental income year-round.
A graphic shares the difference between vacation homes and short-term rentals.
Because people on vacation will most often use short-term rentals, stays might vary from a few nights to several weeks. Sometimes, renters may lease them for as long as a month. Anything under six months is generally considered a short-term rental. Ultimately, your local jurisdiction defines what a short-term rental is for your area.

What’s considered a short-term rental in each state?

Local restrictions are a critical factor for anyone considering owning multiple homes. Each city or county defines what qualifies as a short-term rental property, and the fees can be hefty for homeowners who rent under the radar.

Short-term rental qualifiers by state

StateLength of stay maximumsLocal regulations
Alabama30 consecutive days or less Requires a zoning certificate
Alaska30 consecutive days or lessRequires a business license
Arizona30 consecutive days or lessSubject to Arizona transaction privilege tax (TPT)
Arkansas30 consecutive days or lessRequires an STR business license
California30 consecutive days or lessRequires a business license
Colorado29 consecutive days or lessRequires an STR license
Connecticut90 consecutive days or lessRequires a zoning certificate
Delaware150 consecutive days or lessRequires an occupational license
Florida181 consecutive days or lessRequires zoning approval
Georgia30 consecutive days or lessRequires an STR license
Hawai’i30 consecutive days or lessMay only be permitted in resort-zoned areas
Idaho30 consecutive days or lessRequires an STR license
IllinoisOne month or lessRequires a zoning permit
Indiana29 consecutive days or lessRequires a zoning permit
​​​​Iowa30 consecutive days or lessRequires a zoning permit
​​Kansas30 consecutive days or lessRequires rental registration
Kentucky30 consecutive days or lessMay require a conditional use permit
Louisiana30 consecutive days or lessRequires an STR permit
Maine30 consecutive days or lessMay require a minimum of two nights
Maryland90 consecutive days or lessRequires a rental license
Massachusetts31 consecutive days or lessRequires a rental license
Michigan30 consecutive days or lessRequires a rental license
Minnesota30 consecutive days or lessRequires a zoning permit
Mississippi30 consecutive days or lessRequires rental registration
Missouri31 consecutive days or lessRequires a rental permit
Montana30 consecutive days or lessRequires a zoning permit
Nebraska29 consecutive days or lessRequires an STR license
Nevada30 consecutive days or lessRequires an STR license
New Hampshire30 consecutive days or lessRequires a zoning permit
New Jersey30 consecutive days or lessRequires a seasonal certificate of occupancy
​​New Mexico29 consecutive days or lessRequires an STR permit
New York30 consecutive days or lessRequires rental registration
North Carolina30 consecutive days or lessRequires a zoning permit
North Dakota29 consecutive days or lessRequires a sales and use tax permit
Ohio29 consecutive days or lessRequires an STR permit
Oklahoma29 consecutive days or lessRequires an STR license
Oregon30 consecutive days or lessRequires an STR permit
Pennsylvania30 consecutive days or lessSubject to the hotel occupancy tax
Rhode Island30 consecutive days or lessRequires rental registration
South Carolina29 consecutive days or lessRequires rental registration
South Dakota14 consecutive days or lessRequires a conditional use permit
Tennessee30 consecutive days or lessSubject to local occupancy tax
Texas30 consecutive days or lessRequires a zoning permit
Utah29 consecutive days or lessRequires an STR permit
Vermont15 consecutive days or lessSubject to the local option tax
Virginia30 consecutive days or lessRequires a special use permit
Washington29 consecutive days or lessRequires liability insurance
Washington D.C.30 consecutive days or lessRequires an STR license
West Virginia29 consecutive days or lessRequires a business license
Wisconsin180 consecutive days or lessRequires a DATCP license
Wyoming29 consecutive days or lessRequires a basic use permit
Owners should verify local regulations, zoning, taxes and licensing with their city or state government website for specific details about what qualifies as a short-term rental in their area before leasing their property.
Example: John lives in Austin, Texas, and rents out a garage apartment during South by Southwest, a festival that fills the city’s hotel rooms. His property is registered and licensed with the city to allow stays under 30 days in length. 

Types of short-term rentals

Many vacation rental sites allow you to filter the type of short-term rental options you can browse through. The three main types of vacation rentals are entire homes, accessory dwelling units (ADUs) and individual rooms.
A graphic presents the three types of vacation rentals.
The type of short-term rental you operate can affect how you operate your vacation rental business. It’s important to correctly categorize your vacation rental so that you pay the appropriate taxes and apply for the right zoning permits.

Entire homes

Example: A beachside retreatAirbnb and Airbnb alternatives list entire homes that double as seaside sanctuaries, mountain retreats and urban oases. The key component of qualifying as an entire home is that the rental must have a living area, bathroom and cooking space separate from shared spaces.

Accessory dwellings

Example: A backyard cottageAccessory dwellings are sometimes known as in-law suites because they often take the form of cozy detached studios complete with an en-suite bathroom and comfortable furnishings — perfect for when the parents are in town. An ADU is generally on the same property as the primary residence and can potentially include a private entrance.

Rooms

Example: A private guest suiteSome jurisdictions allow homeowners to rent out a room in their primary residence as a short-term rental. The room can serve one or multiple guests at a time and can potentially include access to shared spaces like a kitchen or yard. Like an accessory dwelling, private rooms can sometimes include private entrances.

Comparing long-term to short-term rentals

Both short-term and long-term rentals are investment properties that homeowners can use to generate rental income. The length of the lease between owner and tenant often determines which type of rental agreement both parties will abide by.A long-term rental is generally a lease agreement for tenants who live at a rental property for at least 90 days, although some landlords require a minimum of 180 days or a full calendar year. A short-term rental, however, is generally available to lease for less than 30 consecutive days.
Short-term rentalsLong-term rentals
FurnishingsFurniture requiredTypically unfurnished
Tenant responsibilitiesLight cleaning may be necessaryModerate maintenance may be necessary 
Utility paymentsUtility costs are built into rental ratesTenants generally pay for utilities independently
VacanciesSeasonal vacancies are possiblePotentially fewer vacancies
Compared to a long-term rental, owning a short-term vacation has its fair share of unique pros and cons. From zoning laws to low-season vacancies, there are a few considerations before investing in short-term rentals.

Considerations before investing in short-term rentals

Short-term rentals require homeowners to abide by local vacation rental rules and regulations. There are several factors to consider before investing in a vacation rental.
A graphic shares the five things short-term rental owners must keep in mind.
To operate a short-term rental, owners need to:
  • Ensure property zoning allows short-term rentals: Check your local state, city or county website for specific short-term rental guidelines.
  • Register for appropriate licenses: You may need to obtain a permit or license before earning income from your rental.
  • Report business income: Operating a short-term vacation rental business means you assume the responsibility of reporting your income and expenses.
  • Budget for additional taxes: Create a financial plan that accounts for the appropriate tax payments.
  • Manage and maintain your rental property: You may need to hire a property manager or schedule time to manage and maintain your vacation rental.
A short-term rental investment property generates income from short-term leases. Short-term rentals can take the form of entire homes, ADUs or rooms within your primary residence. Although vacation rentals can potentially yield rental income, they also come with a fair share of property management and tenant communication. If you’re more interested in relaxing than running a business, consider becoming a co-owner of a second home. Co-owning a luxury second home has never been easier. Unlike vacation rentals, a Pacaso vacation home is fully managed and turnkey — which means less work and more time to unwind. You choose the amount of ownership that works for you, and you share the costs and time spent in the home with other co-owners.

What is a short-term rental FAQ

How do I know if my city allows short-term rentals?

Do a Google search for your city name and “short-term rentals.” Airbnb has gotten so popular that most local governments devote a section of their website to licensing FAQs.

What kind of properties qualify as a short-term rental?

It depends on what your city allows. Some local governments allow whole homes to be leased as short-term rentals, while others restrict residents from leasing anything larger than a single room. In some cities, homeowners can rent something as small as a renovated Airstream trailer or a “structure” in their backyard.

What is the shortest time you can rent a property?

Your local jurisdiction will determine the shortest time you can rent a property you classify as a short-term rental. Generally, guests must book your vacation rental for one or two nights minimum.

What are the risks of a short-term lease?

Potential risks of a short-term lease can include low-season vacancies and keeping up with the latest market pricing. Unlike long-term leases, a short-term lease may require more tenant management and communication.


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Kayla Moses


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