Start with the goal, not the destination
Before comparing places, define what you want: cash flow, appreciation potential, a personal-use property, or a mix. Also define your constraints: budget, how far you can travel, and how hands-on you want to be. A market that fits one goal can be a poor fit for another. See our markets pages and the posts on beginner markets and drive markets for starting points.
Step 1: Define your criteria
- Regulation: Are short-term rentals allowed? Are permits limited? Is the trend tightening?
- Demand: What drives visitors: beaches, mountains, parks, events, business travel? Is demand broad or reliant on one attraction?
- Seasonality: How uneven is the year?
- Supply: How many active listings, and how fast is the count growing?
- Price to revenue: Does typical revenue justify the typical purchase price?
- Operating environment: Availability and cost of cleaners, maintenance vendors, and managers.
- Financing and insurance: Are loans available, and is insurance obtainable at a workable cost, particularly in wind, flood, or wildfire areas?
- Your access: Distance, familiarity, and ability to visit.
Step 2: Assign weights
Weights should reflect your priorities, and should total 100 percent.
Example (illustrative only): Regulation 25 percent, price-to-revenue 20 percent, demand strength 15 percent, seasonality 10 percent, supply trend 10 percent, operations availability 10 percent, insurance and financing 10 percent.
Step 3: Gather evidence for each market
- Read the ordinances and speak with the local planning office (see permits and zoning checklist).
- Pull revenue, occupancy, ADR, and supply data (see how to read AirDNA data).
- Review monthly seasonality.
- Compare typical home prices for the property type you would buy.
- Ask local managers and cleaners about capacity and costs.
- Get preliminary insurance and lender feedback.
- Read local news for tourism trends, planned developments, and regulation debates.
Step 4: Score each market
Score each criterion from 1 to 5, with a short written reason. Multiply by the weight, and sum.
Example (illustrative only): Market A scores 4 on regulation, 3 on price-to-revenue, 4 on demand, 2 on seasonality, 3 on supply, 4 on operations, and 3 on insurance and financing. Weighted score = 4(0.25) + 3(0.20) + 4(0.15) + 2(0.10) + 3(0.10) + 4(0.10) + 3(0.10) = 1.00 + 0.60 + 0.60 + 0.20 + 0.30 + 0.40 + 0.30 = 3.40 out of 5. Market B, with different scores, might come out at 3.75. Treat the difference as a prompt to investigate, not a verdict; small gaps are within your uncertainty.
Step 5: Apply knockout rules
Some criteria should disqualify a market regardless of score. Examples: rentals are prohibited or permits are unobtainable, insurance is unavailable, or you cannot service the property remotely. Set these before scoring so enthusiasm does not override them.
Step 6: Test with a sample underwriting
Take two or three real listings in each top market and run the model in STR underwriting basics, including stress tests. If the deals fail the stress test in a market, the score should reflect that.
Step 7: Visit and talk to locals
If possible, spend time in the market: walk neighborhoods, meet a manager, and check for noise and infrastructure. Visit in an off-peak period to see the quiet season.
Common mistakes
- Choosing a market because it is popular in social media or on lists
- Ignoring regulatory momentum, only looking at the current rules
- Underweighting operations, such as cleaner availability in a small town
- Looking only at top-performing listings
- Forgetting insurance costs in wind, flood, or wildfire regions
- Buying in a market where your local knowledge is zero and you have no local team
Scorecard summary
- Goal and constraints written.
- Criteria and weights set before research.
- Evidence gathered for each market.
- Knockout rules applied.
- Scores calculated, with notes.
- Top markets tested with real deals.
Keeping a decision log
Write down why you chose or rejected each market, including the data you used and the date. A decision log protects you from changing your reasoning later and gives you a baseline for evaluating your choice after a year of results. It also makes it easier to revisit a rejected market if conditions change.
Reasons to revisit a market decision
- A rule change that affects permits or minimum stays
- A sharp change in listing supply
- New attractions, closures, or transportation changes
- A change in your budget, goals, or ability to travel
Treat the scorecard as a living tool. The best market for you is the one whose risks you understand and can afford.
Key takeaways
- Set criteria and weights before you research, to limit bias.
- Apply knockout rules for regulation and insurance availability.
- Test top markets with real listings and stress tests.
- Record your reasoning so you can learn from the outcome.
Finally, share the scorecard with a trusted adviser or local manager and invite them to challenge your scores, since outside views expose blind spots quickly.
Educational only: this guide is general education, not investment advice; scores and weights are illustrative.