Short-term rental (STR) markets across the U.S. are positioned for major growth in 2026 and 2027—and this isn’t speculation. It’s driven by real tax policy shifts that directly impact investor behavior.
With the recent changes under the One Big Beautiful Bill Act, investors now have expanded advantages when purchasing STR properties, including accelerated depreciation that significantly reduces taxable income. For serious investors planning their next strategic move, the STR sector is about to become one of the strongest asset classes in the coming years.
Understanding the STR Depreciation Advantage
Real estate investors have always been able to depreciate property, but STRs unlock a unique opportunity:
When IRS criteria are met—particularly average stays under seven days and material participation—the depreciation losses can be applied against active income, not just passive.
This means:
- High earners can dramatically reduce taxable income.
- Bonus depreciation through cost segregation amplifies first-year tax savings.
- Investors can effectively exchange part of their tax liability for a high-performing STR asset.
Example Scenario (Simplified):
- A professional earning $600K/year in W-2 income
- Tax bracket approx. 35% → owes around $210K in taxes
- Purchases a $1M STR, with $600K eligible for accelerated depreciation
- Result: A large portion of taxable income can be offset through first-year depreciation
This strategy doesn’t eliminate the responsibility of down payments or mortgage commitments, but it does turn required tax payments into leveraged real estate wealth.
How Investors Should Prepare Now
Investors who plan early will have a massive advantage. REI America recommends the following steps:
1. Secure a Cost Segregation Strategy Before Closing
Don’t wait for tax season.
Speak to your CPA early, before committing to a contract.
2. Target High-Basis Properties
Newer builds or recently renovated STRs typically offer stronger depreciation value.
3. Verify STR Eligibility Directly with Local Authorities
Even if a listing claims STR approval, confirm it yourself—especially in areas with:
- STR caps
- Permit waitlists
- Moratoriums
- High regulatory scrutiny
You need to ensure you can operate the property immediately and meet participation rules.
4. Model ROI Including Tax Benefit
Traditional ROI is no longer enough.
Smart investors today calculate:
✔ Cash flow
✔ Equity gain
✔ First-year tax savings
✔ After-tax yield
This gives a more accurate picture of true performance.
5. Work with STR-Specialized Teams
From agents to lenders to CPAs, specialized partners save time, reduce risk, and improve profitability.
Markets Expected to Outperform
Based on STR demand patterns, regulatory landscapes, and travel data, the strongest markets for 2026–2027 will likely include:
✨ Coastal vacation markets (Florida, Carolinas, Pacific Northwest)
✨ Luxury lifestyle destinations (mountain resorts, ski towns, lakes)
✨ Second-home markets with STR-friendly zoning
✨ Growing Sunbelt cities with year-round tourism
REI America continues to track these markets closely to identify the highest-yield opportunities for our investors.
What Investors Should Expect Moving Forward
The STR boom of 2026–2027 will shift the industry toward strategy and financial planning—not guesswork.
Here’s what we anticipate:
- Faster offer timelines for top-tier STR properties
- More competitive, multi-offer situations in high-demand regions
- Strategic pricing from STR sellers
- Increased investor activity from spring through late fall
- Stronger performance for well-managed STRs with high guest satisfaction
- Wider use of depreciation planning and cost segregation from the start
With borrowing costs expected to gradually ease, conditions are aligning for significant returns—both in cash flow and long-term equity growth.
Final Takeaway from REI America
Smart investors win by combining solid market fundamentals with tax strategy.
The evolving STR depreciation advantages offer one of the best opportunities to:
- Reduce taxable income
- Accelerate portfolio growth
- Acquire high-performing properties with stronger after-tax ROI
At REI America, we help investors navigate these opportunities with real market data, vetted properties, and transparent deal analysis—so you invest confidently in the right markets at the right time.
