Tips for Profitable Short-Term Rentals in 2025

Thinking about jumping into short-term rentals (STRs)? In a recent interview on the Tax Smart REI Podcast, host Thomas Castelli, CPA, chatted with Avery Carl, founder of The Short Term Shop, seasoned real estate investor, and author of Smarter Short-Term Rentals.

Together, they explored how investors can optimize, self-manage, and thrive despite today’s higher interest rates and shifting buyer sentiment. Below is a distilled rundown of their conversation.

Higher Interest Rates: A Challenging but Manageable Environment

Higher interest rates have made the short-term rental environment more challenging, but they’re still manageable for savvy investors. Over the past two years, fewer homes have sold than in any comparable period in the last 30 years. Rapidly rising rates caught many investors off guard, resulting in a market “freeze.” However, there are several financing options available to navigate this environment.

DSCR loans allow you to qualify based on rental income projections rather than personal income, though they typically come with higher rates. A 10% down vacation home loan can be a great option if you plan to use the property personally for at least two weeks each year. Alternatively, a 15% down conventional loan may offer better rates, though it requires financing in your personal name. The key takeaway is that even in a high-rate environment, understanding and leveraging the right loan products is critical. A slightly higher interest rate may still be worthwhile if the property cash flows well.

Market Selection: The Advantage of Going Where You Know

When it comes to market selection, Avery Carl emphasizes the importance of buying in areas you’re already familiar with. Knowing the local attractions, guest expectations, and seasonality can be far more valuable than any spreadsheet or data analysis. In popular tourist destinations—such as mountain cabins or beachfront condos, guests expect a certain experience and aesthetic. Properties that don’t meet those expectations may underperform, no matter how good the numbers look on paper. Carl points out that when you are the “guest avatar”, someone who has visited and enjoyed the destination yourself—you can make better property choices and create stronger guest experiences.

Cash Flow vs. Appreciation: Why Both Matter

While cash flow is often king in the world of short-term rentals, Avery Carl warns against ignoring appreciation potential. Investing in a high-cash-flow market with little to no appreciation can leave you vulnerable, especially if local issues—like rising crime or economic downturns—force you to sell sooner than expected. It’s important to look for markets that offer a balance: steady income today and the potential for property appreciation over time. Prioritizing consistent cash flow is essential, but adding a layer of long-term protection by investing in appreciating markets can create a more resilient investment strategy.

Pricing & Occupancy: Dropping Rates Strategically

Pricing flexibility is key to maintaining high occupancy rates. Many investors fixate on their nightly break-even rates and resist lowering prices, especially during slow seasons. Unfortunately, this often leads to “empty house syndrome,” where no bookings come in at all. Avery Carl suggests being more strategic: temporarily lowering rates to spur bookings can create momentum, which allows you to raise prices again once demand returns. Think like a hotel, where pricing adjusts constantly based on supply and demand. Tools like Beyond Pricing and PriceLabs can automate much of this process, helping you maximize both occupancy and revenue throughout the year. The key is to stay flexible and avoid letting your property sit empty for too long.

Amenities & Theming: Striking the Right Balance

When it comes to amenities and theming, it’s all about finding the right balance. While heavily themed properties and extravagant amenities like pickleball courts or elaborate game rooms can increase your nightly rate, they don’t always add to the property’s resale value. In fact, over-improving can backfire, especially if you need to convert the property to a long-term rental down the line. Avery Carl recommends focusing on the “three Cs”: cute, clean, and comfortable. A modernized, well-maintained property that is aesthetically pleasing and functional will attract guests without overextending your budget. While the mega-themed strategy works in certain markets—like Orlando’s Disney area—be cautious about where you choose to go over the top.

Unit Size Matters (But So Does Consistency)

Property size plays a role in your rental strategy, but consistency is just as important. Smaller units, such as one-bedroom apartments or studios, tend to have high year-round occupancy. These units are popular among couples and solo travelers who often book last minute, helping to minimize vacancies. On the other hand, larger properties—like cabins or beach houses—can command premium rates during peak seasons but may sit empty in the off-season. There’s no universal “best size” for short-term rentals. Instead, your decision should be based on your budget, risk tolerance, and the local demand in your chosen market.

Hospitality & Guest Experience: Getting Five-Star Reviews

Providing an exceptional guest experience is essential for earning five-star reviews and repeat bookings. One of the best ways to do this is by anticipating guest needs before they arise. Tools like Touch Stay and Hostfully allow you to create digital guidebooks that answer common questions about Wi-Fi passwords, coffee maker types, nearby stores, TV instructions, and more. Proactively addressing these concerns reduces guest frustration and leads to smoother stays. Additionally, having standard operating procedures (SOPs) in place for common issues—like missed cleanings or maintenance hiccups—ensures consistency and professionalism in your management. Great hospitality starts with preparation, and the smoother you make the guest experience, the more likely you are to receive glowing reviews.

Self-Managing for Better Returns (and Tax Benefits)

Self-managing a short-term rental can lead to higher returns and added tax benefits, even if you don’t live near the property. Building a reliable local team—a trustworthy cleaner and handyman, for example—is key. You can then rely on property management software like Hospitable or HostAway to automate communication, bookings, and task coordination. Many investors self-manage to meet the IRS’s “material participation” thresholds, which can unlock favorable tax treatment for short-term rentals. By actively managing your property—handling guest communication, scheduling cleanings, and overseeing operations—you can take advantage of these tax benefits while keeping management costs low and profits high.

Conclusion

Despite higher interest rates and a quieter transactional market, short-term rentals remain a compelling investment—if you do your research and manage them effectively. By focusing on the right market, setting competitive prices, delivering excellent guest experiences, and building efficient systems, you can create a profitable and resilient STR portfolio in 2025 and beyond. If you’re interested in short-term rentals but aren’t sure where to begin, Avery Carl’s approach—buying in familiar markets, self-managing with streamlined systems, and designing balanced properties—provides a clear roadmap for long-term success.

Transcript

Introduction

Thomas Castelli, CPA
Thanks for tuning into this week’s episode of the Tax Smart REI Podcast. Today we’re joined by Avery Carl, founder of the Short Term Rentals Shop, host of the Short Term Rental Show, and brand new author of a book called Smart Short Term Rentals. We’ll be talking about all of that in today’s episode. If you’re acquiring or running short-term rentals, you’ll definitely want to stick around to the end. We’ll dive into everything in just one minute.

Welcome Back & Guest Introduction

Thomas Castelli, CPA (00:28.000)
All right, and we’re back. So, Avery, thank you so much for joining us on the show again. You’ve joined us before in a past episode. Would you mind giving our listeners a brief overview of your background and how you got involved in the short-term rental space, for those who may be new?

Avery Carl (00:41.710)
Yes, yes. So my name is Avery Carl. I’m a real estate investor. I own eight vacation rentals; that’s how I started my portfolio and eventually grew it to around 250 units—not all of them short-term rentals, of course. We’ve branched out into single-family long-term, multifamily long-term, a number of things. But vacation rentals are near and dear to my heart because that’s what got us started.

We still buy them, but I also have a company called the Short Term Shop, started in 2018. It’s a real estate brokerage or team—a brokerage within a brokerage—that helps people buy short-term rental properties and teaches them how to self-manage so they don’t have to pay 25% to 40% of their gross to a property manager. We teach them how to manage from anywhere. We have 65 agents in 20 markets, and we’ve helped over 5,000 people buy and sell short-term rental properties.

Starting Out in 2025: Acquisition Tips (02:06.552)

Thomas Castelli, CPA
That’s awesome. Your new book focuses on optimizing short-term rentals and portfolios. We’ll definitely dive into some tips there. But before we get into portfolio optimization, let’s talk to someone brand new in 2025, looking to buy their first short-term rental. From an acquisition standpoint, what’s your number one tip? What would you advise someone just starting out?

Avery Carl (02:27.990)
My number one tip is: buy in a market you already know. There’s a lot of content out there about the “best” places to buy or “top 10” places. But buy in a place where you have a competitive advantage—a place you are or have been the target guest avatar. I only buy in vacation markets, specifically ones where I’ve actually been a tourist. I know why the guests are visiting and what they’re looking for. No spreadsheet can outperform genuine knowledge of your market.

Common Acquisition Mistakes

Thomas Castelli, CPA (02:48.636)
That’s a great tip. Definitely important to focus on the guest experience. Are there any red flags people should watch out for when acquiring a short-term rental—beyond buying in the wrong market?

Avery Carl (03:06.552)
Yes. One big mistake is buying a cheap property just because it’s cheap. For example, in a mountain market, guests often want a cabin. But a four-bedroom cabin typically costs more than a four-bedroom ranch home that looks like your mom’s house back in Kansas City. People see data saying, “Four bedrooms in this market make X,” and they’ll compare two four-bedroom properties—one is much cheaper, so they think they’ll have a better margin. Then they discover that type of property doesn’t rent well because guests want a certain style.
So always choose the type of property tourists expect. Don’t buy something “cheap” that won’t actually earn a similar or higher level of income.

Balancing Cash Flow vs. Appreciation

Thomas Castelli, CPA (03:27.276)
When you’re analyzing properties, do you emphasize cash flow, appreciation, or a mixture of both?

Avery Carl (03:39.890)
It’s a mixture of both. I used to say, “Cash flow is everything; appreciation is garbage.” But I bought a property in a Midwestern market that doesn’t appreciate. After three or four years, external factors forced us to sell—it involved a nearby property that was condemned, causing crime to move into our units. We had to sell for a loss because that market doesn’t appreciate.
Cash flow is crucial, but don’t neglect appreciation. If you’re forced to sell, it helps to have some appreciation cushion.

Impact of Interest Rates on Short-Term Rentals

Thomas Castelli, CPA (04:41.886)
Switching gears: interest rates in 2025 are higher than they’ve been in a while. How have you seen that affect the appetite for short-term rentals?

Avery Carl (05:03.990)
It’s impacted the appetite for every type of real estate. People say they’re waiting for a crash, but the crash has essentially been here for two years. In 2023 and 2024, fewer homes were sold than in any of the previous 30 years. More homes were sold in 2009 and 2010—right after the Great Recession—than in these past two years. The real estate market basically stopped.
High rates definitely slowed things down. It’s not just that rates are high; it’s that they quadrupled very quickly. Had it been gradual over several years, we might not have seen the market stall. But here we are.

Common Financing Methods Today

Ryan Carriere, CPA (05:55.249)
In light of these rates, what financing are you seeing the most right now? DSCR loans were popular, but are they still?

Avery Carl (06:20.824)
People still use DSCR loans because you qualify based on the property’s projected income rather than your personal W-2 income. But the rate on those loans is higher, and in a high-interest environment, they can be really high. So we see a lot of people opting for conventional 10% down vacation home loans, which allow short-term renting if you use the property at least two weeks a year, or a 15% down conventional investment loan.
The tradeoff is you often have to put the loan in your personal name rather than an LLC, but your interest rate might be more favorable. So those three options—DSCR, a 10% vacation home loan, or a 15% conventional investment loan—are generally the most common.

Tips for Optimizing a Short-Term Rental

Thomas Castelli, CPA (07:46.062)
Assume someone has acquired their short-term rental. They want to optimize so it’s profitable. From your perspective, what are the major keys to success?

Avery Carl (08:06.590)
A lot boils down to common sense, good systems, and mastering your pricing. People often cling to their “breakeven number”—say it’s $200 a night at 70% occupancy. Then, if it’s the off-season, they won’t go below $200, thinking they’ll lose money. But remember, your $200 breakeven is an average. In high season, you can go above that; in low season, you might need to dip below it.
Another tip is to occasionally drop the price to “wake up” the Airbnb algorithm, get some bookings, then raise it again. Don’t let your property sit empty at $0 just because you refuse to go $5 below your mental breakeven in the off-season.

Design, Amenities & Theming

Ryan Carriere, CPA
What about design and amenities? We see some properties going all out—pickleball courts, golf simulators, elaborate murals. Is that absolutely necessary?

Avery Carl (10:27.220)
I have a somewhat contrarian take. It’s not strictly necessary unless you’re in Orlando, where heavy Disney-themed properties are standard. In other markets, you see people spending huge amounts on amenities: adding pools, pickleball courts, murals in every room. Sure, it can increase income, but it doesn’t necessarily increase the property’s actual market value.
If you spend $250,000 on theming a $500,000 property, you won’t recover that cost on resale because murals and putt-putt don’t typically add appraised value. This is important if anything outside your control forces you to sell early. So yes, it can help with rental income, but think carefully about your exit strategy. We recently sold a heavily themed property that earned a lot, but it sat on the market for a year because the murals felt childish to many buyers at that price point.

Ideal Unit Sizes & Consistent Bookings

Thomas Castelli, CPA (14:41.558)
Is there a certain unit size or type—studios, one-bedrooms, larger cabins—that you find especially profitable or consistent?

Avery Carl (15:03.791)
Not necessarily more profitable, but one-bedrooms or studios can be very consistent in the right market. For instance, in the Smokies or beach towns, couples will book smaller places, and they often book last minute. So you keep the property pretty full. We have clients who only buy one-bedroom cabins or studio condos because they stay consistently booked. That said, you can also go bigger, but don’t overlook the stability of smaller properties.

Hospitality & Guest Experience

Thomas Castelli, CPA (19:46.132)
Short-term rentals are a hospitality business. Any tips on creating a great guest experience and earning five-star ratings?

Avery Carl (20:02.392)
Yes—answer questions before they’re even asked. We use a digital guidebook (Touch Stay, for example). Instead of the old binder on the coffee table, guests get a link as soon as they book. It has everything: Wi-Fi info, coffee maker type, how to work the TV or thermostat, where the nearest grocery store or hospital is. Then they don’t have to message you for every little thing. This drastically improves their experience and reduces friction.

Key Insights from Smarter Short-Term Rentals

Thomas Castelli, CPA (21:46.332)
You recently released your book Smarter Short-Term Rentals. Any major takeaways you’d highlight?

Avery Carl (21:56.694)
One big theme is setting standard operating procedures. You’ll encounter the same 10 or so scenarios over and over—like a guest complaining about a hair on the bed or a cleaner who forgot to clean. My book goes through those scenarios and how to create a plan for each, including guest archetypes. Another key is how to scale properly without over-leveraging yourself. People buy one property, see success, then want 100 more immediately. That’s how mistakes happen. Slow down, build systems, and keep your debt manageable.

Self-Management & Building a Team

Thomas Castelli, CPA (25:51.574)
A lot of our listeners self-manage for tax benefits. What does building a local team look like if you’re not onsite?

Avery Carl (27:06.552)
It’s mostly a mindset shift. If a toilet breaks in my own house, I call a plumber. Same if it breaks in a property 1,000 miles away; I still just make a phone call. So you primarily need a great cleaner, a handyman or maintenance person, and you can do everything else remotely with tools like Hospitable, Hostfully, or Host Away. Those automate guest communication and lots of tasks.
If you’re meeting the material participation hours for STR tax strategy—particularly if you’re doing your own setup—that often involves a lot of hands-on time upfront. But ongoing management isn’t too difficult once systems are set up.

Finding Good Vendors from Afar

Ryan Carriere, CPA (29:47.537)
How do you find good cleaners, good handymen, especially if you’re out of state?

Avery Carl (30:14.550)
Facebook groups can help, but there’s a lot of junk to sift through—people getting friends and family to recommend them. Make sure you’re getting real referrals, where the person has actually worked with that cleaner or handyman. Alternatively, if you work with the Short Term Shop, we provide a vetted vendor list in all 20 of our markets.

Markets the Short-Term Shop Serves

Thomas Castelli, CPA (31:05.948)
Which markets do you operate in?

Avery Carl (31:13.806)
We focus on vacation-dependent markets: the Smoky Mountains in Tennessee, the Emerald Coast of Florida, Gulf Shores, Alabama, the coastal Carolinas, Texas Hill Country, the Texas Gulf Coast, Broken Bow, Oklahoma, Branson, Missouri, Scottsdale, Arizona, and more. Typically Southeastern US plus a few extras. Our goal is to offer diversity: some markets you can enter with $250k, others where you can buy a $5M vacation home if you need a large-scale tax strategy.

How to Work with Avery & The Short-Term Shop

Thomas Castelli, CPA (33:36.812)
If someone wants to work with you—either acquiring their first short-term rental or expanding—what’s the best way to connect?

Avery Carl (33:46.370)
Visit theshorttermshop.com to see the 20+ markets we cover. That’s our affordable paid option for helping you analyze deals and learn how to manage even if we’re not your agent.

Also, you can follow me on Instagram:
@theshorttermshop for the brokerage brand
@theaverycarl for my personal real estate journey

Smarter Short-Term Rentals Book Details

Thomas Castelli, CPA (34:10.370)
Your book covers market identification, property setup, and optimization. Where can people find it?

Avery Carl (34:22.620)
You can find Smarter Short-Term Rentals anywhere books are sold—Amazon, Audible, or you can walk right into Barnes & Noble. The best deal is probably on the BiggerPockets bookstore at biggerpockets.com/smarterSTR.

Final Takeaways

Thomas Castelli, CPA (34:41.558)
Any final takeaways for our audience?

Avery Carl (34:46.893)
Yes—you can do this! People sometimes think real estate investing is for the already rich. But I was making $37,000 a year when I qualified for my first STR loan. It wasn’t easy, but it’s absolutely possible. Don’t let anybody tell you otherwise.

Wrap-Up

Thomas Castelli, CPA (35:40.494)
Thank you for joining us today, Avery. This was super insightful. We’ll drop all the links in the show notes. For everyone listening, we’ll see you next week on the TaxSmart REI Podcast.

Disclaimer: This podcast summary and transcript were partly generated and may contain some errors or miss key points from the audio recording.