How Sean Rakidzich Picks STR Markets in 2026: A 5-Filter System

In 2026 the U.S. short-term rental count has crossed 1.7 million active listings, and roughly 38% of them sit in the bottom quartile for revenue. Sean Rakidzich, the operator behind the Orange House portfolio and the Airbnb Automated YouTube channel, filters markets down to a shortlist of four to six each cycle. His screen is not a vibe check. It is a stack of five hard filters, run in order, that eliminate 95% of ZIP codes before anyone tours a single property.

Key Takeaway

Regulation first. No permit path, no deal. Skip cities with pending caps.
Rent-to-revenue ratio. Monthly rent must be under 25% of projected monthly STR gross.
Event thickness. A market needs at least 20 demand peaks a year, not one.
Supply slope. Active listing growth under 8% year over year beats raw demand.
Exit optionality. If STR gets banned tomorrow, can the unit cover rent on a mid-term lease?

The Regulation Filter Runs Before Any Math

Rakidzich starts every market review by pulling the city code. Not a Reddit thread. The actual ordinance PDF. If a city has an active cap, a pending referendum, or a zoning overlay that blocks non-owner-occupied rentals, the ZIP is dead on arrival.

He has watched operators lose six-figure build-outs in Dallas, New Orleans, and Honolulu because they trusted a leasing agent over the municipal record. The pattern is the same each time. Someone signs a 24-month lease in February. The city council votes in June. By September the listing is delisted and the rent keeps coming due.

The counter-move is boring and effective. Read the code. Call the permit office. Ask when the next council agenda drops.

The Three Regulation Tiers

Tier	Signal	Action
Green	Clear permit path, no cap, stable for 3+ years	Proceed to math
Yellow	Permit exists, cap under discussion	Only buy, never lease
Orange	Owner-occupied only, or primary-residence rule	Skip unless you live there
Red	Active ban or pending vote within 90 days	Do not enter

For a broader view of how rules shift mid-cycle, the primer at navigating updated short-term rental regulations walks through the 2025-2026 wave city by city.

The Rent-to-Revenue Ratio Kills Most Cities

After regulation, Rakidzich runs a single ratio. Monthly rent divided by projected monthly gross revenue. If that number is above 28%, the unit will not clear enough to pay cleaning, utilities, software, and his time. He wants 25% or lower. He loves 22%.

This is why Miami, San Diego, and most of coastal California fail his filter in 2026. Rents have climbed faster than ADR. A $4,800 two-bedroom that grosses $6,500 a month on Airbnb looks fine on paper until you subtract $1,400 in cleans, $600 in utilities, $250 in software, and the midweek vacancy tax. You are working for free.

25%

The rent-to-revenue ceiling Rakidzich uses on every rental arbitrage deal. Above this number, margin collapses the moment occupancy drops 5 points.

How He Pulls the Revenue Number

He does not use a single data source. He pulls three, then takes the median. Industry dashboards give him the top-down. AirROI gives him a free cross-check. And he manually samples 20 active listings in the target ZIP that match bedroom count and bathroom count.

The manual sample is the step most new operators skip. A dashboard tells you the ZIP average. The sample tells you what the top quartile is actually earning, because that quartile is where your listing will live if you operate well.

Event Thickness Beats a Single Demand Peak

A market with one giant weekend a year is a trap. Nashville on CMA weekend, Louisville on Derby, Indianapolis on the 500. Those peaks price the rest of the year out of proportion, and operators overpay on rent because they anchor on the peak.

Rakidzich wants markets with thick, distributed demand. Twenty or more weekends a year where occupancy reliably clears 85%. Medical hubs, university towns with strong sports and parent traffic, state capitals with legislative sessions, and convention cities all score well.

Thick demand protects you from one bad quarter.

Pull the convention calendar. Every city with a convention bureau publishes next year's events. Count dates over 5,000 attendees.
Add the university schedule. Move-in, move-out, homecoming, graduation, parents weekend, and home football games. That is 8 weekends minimum.
Layer the hospital system. Travel nurse contracts, residency interview season, and medical conferences often run 30+ nights a year.
Check the wedding venues. Search venue Instagram for booked weekends. Wedding towns pull consistent 2-night stays May through October.
Map peaks across the calendar. If peaks cluster in one month, you have a seasonal trap. If they spread across 9 months, you have a thick market.

Supply Slope Matters More Than Current Supply

A crowded market with flat listing growth is safer than an empty market with 40% year-over-year supply growth. Rakidzich watches the slope, not the level. When new listings flood in, ADR compresses first, then occupancy collapses six months later.

He pulls the active listing count for a ZIP quarterly. Any ZIP growing supply faster than 8% a year goes on the watch list. Any ZIP growing faster than 15% gets dropped. The Smokies in 2022 and 2023 are his case study. Supply grew 35% in 18 months. RevPAR dropped 28%. Operators who had cleared $80K a cabin in 2021 were netting $12K by 2023.

Current count is a snapshot. Slope is the story.

The Saturation Signal

When you see four new listings in a ZIP within 30 days, all with professional photos and aggressive launch pricing, a hedge fund or a portfolio operator has arrived. Your ranking fight just got harder. The search algorithm rewards velocity, and well-capitalized entrants buy velocity with discounts you cannot match. The mechanics of that fight are covered in how Airbnb search ranks listings in 2026.

Exit Optionality Is the Insurance Policy

The fifth filter is the one most operators ignore. If the city bans STRs tomorrow, what happens to your unit? Rakidzich will not enter a market where the mid-term rental comp or the long-term rental comp cannot cover at least 85% of his rent obligation.

This means he avoids tourist-only towns where the local economy cannot support $2,800 a month in rent without the STR premium. Park City satellites, Gulf Shores side streets, and remote mountain ZIPs all flunk the exit test. Urban cores, medical hubs, and university towns pass.

The best STR market is the one that still pencils if you are forced to turn it into a long-term rental on 60 days notice.

Exit optionality is why he keeps circling back to secondary cities. Knoxville, Chattanooga, Columbus, Richmond, and Oklahoma City all have diversified rental demand. If the STR ordinance tightens, the unit finds a corporate tenant or a graduate student in under 45 days.

The 2026 Shortlist Pattern

Run all five filters and the 2026 shortlist starts to look predictable. Mid-size cities with a major hospital system, a Division I university, a convention center over 200,000 square feet, and a clear permit path. These are not glamorous markets. They are boring markets that pay.

Rakidzich's current favorites cluster in the Midwest and the Sunbelt second tier. The glamour markets, the Miamis and the Austins and the Nashvilles, are priced for operators with institutional cost structures. You are not that operator.

Pick boring. Pick boring twice.

Markets on Rakidzich's active shortlist at any given time. Not 40. Depth beats breadth when you are the one answering messages at 11 p.m.

What the Shortlist Cities Share

Population between 250,000 and 900,000 in the metro
Median rent under $1,800 for a two-bedroom
At least one Fortune 500 headquarters or major hospital system
STR ordinance passed more than 3 years ago with no active amendment
Active listing growth under 8% year over year

Running the Filter as a New Host

If you are new, the filter feels slow. That is the point. Rakidzich has watched hundreds of new operators skip the regulation read, sign a lease in a hot market, and discover the permit path six weeks in. The fastest way to lose money in this business is to enter the wrong market fast.

Spend two weekends on the filter before you spend a dollar on a deposit. The opportunity cost of a slow screen is zero. The opportunity cost of a bad lease is $40,000.

Pick three candidate cities. Start with places you can drive to in under six hours. Site visits matter.
Download each ordinance. Read the permit fee, the cap structure, and the zoning overlay. Call the permit office to confirm.
Run the rent-to-revenue ratio. Use three data sources, take the median, and require 25% or better.
Count the demand peaks. Twenty or more weekends above 85% occupancy, or skip the market.
Check the exit number. Pull long-term and mid-term rental comps. Require 85% rent coverage.
Shortlist the survivors. You will have one or two cities left. That is the right answer, not a failure.

For the broader new-host checklist that sits upstream of market selection, work through the 2026 new-host playbook before you commit.

A Concrete Example From a Recent Meetup

At a small operator meetup in Columbus last spring, an attendee named Priya walked through her screen for a two-bedroom in the Short North. Rent was $2,150. Her median revenue projection pulled from three sources landed at $4,900. That is a 43% rent-to-revenue ratio. The deal failed the filter on the spot. She found a unit eight blocks east for $1,750 rent

Frequently Asked Questions

How does the regulation filter runs before any math work?

He starts every market review by pulling the actual city code ordinance PDF rather than relying on informal sources like Reddit threads. If a city has an active cap, pending referendum, or zoning that blocks non-owner-occupied rentals, the location is immediately eliminated from consideration. He verifies permit paths by calling the permit office and checking council agendas to avoid losing money on leases signed before regulations change.

How does the rent-to-revenue ratio kills most cities work?

This filter divides monthly rent by projected monthly gross revenue to ensure the rent stays under 25% of the income. If the ratio exceeds 28%, there is not enough margin left to cover cleaning, utilities, software, and operational time. A ratio higher than 25% means the deal loses profitability immediately if occupancy drops slightly.

How does event thickness beats a single demand peak work?

He avoids markets that rely on a single giant weekend event because this causes operators to overpay rent based on temporary peak pricing. Instead, he seeks markets with at least twenty demand peaks a year where occupancy reliably clears 85%. This ensures consistent revenue throughout the year rather than relying on sporadic high-demand events.

How does supply slope matters more than current supply work?

Rakidzich prioritizes active listing growth under 8% year over year over raw demand metrics. This ensures that the market is not becoming oversaturated with new inventory that could drive down rates. He looks for supply slope stability rather than just high current demand numbers.

How does exit optionality is the insurance policy work?

This filter asks whether the unit can cover rent on a mid-term lease if short-term rentals are banned the next day. It serves as an insurance policy to ensure the investment remains viable even if the STR model becomes illegal. Without this safety net, an operator risks being stuck with high rent and no legal way to operate.