Regulation is the risk that never appears in a revenue projection and the one most likely to end an investment outright. Every jurisdiction sits in one of four positions, and identifying which answers most of what matters. This is where it stood in 2025, which was the year the acquisition date on your closing statement started to matter enormously.
What 2025 changed
2025 was the year the tax calculation split in two. Property acquired on or before 19 January stayed on the old phase-down at 40%. Property acquired after that date, once OBBBA passed in July, qualified for 100% bonus depreciation again. The same property, the same buyer, a different acquisition date, and a materially different first-year deduction.
Supply growth had slowed enough that well-selected markets were producing consistent results again, and the gap between markets widened as regulation diverged.
Financing costs had settled into a range buyers had learned to underwrite around rather than wait out.
How it works
Regulation is the risk that never appears in a revenue projection and the one most likely to end an investment outright. Every jurisdiction sits in one of four positions, and identifying which answers most of what matters.
- State preemption of bans, as in Arizona and Idaho, is the strongest protection available because it removes the possibility that the property becomes unable to operate legally.
- Local control with light regulation is comfortable and offers no guarantee against a future tightening.
- Local control with permit caps cuts both ways: a barrier when buying and a moat once in, because capped supply protects against rate compression.
- Effectively prohibitive jurisdictions, including New York City, Denver, Atlanta and Charleston for non-owner-occupied purchases, are closed regardless of the numbers.
What that meant in 2025 specifically
Supply growth had slowed enough that well-selected markets were producing consistent results again, and the gap between markets widened as regulation diverged.
The risk in 2025 was assuming the restored bonus depreciation applied to a property already owned or already under contract before the cut-off. Acquisition date, not placed-in-service date alone, governs which schedule applies.
2025 rewarded buyers who confirmed with their CPA which schedule their specific acquisition fell under before modelling a deduction.
Where it goes wrong
The failure modes are consistent across years, which is itself useful information: they are not caused by the market cycle, so a different year does not protect you from them.
- Assuming a state-level headline settles a parcel-level question.
- Skipping the homeowner association declaration, which binds independently and which state preemption does not reach.
- Treating prior operation as evidence of legality or of transferability.
What a buyer should have done in 2025
2025 rewarded buyers who confirmed with their CPA which schedule their specific acquisition fell under before modelling a deduction.
The underwriting discipline does not change with the year. Twelve individual monthly revenue figures from a comparable set you assembled, a complete expense stack including reserves, and a stress test at 75% of projection that still covers debt service.
We screen roughly a thousand deals a week and eliminate about 98% of them. That ratio has held across every year on this site, through the boom, the correction and the stabilisation, because it is a function of how listings are selected rather than of the market.
What generalises, and what does not
Reading a year in isolation is the most common analytical error in this business. 2025 had its own conditions, and someone who learned the wrong lesson from it carried that lesson into a market that no longer rewarded it.
What generalises is the mechanics above. The definitions, the tests, the sequence and the failure modes are the same in every year on this site, which is why they are worth learning properly once rather than relearning each cycle.
What does not generalise is the environment: the cost of capital, the depth of supply, the bonus depreciation percentage, and the regulatory posture of a given jurisdiction. Those change, sometimes abruptly, and a model that treats them as fixed is a model that was only ever right about one year.
The practical consequence is to build the analysis so the environment is an input rather than an assumption. A property that only works at one interest rate, one occupancy level and one tax treatment is not an investment thesis, it is a bet that nothing moves.
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Frequently asked questions
What was different about short-term rental regulation in 2025?
2025 was the year the tax calculation split in two. Property acquired on or before 19 January stayed on the old phase-down at 40%. Property acquired after that date, once OBBBA passed in July, qualified for 100% bonus depreciation again. The same property, the same buyer, a different acquisition date, and a materially different first-year deduction.
What was the main risk in 2025?
The risk in 2025 was assuming the restored bonus depreciation applied to a property already owned or already under contract before the cut-off. Acquisition date, not placed-in-service date alone, governs which schedule applies.
What were financing conditions like in 2025?
Financing costs had settled into a range buyers had learned to underwrite around rather than wait out.