Note: This is NOT LEGAL ADVICE, YOU MUST DO YOUR OWN RESEARCH.
Complete rental arbitrage legal guide by state for 2026. State-by-state regulations, permits, licenses, and restrictions. Verify legality in your market before starting.
Quick Answer: Is Rental Arbitrage Legal?
Rental arbitrage legality depends on three factors:
- Local short-term rental regulations (city/county ordinances)
- Lease agreement terms (landlord approval for subletting)
- Zoning laws (STRs allowed in property’s zone)
Federal level: No federal restrictions on rental arbitrage. Tax implications apply (report rental income).
State level: Most states allow rental arbitrage, but regulations vary. Most regulation occurs at the city/county level.
Local level (most important): City ordinances vary widely. Some cities ban STRs entirely, others require permits/licenses. Always verify local ordinances before starting.
Cities with strict restrictions: New York City, San Francisco, Los Angeles, Boston, and others have strict regulations or bans.
This legal guide is part of our complete rental arbitrage guide. For related topics, see our best markets analysis and common mistakes guide.
Introduction
Understanding rental arbitrage legality is essential before investing in your first property. Regulations vary significantly by state and city, and violating local ordinances can result in fines, eviction, or legal action.
This comprehensive 2026 legal guide covers federal, state, and local regulations for all 50 states, required permits and licenses, cities with strict restrictions, and how to verify legality in your market. You’ll learn exactly what’s legal, what’s not, and how to ensure compliance.
Key takeaway: Rental arbitrage is legal in most U.S. markets, but regulations are primarily local. Always verify local ordinances, secure written landlord approval, and obtain required permits before starting. According to 10XBNB data, 18% of failures are due to regulatory issues—avoidable with proper research.
Federal Regulations
Federal Level Overview
No federal restrictions: There are no federal laws prohibiting rental arbitrage. The federal government does not regulate short-term rentals.
Tax implications:
- Report rental income on federal tax returns
- Business registration may be required (LLC, sole proprietorship)
- Self-employment tax may apply
- Deductible expenses (rent, utilities, cleaning, maintenance, etc.)
Business registration:
- Form LLC or business entity (recommended)
- Obtain EIN (Employer Identification Number) if needed
- Register business name if using DBA
Key federal considerations:
- No federal STR restrictions
- Tax compliance required
- Business registration recommended
- Insurance requirements (business liability)
State-by-State Legal Guide
Alabama
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Birmingham: Permits required, moderate regulations
- Mobile: Permits required, STR-friendly
- Huntsville: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Alaska
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Anchorage: Permits required, moderate regulations
- Fairbanks: Permits required, STR-friendly
- Juneau: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Arizona
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Phoenix: Permits required, STR-friendly
- Tucson: Permits required, moderate regulations
- Scottsdale: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Phoenix is a top rental arbitrage market
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
Arkansas
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Little Rock: Permits required, moderate regulations
- Fayetteville: Permits required, STR-friendly
- Fort Smith: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
California
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Some cities have strict restrictions
Key Cities:
- Los Angeles: Home Sharing Ordinance – Primary residence requirement, 120-day annual limit, registration required
- San Francisco: Strict regulations – Primary residence requirement, 90-day annual limit, business registration required
- San Diego: Permits required, moderate regulations
- Sacramento: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (required in most cities)
- Tax registration (sales tax, occupancy tax)
- Safety inspections (some cities)
Compliance Notes:
- Los Angeles and San Francisco have strict restrictions
- Primary residence requirements limit rental arbitrage
- Verify city ordinances carefully
- Consult local attorney for compliance
Colorado
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Denver: Permits required, moderate regulations
- Colorado Springs: Permits required, STR-friendly
- Boulder: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Denver is a top rental arbitrage market
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
Connecticut
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Hartford: Permits required, moderate regulations
- New Haven: Permits required, moderate regulations
- Stamford: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Delaware
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Wilmington: Permits required, moderate regulations
- Dover: Permits required, STR-friendly
- Newark: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Florida
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Miami: Permits required, moderate regulations
- Tampa: Permits required, STR-friendly
- Orlando: Permits required, moderate regulations
- Jacksonville: Permits required, STR-friendly
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Florida has several top rental arbitrage markets
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
Georgia
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Atlanta: Permits required, STR-friendly
- Savannah: Permits required, moderate regulations
- Augusta: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Atlanta and Savannah are top rental arbitrage markets
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
Hawaii
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Some counties have strict restrictions
Key Cities:
- Honolulu: Permits required, moderate regulations
- Maui County: Permits required, moderate regulations
- Kauai County: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (required in most counties)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify county ordinances carefully
- Some counties have strict restrictions
- Secure landlord approval
- Obtain required permits
Idaho
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Boise: Permits required, STR-friendly
- Nampa: Permits required, moderate regulations
- Idaho Falls: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Boise is an emerging rental arbitrage market
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
Illinois
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Chicago: Permits required, moderate regulations
- Aurora: Permits required, moderate regulations
- Naperville: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Indiana
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Indianapolis: Permits required, STR-friendly
- Fort Wayne: Permits required, moderate regulations
- Evansville: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Iowa
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Des Moines: Permits required, STR-friendly
- Cedar Rapids: Permits required, moderate regulations
- Davenport: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Kansas
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Wichita: Permits required, STR-friendly
- Overland Park: Permits required, moderate regulations
- Kansas City: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Kentucky
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Louisville: Permits required, STR-friendly
- Lexington: Permits required, moderate regulations
- Bowling Green: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Louisiana
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- New Orleans: Permits required, moderate regulations
- Baton Rouge: Permits required, STR-friendly
- Shreveport: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Maine
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Portland: Permits required, moderate regulations
- Lewiston: Permits required, STR-friendly
- Bangor: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Maryland
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Baltimore: Permits required, moderate regulations
- Frederick: Permits required, STR-friendly
- Rockville: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Massachusetts
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Some cities have strict restrictions
Key Cities:
- Boston: Registration required, owner-occupancy requirements, annual limits, strict enforcement
- Cambridge: Permits required, moderate regulations
- Worcester: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (required in most cities)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Boston has strict restrictions
- Owner-occupancy requirements limit rental arbitrage
- Verify city ordinances carefully
- Consult local attorney for compliance
Michigan
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Detroit: Permits required, STR-friendly
- Grand Rapids: Permits required, moderate regulations
- Warren: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Minnesota
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Minneapolis: Permits required, moderate regulations
- St. Paul: Permits required, moderate regulations
- Rochester: Permits required, STR-friendly
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Mississippi
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Jackson: Permits required, STR-friendly
- Gulfport: Permits required, moderate regulations
- Southaven: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Missouri
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Kansas City: Permits required, STR-friendly
- St. Louis: Permits required, moderate regulations
- Springfield: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Montana
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Billings: Permits required, STR-friendly
- Missoula: Permits required, moderate regulations
- Great Falls: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Nebraska
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Omaha: Permits required, STR-friendly
- Lincoln: Permits required, moderate regulations
- Bellevue: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Nevada
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Las Vegas: Permits required, moderate regulations
- Reno: Permits required, STR-friendly
- Henderson: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
New Hampshire
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Manchester: Permits required, STR-friendly
- Nashua: Permits required, moderate regulations
- Concord: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
New Jersey
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Newark: Permits required, moderate regulations
- Jersey City: Permits required, moderate regulations
- Paterson: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
New Mexico
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Albuquerque: Permits required, STR-friendly
- Las Cruces: Permits required, moderate regulations
- Rio Rancho: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
New York
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- New York City has strict restrictions
Key Cities:
- New York City: Local Law 18 – Registration required, entire-unit rentals prohibited in most buildings, only owner-occupied units or 2+ unit buildings allowed, strict enforcement with fines up to $5,000
- Buffalo: Permits required, moderate regulations
- Rochester: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (required in NYC)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- New York City has very strict restrictions
- Entire-unit rentals prohibited in most buildings
- Rental arbitrage very limited in NYC
- Other New York cities more STR-friendly
North Carolina
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Charlotte: Permits required, STR-friendly
- Raleigh: Permits required, STR-friendly
- Greensboro: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Charlotte and Raleigh are top rental arbitrage markets
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
North Dakota
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Fargo: Permits required, STR-friendly
- Bismarck: Permits required, moderate regulations
- Grand Forks: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Ohio
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Columbus: Permits required, STR-friendly
- Cleveland: Permits required, moderate regulations
- Cincinnati: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Columbus is a top rental arbitrage market
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
Oklahoma
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Oklahoma City: Permits required, STR-friendly
- Tulsa: Permits required, moderate regulations
- Norman: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Oregon
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Portland: Permits required, moderate regulations
- Eugene: Permits required, STR-friendly
- Salem: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Pennsylvania
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Philadelphia: Permits required, moderate regulations
- Pittsburgh: Permits required, STR-friendly
- Allentown: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Rhode Island
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Providence: Permits required, moderate regulations
- Warwick: Permits required, STR-friendly
- Cranston: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
South Carolina
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Charleston: Permits required, moderate regulations
- Columbia: Permits required, STR-friendly
- Greenville: Permits required, STR-friendly
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
South Dakota
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Sioux Falls: Permits required, STR-friendly
- Rapid City: Permits required, moderate regulations
- Aberdeen: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Tennessee
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Nashville: Permits required, STR-friendly
- Memphis: Permits required, moderate regulations
- Knoxville: Permits required, STR-friendly
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Nashville is the #1 rental arbitrage market
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
Texas
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Austin: Permits required, STR-friendly
- Dallas: Permits required, moderate regulations
- Houston: Permits required, moderate regulations
- San Antonio: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Austin is a top rental arbitrage market
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
Utah
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Salt Lake City: Permits required, STR-friendly
- West Valley City: Permits required, moderate regulations
- Provo: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Salt Lake City is an emerging rental arbitrage market
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
Vermont
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Burlington: Permits required, moderate regulations
- Essex: Permits required, STR-friendly
- South Burlington: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Virginia
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Virginia Beach: Permits required, moderate regulations
- Norfolk: Permits required, STR-friendly
- Richmond: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Washington
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Seattle: Permits required, moderate regulations
- Spokane: Permits required, STR-friendly
- Tacoma: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
West Virginia
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Charleston: Permits required, STR-friendly
- Huntington: Permits required, moderate regulations
- Parkersburg: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Wisconsin
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Milwaukee: Permits required, STR-friendly
- Madison: Permits required, moderate regulations
- Green Bay: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Wyoming
State Regulations:
- No state-level STR restrictions
- Regulation primarily at city/county level
- Generally STR-friendly
Key Cities:
- Cheyenne: Permits required, STR-friendly
- Casper: Permits required, moderate regulations
- Laramie: Permits required, moderate regulations
Required Permits/Licenses:
- Business license (city/county)
- STR registration (if required by city)
- Tax registration (sales tax, occupancy tax)
Compliance Notes:
- Verify city ordinances before starting
- Secure landlord approval
- Obtain required permits
- Register for tax collection
Cities with Strict Restrictions
New York City
Regulations:
- Local Law 18 requires registration for all STRs
- Prohibits entire-unit rentals in most buildings
- Only allows owner-occupied units or 2+ unit buildings
- Strict enforcement with fines up to $5,000
Impact on Rental Arbitrage:
- Very limited opportunities
- Entire-unit rentals prohibited in most buildings
- Owner-occupancy requirements limit rental arbitrage
- Not recommended for rental arbitrage
San Francisco
Regulations:
- Strict regulations require business registration
- Host must be permanent resident
- 90-day annual limit for unhosted stays
- Strict permitting process
Impact on Rental Arbitrage:
- Primary residence requirement limits rental arbitrage
- 90-day annual limit restricts operations
- Not recommended for rental arbitrage
Los Angeles
Regulations:
- Home Sharing Ordinance requires registration
- Primary residence requirement
- 120-day annual limit for unhosted stays
- Compliance with building codes required
Impact on Rental Arbitrage:
- Primary residence requirement limits rental arbitrage
- 120-day annual limit restricts operations
- Not recommended for rental arbitrage
Boston
Regulations:
- Registration required
- Owner-occupancy requirements
- Annual limits on unhosted stays
- Strict enforcement
Impact on Rental Arbitrage:
- Owner-occupancy requirements limit rental arbitrage
- Annual limits restrict operations
- Not recommended for rental arbitrage
How to Verify Legality in Your Market
Step 1: Check Local Short-Term Rental Ordinances
Actions:
- Search “[City Name] short-term rental regulations”
- Check city government websites
- Review zoning codes
- Contact city planning department
Resources:
- City government websites
- Planning department
- Zoning office
- Local attorney
Step 2: Verify Zoning Laws
Actions:
- Confirm STRs allowed in property’s zone
- Check for HOA restrictions
- Review building codes
- Verify parking requirements
Resources:
- Zoning maps
- HOA bylaws
- Building codes
- Local attorney
Step 3: Review Lease Agreement Terms
Actions:
- Check for subletting restrictions
- Verify STR prohibition clauses
- Review early termination terms
- Confirm landlord approval requirements
Resources:
- Lease agreement
- Landlord
- Real estate attorney
Step 4: Consult with Local Attorney
Actions:
- Get legal opinion on regulations
- Review lease agreement
- Understand compliance requirements
- Plan for regulatory changes
Resources:
- Local real estate attorney
- Business attorney
- STR compliance specialist
Required Permits and Licenses
Short-Term Rental Registration
Requirements:
- Annual registration fees ($50-$500+)
- Property inspection requirements
- Safety code compliance
- Renewal process
Where to Apply:
- City planning department
- Business license office
- STR registration office
Business License
Requirements:
- General business registration
- Tax identification number
- Annual renewal
- Compliance with business codes
Where to Apply:
- City business license office
- County business license office
- State business registration
Tax Registration
Requirements:
- Sales tax collection
- Occupancy tax (lodging tax)
- Income tax reporting
- Quarterly/annual filings
Where to Apply:
- State tax department
- City tax office
- County tax office
Safety Inspections
Requirements:
- Fire safety requirements
- Building code compliance
- Smoke detector installation
- Emergency exit requirements
Where to Apply:
- Fire department
- Building inspection office
- Code enforcement office
Legal Risks and How to Mitigate
Regulatory Changes
Risk: Cities can ban or restrict STRs mid-lease.
Mitigation:
- Choose markets with stable regulations
- Monitor regulatory changes
- Maintain early termination clauses in leases
- Diversify across multiple markets
Lease Violations
Risk: Operating without landlord approval can result in eviction.
Mitigation:
- Secure written landlord approval
- Include STR approval in lease addendum
- Maintain professional landlord relationship
- Document all approvals
Compliance Issues
Risk: Violating regulations can result in fines or legal action.
Mitigation:
- Verify regulations before starting
- Obtain required permits and licenses
- Maintain compliance documentation
- Consult local attorney
Zoning Violations
Risk: Operating in zones that prohibit STRs.
Mitigation:
- Verify zoning before signing lease
- Check HOA restrictions
- Review building codes
- Consult local attorney
Working with Attorneys
When to Consult an Attorney
Before Starting:
- Review local regulations
- Verify legality in your market
- Review lease agreement
- Understand compliance requirements
During Operations:
- Regulatory changes
- Lease disputes
- Compliance issues
- Legal questions
What to Ask Your Attorney
Regulatory Questions:
- Is rental arbitrage legal in my market?
- What permits and licenses are required?
- What are the compliance requirements?
- What are the risks?
Lease Questions:
- Is my lease agreement compliant?
- Do I need a lease addendum?
- What are my rights and obligations?
- What happens if regulations change?
Compliance Questions:
- How do I maintain compliance?
- What documentation do I need?
- How do I handle tax obligations?
- What are the reporting requirements?
Frequently Asked Questions
Is rental arbitrage legal in all states?
Rental arbitrage is legal in most states, but regulations are primarily local (city/county level). Some cities have strict restrictions or bans (New York City, San Francisco, Los Angeles, Boston). Always verify local ordinances before starting.
Do I need a permit for rental arbitrage?
Many cities require permits, licenses, or registration for short-term rentals. Requirements vary by city. Check with your city’s planning department or business license office to determine what’s required in your market.
Can I do rental arbitrage if my lease prohibits subletting?
No, you cannot do rental arbitrage if your lease prohibits subletting. Always secure written landlord approval for subletting before investing in furnishings. Operating without approval can result in eviction.
What happens if regulations change after I start?
If regulations change after you start, you may need to comply with new requirements or exit the market. Maintain early termination clauses in leases and monitor regulatory changes. Consult with a local attorney if regulations change.
Do I need an attorney for rental arbitrage?
While not required, consulting with a local attorney is highly recommended, especially before starting. An attorney can help you verify legality, review lease agreements, understand compliance requirements, and plan for regulatory changes.
Conclusion
Understanding rental arbitrage legality is essential for success. Regulations vary significantly by state and city, and violating local ordinances can result in fines, eviction, or legal action.
Key takeaways:
- Rental arbitrage is legal in most U.S. markets
- Regulations are primarily local (city/county level)
- Some cities have strict restrictions (NYC, San Francisco, LA, Boston)
- Always verify local ordinances before starting
- Secure written landlord approval
- Obtain required permits and licenses
- Consult with local attorney for compliance
Ready to start your rental arbitrage business legally? Join 10XBNB for legal compliance guidance, landlord pitch scripts, and mentorship from successful operators.
Related Guides
- Complete Rental Arbitrage Guide – The ultimate guide to rental arbitrage
- Best Markets for Rental Arbitrage 2026 – Market analysis and selection
- Rental Arbitrage Common Mistakes – How to avoid costly errors
- How to Get Landlord Approval – Complete landlord approval guide
Last updated: January 22, 2026. Legal information based on 2026 regulations. Always verify current regulations with local authorities and consult with a local attorney for legal advice.
Note: This is NOT LEGAL ADVICE, YOU MUST DO YOUR OWN RESEARCH.
Complete rental arbitrage legal guide by state for 2026. State-by-state regulations, permits, licenses, and restrictions. Verify legality in your market before starting.
