How to Start an Airbnb Business in Minnesota

Why Minnesota Is a Top Market for Short-Term Rentals

Minnesota is called the Land of 10,000 Lakes, but the actual count is 11,842. That is not just a fun fact. It is the foundation of a vacation rental market that generates consistent demand from May through September and increasingly year-round. Tourism contributed $17.7 billion to Minnesota’s economy in 2023, with the state hosting over 73 million person-trips annually. A significant share of that spending goes toward accommodations, and short-term rentals are capturing more of it each year as travelers seek alternatives to the limited hotel inventory in lake country and resort communities.

What makes Minnesota distinctive as an STR market is the strength of its drive-to tourism base. Minneapolis-St. Paul is a metro of 3.7 million people, and those residents are some of the most active cabin-goers in the country. “Going to the cabin” is embedded in Minnesota culture the way going to the beach is in Florida. The difference is that not everyone owns a cabin, which creates robust demand for short-term lake rentals within a 2 to 4 hour drive of the Twin Cities.

The Twin Cities themselves represent a strong urban STR market. Minneapolis draws conventions, corporate travelers, and event-goers year-round. The city hosts the Super Bowl (2018), the Final Four (2019), and regularly lands major concerts at US Bank Stadium, Target Center, and the Xcel Energy Center across the river in St. Paul. The University of Minnesota, with 52,000 students, drives parent visit and graduation demand. And a healthcare corridor anchored by Mayo Clinic (90 miles south in Rochester) and the U of M Medical Center generates steady travel nurse and patient family lodging needs.

Duluth deserves special attention. This Lake Superior port city has transformed into one of the top tourism destinations in the Upper Midwest. Visitors come for the craft brewery scene (over 15 breweries in a city of 90,000), Canal Park’s waterfront, the Superior Hiking Trail, and Gooseberry Falls State Park. Duluth’s short-term rental market has exploded since 2019, with ADR climbing 20 to 30% as the city became a pandemic-era relocation and remote work hotspot.

Minnesota also has a winter tourism economy that most STR operators underestimate. Ice fishing draws thousands to lakes across the state from December through February. Skiing at Lutsen Mountains, Giants Ridge, and Spirit Mountain generates winter weekend demand in the Duluth and North Shore corridor. Even the Twin Cities have winter draw through events like the St. Paul Winter Carnival and an indoor entertainment infrastructure designed for cold-weather months.

Minnesota Short-Term Rental Laws and Regulations

Minnesota gives significant regulatory authority to local governments, which means STR rules vary substantially from one city to the next. The state itself takes a relatively hands-off approach, but certain cities have built detailed frameworks that operators must understand.

State-Level Requirements

Minnesota does not have a statewide STR permit or licensing requirement. However, all operators must register with the Minnesota Department of Revenue and collect state and local lodging taxes. You will need a Minnesota Tax ID Number, which you can obtain through the department’s online system at no cost.

Minnesota statute classifies short-term rentals under its lodging tax framework. Any accommodation rented for fewer than 30 consecutive days is subject to state sales tax and local lodging taxes. The state has not passed preemption legislation, meaning cities and counties retain full authority to regulate, restrict, or (in some cases) effectively ban STRs through zoning.

Minnesota’s fire code (Minnesota State Fire Code, based on the International Fire Code) applies to all rental properties. STRs must have working smoke alarms in every bedroom and on every level, carbon monoxide detectors within 10 feet of sleeping areas, and a fire extinguisher accessible to guests. Properties accommodating more than 8 guests may trigger additional commercial fire safety requirements.

Minneapolis Regulations

Minneapolis requires a Short-Term Rental License issued by the city’s Department of Community Planning and Economic Development (CPED). There are two license types:

• Limited License: For renting out a portion of your primary residence while you are present. No minimum stay requirement. Annual fee is $100.
• Comprehensive License: For renting an entire dwelling unit (unhosted). Requires a $200 annual fee, a rental property inspection, and compliance with the city’s Rental Dwelling License standards. Properties must meet minimum maintenance standards for heating, plumbing, electrical, and structural systems.

Minneapolis does not cap the number of STR licenses, but the city does require a local contact person available within one hour for comprehensive licenses. Operators must carry minimum liability insurance of $300,000. The city mandates a 2-guest-per-bedroom maximum occupancy standard and requires off-street parking for rentals with 3+ bedrooms.

Duluth Regulations

Duluth introduced its STR regulatory framework in 2021 after the city’s short-term rental inventory grew 300% in three years. The city requires a Short-Term Rental License through the Planning Division. The annual fee is $150. Duluth distinguishes between owner-occupied rentals (the host lives in the building) and non-owner-occupied whole-home rentals.

Non-owner-occupied STR licenses are capped by district. The city limits the concentration of whole-home STRs in residential neighborhoods to prevent housing stock conversion. As of 2025, certain neighborhoods near Canal Park and along the hillside have reached their caps, meaning new non-owner-occupied licenses are unavailable in those areas. Owner-occupied licenses remain uncapped citywide. Duluth also enforces a 2-night minimum stay in residential zones.

Rochester Regulations

Rochester, home to the Mayo Clinic, has a significant lodging demand from patients, families, and medical professionals. The city requires STR operators to obtain a Conditional Use Permit (CUP) in residential zones, which involves a public hearing and planning commission approval. The CUP process costs $500 to $700 and can take 60 to 90 days. In commercial zones, a standard business license suffices. Rochester limits non-owner-occupied STRs in residential areas and requires annual renewal of permits.

Recent Regulatory Changes (2025-2026)

Duluth tightened its district caps in 2025, reducing the allowed concentration of non-owner-occupied STRs in several neighborhoods after residents raised housing affordability concerns. Minneapolis updated its inspection requirements in late 2025 to include energy efficiency standards (working heating system must maintain 68 degrees Fahrenheit, verified through inspection). At the state level, a 2025 legislative proposal to create a statewide STR registry did not advance but is expected to return in the 2026 session. Several lake communities in the Brainerd Lakes area introduced their first STR ordinances in 2025, requiring registration and safety inspections for properties renting fewer than 30 days.

Tax Obligations for Minnesota Airbnb Hosts

Minnesota’s tax obligations for STR operators are more complex than neighboring states. The multi-layered structure requires careful setup to avoid compliance issues.

State Sales Tax: Minnesota charges a 6.875% sales tax on short-term lodging (stays under 30 days). This is one of the higher state sales tax rates in the Midwest. Airbnb collects and remits this automatically for Minnesota listings.

State Lodging Tax: In addition to sales tax, Minnesota levies a separate lodging tax. For properties in the Minneapolis-St. Paul metro area, a 3% metro area lodging tax applies. Outside the metro, a 1% state-level lodging tax applies. These lodging taxes are in addition to the 6.875% sales tax. Airbnb collects the state-level lodging taxes in most cases, but verify through your Minnesota Revenue account.

Local Lodging Taxes: Many Minnesota cities and counties add their own lodging tax. Minneapolis charges a 6.5% city lodging tax on top of state taxes. St. Paul charges 6%. Duluth charges 6.5%. These local taxes bring the total tax burden to significant levels. In Minneapolis, the combined rate (sales + metro + city) can approach 16.4% of the nightly rate. Some of these local taxes are collected by Airbnb, but others are not. Check the specific collection agreements for your jurisdiction through the Minnesota Department of Revenue.

Income Tax: Minnesota has a progressive state income tax with rates ranging from 5.35% to 9.85%. The top rate kicks in at $193,240 for single filers and $284,810 for married filing jointly. Minnesota’s income tax rate is among the highest in the country, which meaningfully impacts your STR net income. Your rental profits are reported on your Minnesota individual return (Form M1).

Estimated Tax Payments: If you expect to owe $500 or more in Minnesota income tax from STR income, you must make quarterly estimated payments. The due dates are April 15, June 15, September 15, and January 15. Missing estimated payments triggers underpayment penalties.

Best Cities for Airbnb in Minnesota

Minnesota’s STR markets split into three categories: urban (Twin Cities, Rochester), lakefront (Brainerd Lakes, Alexandria, Mille Lacs), and North Shore/Duluth. Each serves a different guest profile and produces different revenue patterns.

Minneapolis-St. Paul

The Twin Cities metro is Minnesota’s largest STR market by volume and offers the most consistent year-round demand. Minneapolis ADR for a well-positioned two-bedroom ranges from $130 to $210, with occupancy averaging 68 to 76%. St. Paul runs slightly lower at $110 to $180 ADR with 62 to 70% occupancy.

Demand drivers are diverse: corporate travel (Target, UnitedHealth Group, 3M, Best Buy all headquartered in the metro), University of Minnesota events, professional sports (Vikings, Twins, Timberwolves, Wild, Minnesota United), conventions at the Minneapolis Convention Center, and a robust concert and entertainment calendar. Properties near the North Loop, Uptown, and downtown Minneapolis command the highest rates. St. Paul’s Cathedral Hill and Grand Avenue neighborhoods also perform well.

Annual gross revenue for a two-bedroom in a prime Minneapolis location runs $35,000 to $52,000. The market supports rental arbitrage well. A two-bedroom apartment lease in the North Loop or Uptown runs $1,600 to $2,200 per month, with STR revenue of $3,200 to $4,500 monthly. That math leaves $500 to $1,500 in monthly net income after expenses per property.

Duluth and the North Shore

Duluth has become one of the most talked-about STR markets in the Midwest. The city’s combination of craft brewing culture, outdoor recreation access, and dramatic Lake Superior scenery draws visitors year-round, though summer and fall are peak. ADR ranges from $175 to $300 for a two-bedroom with lake views or proximity to Canal Park. Occupancy averages 60 to 72%.

Annual gross revenue for a well-positioned Duluth two-bedroom runs $40,000 to $60,000. Properties along the North Shore corridor between Duluth and Grand Marais (about 110 miles of scenic Lake Superior coastline) can command even higher rates, particularly cabins with fireplace, hot tub, and lake access. The North Shore market is heavily seasonal (June through October for the peak, with a smaller winter spike for skiing and winter activities), but the summer rates are strong enough to generate compelling annual returns.

The main challenge in Duluth is the license cap for non-owner-occupied rentals. If you are not living in the building, securing a license in desirable neighborhoods may require waiting for an existing license to become available. Owner-occupied rentals face no such restriction, making house-hacking (living in one unit of a duplex while renting the other) a viable entry strategy.

Brainerd Lakes Area

The Brainerd Lakes area (including Gull Lake, Mille Lacs Lake, and surrounding communities) is Minnesota’s quintessential cabin country. This region sits about 2 hours north of Minneapolis, making it the primary weekend escape for Twin Cities families. ADR runs $150 to $275 for lakefront properties and $90 to $150 for non-lakefront.

Occupancy is highly seasonal: 75 to 90% during summer weekends, dropping to 30 to 45% in winter (though ice fishing season provides a meaningful bump from December through February). Annual gross revenue for a lakefront three-bedroom averages $30,000 to $50,000. The key differentiator in this market is lake access and amenities. Properties with a private dock, pontoon boat rental, and outdoor fire pit can charge $100+ more per night than comparable properties without these features.

Brainerd Lakes is an excellent market for operating without owning property if you can negotiate seasonal lease terms with cabin owners who do not fully utilize their properties. Some owners are happy to lease their cabin from May through September for $2,000 to $3,500 per month while the STR revenue potential is $5,000 to $8,000 per month.

Rochester

Rochester is a unique STR market driven almost entirely by Mayo Clinic. Over 1.3 million patients visit Mayo annually, and many bring family members who need multi-day lodging. Medical tourism demand creates consistent bookings throughout the year, including traditionally slow periods for vacation markets. ADR averages $100 to $165, with occupancy around 65 to 74%.

Annual gross revenue for a two-bedroom near Mayo Clinic runs $28,000 to $42,000. The guest profile is distinctive: patient families value cleanliness, comfort, full kitchens (for dietary needs), accessibility features, and proximity to the clinic campus above all else. Properties within walking distance or a short drive of Mayo’s downtown campus outperform. The CUP process is a barrier to entry, but it also limits supply, which supports pricing for permitted operators.

How Much Do Airbnbs Make in Minnesota?

Minnesota STR revenue follows distinct geographic patterns. Understanding where the money concentrates helps you avoid markets that look attractive on the surface but underperform in practice.

Statewide, the median Minnesota STR generates $27,000 to $38,000 in gross annual revenue. Top-quartile properties (lakefront, well-designed, professionally managed) exceed $55,000. The gap between median and top performers is wider in Minnesota than in many states because the lakefront premium is so significant. A cabin on Gull Lake with dock access might gross $48,000 while a comparable cabin on a smaller, less popular lake 20 miles away might gross $22,000.

Minneapolis offers the most predictable revenue curve. Monthly income stays relatively flat throughout the year, with modest bumps during Vikings home games, conventions, and summer festivals (Aquatennial in July, the State Fair in late August/early September). The Minnesota State Fair is the best-attended state fair in the country by daily attendance, drawing over 2 million visitors in its 12-day run. Properties within 3 miles of the fairgrounds can book at 2 to 3 times their normal rate during the Fair.

Duluth and the North Shore show a more pronounced seasonal pattern. July and August are the peak earning months, with strong Saturdays booking at $350 to $500 for premium properties. September and October bring a fall color season that is nearly as strong as summer in terms of occupancy, though rates drop slightly. November through April is the lean season, with the exception of ski weekends and holiday periods. A Duluth operator should plan for 60 to 65% of annual revenue to come from June through October.

The rental arbitrage model works particularly well in Minneapolis and Rochester, where year-round demand matches the year-round lease obligation. In lake markets, arbitrage is trickier because of seasonal revenue concentration. If your monthly lease is $2,000 and January revenue is $800, you need your summer months to more than compensate. They usually do, but you need the cash reserves to weather lean months without stress.

One revenue strategy specific to Minnesota: ice fishing packages. Properties near popular ice fishing lakes (Mille Lacs, Upper Red Lake, Lake Winnibigoshish) can create winter revenue by offering heated fish house access, bait shop recommendations, and proximity to lake access points. This niche is underserved on Airbnb and can add $3,000 to $8,000 in winter revenue to an otherwise dead season.

How to Start Your Minnesota Airbnb Business

Minnesota rewards thorough preparation more than most states. Between the tax complexity, varying municipal regulations, and winter operational demands, shortcuts end up costing more than doing it right from the start.

1. Define your market and model. Minnesota has four distinct STR segments: urban (Minneapolis-St. Paul), North Shore/Duluth, lake country (Brainerd, Alexandria, Mille Lacs), and medical (Rochester). Each has different capital requirements, seasonal patterns, and regulatory landscapes. Urban and Rochester offer year-round demand, ideal for arbitrage. Lake country and North Shore offer higher peak revenue but require a different financial plan. Start with the segment that matches your budget and cash flow needs.
2. Register your business. File your LLC with the Minnesota Secretary of State ($160 filing fee, the highest in the Midwest). File for your EIN with the IRS. Register with the Minnesota Department of Revenue for your tax ID through their e-Services portal. Open a business bank account.
3. Navigate local licensing. This is the step where Minnesota gets specific. In Minneapolis, apply for your STR license through CPED ($100 to $200 depending on type). In Duluth, check license availability in your target neighborhood before committing to a property (non-owner-occupied caps may block you). In Rochester, budget 60 to 90 days for the CUP process. In lake communities, check whether the township has adopted STR ordinances since 2025.
4. Secure your property. For Minneapolis arbitrage, target apartments in the North Loop, Northeast, and Uptown neighborhoods with landlord permission for subletting. Present your LLC documentation, insurance proof, and a premium rent offer. For lake properties, look for cabins where the owner does not fully use the property and may welcome guaranteed rental income. For purchases, pull AirDNA data to verify revenue potential before you make an offer.
5. Set up your tax infrastructure. Minnesota’s layered tax system (state sales tax + state lodging tax + local lodging tax) requires careful setup. Verify which taxes Airbnb collects in your jurisdiction and which you need to handle independently. Set up quarterly estimated income tax payments if your expected STR income will create a tax liability over $500. Consider hiring a Minnesota CPA familiar with STR taxation, because the state’s high income tax rates (up to 9.85%) make tax planning especially impactful here.
6. Furnish for the climate. Minnesota-specific furnishing needs differ from warmer states. You need quality heating (verify your furnace before listing), extra blankets and throws, boot trays by the entrance, and a snow shovel available for guests. For lake properties, provide outdoor furniture, citronella candles (Minnesota mosquitoes are legendary), fishing equipment or recommendations, and fire pit supplies. For urban properties, invest in blackout curtains (summer daylight lasts until 9:30 PM), quality coffee equipment, and neighborhood dining guides.
7. Build seasonal pricing tiers. Minnesota demands at minimum four pricing tiers: summer peak (June through August), fall shoulder (September through October), winter low (November through March, with event weekend exceptions), and spring shoulder (April through May). Within each tier, build weekend and weekday rates. Use dynamic pricing software (PriceLabs or Beyond Pricing) and manually override for major events like the State Fair, Vikings home games, and holiday weekends.
8. Plan for winter operations. This is non-negotiable in Minnesota. Arrange a snow removal service for your driveway and walkways. Keep the thermostat at a minimum of 60 degrees Fahrenheit, even when vacant, to prevent frozen pipes. Insulate exposed pipes. Have a local contact who can check the property during extended vacancies in January and February. For lake properties, winterize water systems if you plan to close for the season. Stock the property with ice melt and ensure exterior lighting is adequate for early winter darkness (sunset is before 4:30 PM in December).

Minnesota STR Insurance and Liability

Minnesota’s climate and geography create insurance needs that differ from most states. Your coverage must address both standard hospitality risks and winter-specific exposures that can cause significant financial damage.

Standard homeowner’s insurance excludes commercial rental activity in Minnesota. You need a dedicated STR policy. Expect to pay $1,400 to $3,000 annually for a two-bedroom property, with lakefront properties at the higher end due to water-related liability.

Essential coverage for Minnesota hosts:

• General liability: $1 million minimum recommended. Minneapolis requires $300,000 as a licensing condition, but $1 million is the practical standard. Slip-and-fall claims on icy surfaces are the most common liability exposure in Minnesota, and settlements can be substantial.
• Property damage from weather: Minnesota gets ice storms, heavy snow loads, and severe thunderstorms. Ensure your policy covers roof damage from ice dams and snow weight, water damage from ice dam backup, fallen tree damage, and wind and hail damage. Verify your deductible is manageable.
• Frozen pipe coverage: Pipes burst when heat fails or when properties are left vacant without adequate winterization. This is one of the most common and expensive claims for Minnesota STR operators. A single burst pipe can cause $15,000 to $40,000 in water damage. Confirm your policy covers this scenario.
• Watercraft and dock liability: If your lake property includes dock access, kayaks, canoes, paddleboards, or any watercraft, you need additional liability coverage. Water recreation injuries are a serious liability exposure. A watercraft liability rider typically costs $250 to $500 annually.
• Loss of income: If your property is damaged and offline during peak summer season, the lost revenue can be substantial. A lakefront cabin losing July and August bookings could miss out on $8,000 to $15,000 in revenue. Income replacement coverage ensures you are made whole.

Airbnb’s AirCover does not adequately address Minnesota-specific risks like frozen pipes, ice dam damage, or watercraft liability. Maintain your own comprehensive policy and treat AirCover as an additional backstop. Our full analysis of platform insurance limitations is in our Airbnb insurance guide.

Why 10XBNB Gives You the Edge in Minnesota

Minnesota’s STR market looks straightforward from the outside but has layers of complexity that trip up unprepared operators. The tax structure alone is more involved than most states, with combined lodging tax rates exceeding 16% in Minneapolis. Duluth’s license caps create artificial scarcity that rewards operators who understand how to navigate the system. And winter operations require a level of property management knowledge that you will not find in a generic STR course designed for Florida or Arizona markets.

10XBNB equips you with systems that account for cold-climate operations, seasonal revenue management, and the specific regulatory frameworks of Midwestern markets. The program covers how to structure your finances to handle Minnesota’s 4 to 5 month revenue dip (for seasonal properties), how to negotiate with landlords in Minneapolis where the rental market is competitive, and how to build a listing that converts in a market where guests have strong expectations around winter preparedness.

The 10XBNB community includes operators running properties across Minnesota’s key markets. When Duluth changes its cap limits or a Brainerd Lakes township adopts its first STR ordinance, you hear about it from people managing real properties in those areas. That on-the-ground intelligence, combined with a proven operational framework, is what separates the operators who build sustainable businesses from those who list one property and struggle.

Minnesota is a state where the right preparation translates directly into profitability. The barriers to entry (licensing, taxes, winter operations) filter out casual operators, which means less competition for those who do it right. To see how Minnesota stacks up against other STR markets, explore our best states for Airbnb comparison.

Frequently Asked Questions

For Minnesota business registration and tax information, visit the Minnesota Department of Employment and Economic Development.