Sedona, Arizona receives several million visitors per year in a city of roughly 10,000 permanent residents.
That ratio has created one of the most active short-term rental markets in the American Southwest and one of the most consequential policy debates in Sedona’s recent history. If you’re buying a property in Sedona with rental income in mind, understanding both the opportunity and the regulatory landscape is not optional.
The Short-Term Rental Market in Sedona
Sedona’s STR market is strong. Properties with red rock views, trail access, and premium amenities command nightly rates that significantly outperform most other Arizona markets.
Average nightly rates in Sedona range from approximately $200 to $500 for entry-level properties to $1,500 and above for premium view homes with luxury features. Occupancy rates for well-managed properties with strong listings historically run in the 60% to 80% range annually, with peak demand during spring and fall shoulder seasons.
For a well-positioned Chapel Area home or a premium Village of Oak Creek property, short-term rental gross revenues of $80,000 to $150,000 per year are achievable at the upper end of the market.
The Regulatory Reality
Sedona’s short-term rental market has a regulatory context that every buyer needs to understand before purchasing with rental intentions.
City of Sedona Licensing
Properties within the City of Sedona limits are required to obtain a short-term rental license from the city. The licensing process involves registration, proof of compliance with safety standards, and payment of applicable fees. Unlicensed STR operation is subject to fines.
Arizona State Law
Arizona state law has historically protected short-term rental rights, limiting the ability of municipalities to ban STRs outright. However, legislation in this area continues to evolve. Buyers should verify current state and city regulations at the time of purchase, as the landscape has been actively shifting.
Transaction Privilege Tax
Short-term rental income in Arizona is subject to the state’s transaction privilege tax (TPT). STR operators in Sedona are responsible for collecting and remitting TPT on rental revenue. The combined state, county, and city TPT rate applicable to STRs in Sedona is meaningful and must be factored into revenue projections.
HOA Restrictions
Many Sedona communities have Homeowners Associations with CC&Rs that restrict or prohibit short-term rentals. This applies regardless of city or state licensing status. A community-level STR prohibition is enforceable and cannot be overridden by a city license.
Before purchasing any property with STR intentions in Sedona, Arizona, verify the HOA documents specifically for rental restrictions. This is non-negotiable and must be confirmed before closing. Read the full Sedona HOA guide here.
What Makes a Property Perform Well as an STR in Sedona
Not all Sedona properties produce equal short-term rental results. The factors that drive STR performance here are specific.
Views
The single most important driver of STR revenue in Sedona is view quality. Properties with direct, unobstructed views of Cathedral Rock, Bell Rock, or other named formations command premium nightly rates that properties without views cannot match, regardless of square footage or amenities.
Outdoor Living Spaces
Guests come to Sedona to be outside. Properties with covered patios, decks positioned to capture views, hot tubs, and outdoor dining areas consistently receive higher ratings and justify higher nightly rates.
Proximity to Trails
Direct trail access or close proximity to major trailheads is a significant selling point in STR listings. Guests who can walk from the property to Bell Rock Pathway, Cathedral Rock, or Soldiers Pass trails are paying for that convenience.
Management and Maintenance
STR revenue projections depend entirely on consistent management and maintenance. Sedona has an established community of local property management companies who handle bookings, guest communication, cleaning, and maintenance oversight for absentee owners. Their fees typically range from 20% to 30% of gross revenue.
Frequently Asked Questions: Short-Term Rentals in Sedona
Are short-term rentals allowed in Sedona, Arizona?
Short-term rentals are permitted in Sedona, Arizona subject to city licensing requirements and individual community HOA rules. The City of Sedona requires STR operators to obtain a license and comply with applicable regulations. Some community HOAs independently restrict or prohibit short-term rentals. Buyers must verify both city licensing eligibility and HOA rules for any specific property before purchasing with rental intentions.
How much can I earn from a short-term rental in Sedona?
STR revenue in Sedona varies significantly based on property type, view quality, amenities, and management. Entry-level properties generate approximately $30,000 to $50,000 per year in gross revenue. Premium view properties with strong listings and outdoor amenities can generate $80,000 to $150,000 or more before taxes, management fees, and carrying costs.
Do I need a license to rent my home short-term in Sedona?
Yes. The City of Sedona requires a short-term rental license for properties operated as STRs within city limits. Operating an unlicensed STR in Sedona is subject to fines. The Village of Oak Creek operates under different jurisdiction and buyers should verify applicable rules for that area specifically.
What taxes apply to short-term rental income in Sedona?
Short-term rental income in Arizona is subject to the state’s transaction privilege tax. The combined state, county, and city TPT rate applicable to STR operations in Sedona is significant and must be factored into revenue projections. STR operators are responsible for collecting and remitting TPT. A CPA familiar with Arizona short-term rental taxation is essential.
Can an HOA prevent me from renting my Sedona home short-term?
Yes. HOA CC&Rs that restrict or prohibit short-term rentals are enforceable at the community level regardless of city licensing status or Arizona state law. Before purchasing any Sedona property with STR intentions, you must review the HOA documents specifically for rental restrictions before closing.
What is the best type of Sedona property for short-term rental income?
The properties that perform best in Sedona’s STR market are single-family homes with direct red rock views, covered outdoor living spaces positioned to capture those views, trail access, and hot tubs or other outdoor amenities. A well-positioned 1,800 square foot home with extraordinary views will typically outperform a 3,000 square foot home without views in the STR market.
If you’re evaluating a Sedona property for short-term rental potential, reach out to Angelo Davis, REALTOR® at RE/MAX Sedona, at (928) 274-9114 before you make an offer. He can connect you with local property managers who will give you realistic revenue numbers, not best-case projections.
