Short term it is difficult to make the numbers work, the cost of new construction and the time it takes to zone-plan-build are usually the main reasons why private investors stay clear.

That will increase your material costs for the job and is the contractor paying for the material in their bid or are you paying for it and paying them a labor cost.

My recommendation would be to choose potential markets - in several price points - that have strong rental demand and year-over-year rent increases and that also are in markets that are appreciating. 

Do you need to increase rents in the next year to cover your costs?

And while short-term rentals are the big draw here, there’s also growing demand for mid-term rentals from snowbirds and traveling professionals, as well as long-term housing for the increasing number of permanent residents.Yes, higher interest rates are a factor, but the strong rental demand in the Panhandle often helps offset those costs.

@Placeholder PlaceholderOne word of caution I would advise: If a community or local government is enacting restrictions and also regularly enforcing them, then its often a reflection of the local community sentiment which increases the chance of a neighborhood or nearby resident calling you in if they think you may be running an STR.

However, San Diego is an extreme case.However rents increase fast in San Diego.  

Furthermore you can vastly increase your returns through leverage using a non-recourse loan but that will definitely trigger UBIT but again the numbers can still make a lot of sense. 

However, without more information on what your preferences are, it is difficult to give you good advice.

By making yourself an asset, you’ll increase the chances of someone taking you under their wing.Use BiggerPockets to connect locally.