Vacation rental investors face challenges from cooling returns and stricter regulations affecting profitability and loan approvals. Average ROI dropped to 10.3% in 2025 from a 2021 peak of 30.8%, with regional variations in property prices and rules impacting outcomes. Stricter licensing and tax laws in states like California and Texas increase costs. Accurate, location-specific market research and revenue modeling are essential to avoid negative cash flow and loan issues.