Short-Term vs. Long-Term Rental Strategy in Annapolis & Anne Arundel County (2026)

The honest math on a waterfront Annapolis Airbnb vs. a long-term rental near Fort Meade — and the regulation most investors miss until it's too late.

This article is for educational purposes only and is not legal, tax, or investment advice. Short-term rental regulations in Annapolis and Anne Arundel County have changed multiple times in the past 18 months and continue to evolve. Confirm current regulatory status, tax obligations, and investment implications with a Maryland real estate attorney, CPA, and local zoning authority before purchasing a property.

If you've spent any time on real estate Twitter, you've seen the pitch: buy a waterfront condo in Annapolis, list it on Airbnb, watch the $400+ nightly rates roll in. Boat shows, Naval Academy graduation week, summer sailors — the demand looks endless on a screenshot.

It is not endless on a spreadsheet. And in 2026, the rules have changed enough that a lot of out-of-state investors are buying into a strategy that's either no longer legal for them or no longer available as a new license.

This post does the actual math on two real strategies playing out in Anne Arundel County right now — a $750K waterfront Eastport condo run as a short-term rental, and a $475K single-family in Odenton rented long-term to a Fort Meade military family. Different price points, different capital deployment, wildly different cap rates. And a regulatory situation one of them sits squarely on top of.

Start here: the Annapolis regulatory cliff

Before we touch a single number, you need to understand what the City of Annapolis has done to its short-term rental market over the past 18 months — and what it means for an out-of-state investor right now.

Annapolis has two STR license categories: owner-occupied (your primary residence) and non-owner-occupied (you don't live there). These are governed by different rules, and the rules for non-owner-occupied have been tightened substantially:

October 2025: The Annapolis City Council passed a 10% blockface cap on non-owner-occupied STRs. New licenses cannot push the total over 10% of the homes on any given block face. In high-demand areas, that cap is already hit — meaning new licenses go on a waitlist or aren't being issued at all on those streets.

March 2026: The Annapolis City Council passed a one-year moratorium on all new non-owner-occupied STR licenses, by an 8-1 vote, effective immediately. The moratorium does not affect owner-occupied units, existing licensees, or license renewals — but new non-owner-occupied applications are paused while the city studies the impact of vacation rentals on the housing market.

The owner-occupied path remains open:

• $500 annual operating license, applied for through the city's CSS portal
• Property must be your principal residence (you must live there more than 185 days per year)
• Unhosted nights (where you leave and the whole place rents) capped at 120 per calendar year
• Hosted rentals (you're physically present and rent a room) have different rules
• Mandatory pre-license safety inspection
• Hard-wired interconnected smoke alarms, posted maximum occupancy, emergency contact, fire extinguisher, and other safety standards required
• Annapolis hotel occupancy tax of 7% (per Airbnb's collection schedule; the city code references rates up to 8% — confirm current with your accountant)
• Maryland state sales and use tax of 6%
• Naval Academy graduation week and the official Annapolis Sailboat and Powerboat Show weeks are exempt from the licensing requirement — a long-standing local carve-out written into the city code

What this means for the typical investor: if you are buying a property in the City of Annapolis without intending to live in it, the path to a new non-owner-occupied STR license is currently closed. The moratorium runs at least one year while the city evaluates further policy changes. Some investors buy in Anne Arundel County outside Annapolis city limits — Edgewater, Arnold, Cape St. Claire, Severna Park — where county rules apply instead and currently allow non-owner-occupied STRs with proper registration. But "a waterfront Airbnb in Annapolis" as an out-of-state pure-investment play is harder to execute legally in 2026 than it has been in many years.

With that anchor in place, let's do the math on each strategy honestly — assuming you can legally execute it.

Strategy A: Waterfront Eastport STR (owner-occupied, hosted/hybrid)

This is the realistic legal version. You buy a 2-bed waterfront condo in Eastport at around the median sale price (approximately $750K as of early 2026), make it your Maryland primary residence (you actually live there more than 185 days per year), and run it as a hybrid: hosted when you're there, unhosted up to the 120-night annual cap when you travel.

The property

• Purchase price: $750,000
• Down payment (25%): $187,500
• Loan amount: $562,500
• Mortgage rate (30-yr, primary residence): roughly 6.25%
• Furnishing & startup costs: $25,000
• Total cash invested: $212,500

Revenue (the part everyone gets too excited about)

STR market aggregators show Annapolis at roughly $338 average daily rate (ADR) and 55% occupancy on a stabilized year, with top performers north of $64K annually and waterfront properties pulling premium rates. Sounds great. But you cannot legally earn a full year of those numbers under the owner-occupied license framework.

Why? Because you're capped at 120 unhosted nights per year, and hosted nights (when you're physically present) typically earn a meaningful discount because guests are renting a room rather than the whole place. A realistic blended forecast:

• Unhosted nights (whole-place, premium ADR ~$385): 110 nights × $385 = $42,350
• Hosted nights (room rental, ~$165 ADR): 80 nights × $165 = $13,200
• Gross booking revenue (annual): $55,550

Notice this is below the headline "$64K market average" you'll see on Airbnb data sites. Those averages assume an unhosted property running flat-out — which the current regulation doesn't permit on a new license inside Annapolis city limits.

Annual expenses (the part everyone undercounts)

• Mortgage P&I: $41,560
• Property tax (Anne Arundel ~0.93%, plus Annapolis city add-on): roughly $7,500
• Condo/HOA fees: $8,400
• Insurance (STR rider, flood, liability): $3,800
• Utilities + internet (year-round): $3,600
• Cleaning (passed through, but cost-of-business): $5,200
• Annapolis STR license + inspection: $500
• Platform fees (Airbnb host fee ~3%): $1,667
• Maintenance/repairs/replacements (~10% of revenue): $5,555
• Maryland tax prep/accounting (STR is not simple): $1,200
• Total annual expenses: approximately $78,982

Note on the hotel occupancy tax: this is a pass-through — collected from the guest and remitted to the county, so it doesn't sit in your P&L. It does, however, raise the all-in nightly cost to your guest, which puts mild downward pressure on bookings.

Bottom line on Strategy A

• Gross revenue: $55,550
• Total expenses (incl. mortgage): ($78,982)
• Year 1 net cash flow: approximately ($23,432)
• Net Operating Income (NOI, ex-mortgage): $18,128
• Cap rate (NOI / purchase price): approximately 2.4%

Read that line again. The property is bleeding roughly $1,950 a month in cash flow before you've spent a single hour managing it. The investment thesis isn't operating income — it's appreciation on Annapolis waterfront property plus the lifestyle value of actually living there. That's a valid thesis, but it's not the same thesis as "buy an Airbnb to generate income."

Strategy B: Long-term rental near Fort Meade (Odenton)

Now let's flip it. Same investor, different asset. You buy a 4-bed, 2.5-bath single-family in Odenton — about a 12-minute drive from Fort Meade Gate 1. Anne Arundel County rules, no STR licensing concerns. You rent it long-term.

The demand story here is structural. Fort Meade has approximately 56,000 military and civilian personnel and another 20,000 family members across roughly 120 partner agencies including NSA, U.S. Cyber Command, and DISA. PCS rotations cycle constantly. The 2026 BAH for an E-5 with dependents at Fort Meade runs roughly $2,900 to $3,100 per month and an E-6 with dependents runs roughly $3,200 to $3,800 (rates vary slightly between published sources — verify your specific tenant's BAH via the DoD calculator). Fort Meade BAH rose 3.1% for 2026, with the national average BAH increase at 4.2%. That allowance is paid by the Department of Defense directly into your tenant's bank account, every month, on the first.

The property

• Purchase price: $475,000
• Down payment (25%, investor loan): $118,750
• Loan amount: $356,250
• Mortgage rate (30-yr, investment): roughly 7.00%
• Closing costs + minor make-ready: $15,000
• Total cash invested: $133,750

Worth pausing here: you've deployed $133,750 to control a $475K asset, versus $212,500 to control the $750K Annapolis condo. The Odenton play uses about 63% of the capital and frees up roughly $78,750 you could deploy elsewhere — that's a meaningful comparison even before the cash-flow numbers come in.

Revenue

A 4-bed Odenton single-family in good condition rents for roughly $3,000 to $3,400 per month in 2026 — comfortably within an O-3 or E-7 BAH range. Use $3,200 as a clean midpoint.

• Monthly rent: $3,200
• Gross annual rent: $38,400
• Vacancy allowance (4% — military tenants tend to be sticky): ($1,536)
• Effective gross income: $36,864

Annual expenses

• Mortgage P&I: $28,440
• Property tax (~0.93%): $4,418
• Insurance (landlord policy): $1,400
• Property management (8% of rent — optional): $2,949
• Maintenance/repairs (~5% of rent): $1,920
• CapEx reserve (~5% of rent): $1,920
• Anne Arundel rental license + misc.: $200
• Total annual expenses: $41,247

Bottom line on Strategy B

• Effective gross income: $36,864
• Total expenses (incl. mortgage): ($41,247)
• Year 1 net cash flow with property management: ($4,383)
• Year 1 net cash flow self-managed: ($1,434)
• Net Operating Income (NOI, ex-mortgage): $24,057
• Cap rate (NOI / purchase price): approximately 5.1%

Cash flow is roughly breakeven in Year 1 at today's rates. The cap rate is roughly double the Annapolis STR, and the path to positive cash flow is short. Two years of typical rent escalation (3% annually) plus one refinance into a lower-6% rate, and you're cleanly cash-flow positive without changing anything else.

Side-by-side: same investor, different asset

Purchase price: Eastport STR $750,000 vs. Odenton LTR $475,000

Cash invested: $212,500 vs. $133,750

Gross annual revenue: $55,550 vs. $36,864

Annual expenses: $78,982 vs. $41,247

Year 1 cash flow: ($23,432) vs. ($1,434) self-managed

NOI (ex-mortgage): $18,128 vs. $24,057

Cap rate: approximately 2.4% vs. approximately 5.1%

Time required: Heavy (operating a hospitality business) vs. Light (set-and-forget with quality tenant)

Regulatory risk: High and active (10% caps, moratorium, evolving rules) vs. Low

Tenant payment reliability: Booking-by-booking, seasonal vs. DoD-backed BAH, 1st of month

When does the Annapolis STR math actually work?

Three specific scenarios where the short-term rental still makes sense:

1. You're already moving to Annapolis and want to monetize a primary residence. If you'd be buying the Eastport condo to live in regardless, layering 120 nights of unhosted bookings plus boat-show weeks on top is genuinely lucrative — that $42K of premium nightly revenue is offsetting housing costs you were already going to incur. The cap rate isn't the right frame here; cost-of-living offset is.

2. You buy outside Annapolis city limits. Anne Arundel County has its own rules, and many county jurisdictions currently allow non-owner-occupied STRs with proper registration ($400 for two years, two-unit maximum per host). Cape St. Claire, parts of Edgewater, Arnold, and the western shore communities each have their own zoning treatment. Verify before you buy — and verify with the actual county zoning office, not a forum post.

3. You're buying an existing licensed STR with the license in place. During the current moratorium, existing non-owner-occupied licenses can still renew. There's a narrow window where a buyer might acquire a property with an active license — but underwrite carefully, because the future regulatory environment is being actively rewritten by the city council, and there's no guarantee the renewal path stays open indefinitely.

Why the Fort Meade play is structurally underrated

Most out-of-state investors fly into BWI, drive to Annapolis, fall in love with the harbor, and never look at Odenton or Severn. That's an opportunity, because the Fort Meade rental market has three things you can't easily manufacture:

Tenant quality. Active-duty service members face significant career consequences for breaking leases or damaging rentals. Background checks are essentially pre-done by the military. Default risk tends to be well below market average.

Predictable demand cycle. PCS season runs roughly May through August. Lease renewals or new leases cluster in that window every single year. You can plan around it.

BAH as a structural rent floor. Because BAH is set annually based on local rental survey data, and because Fort Meade BAH rose 3.1% for 2026, you generally have a structural rent escalator tied to a Department of Defense process. Important nuance: BAH rate-protection rules generally protect service members already at a station from rate decreases, but new arrivals get the new (potentially lower) rate. So BAH is a strong floor for tenant payment reliability but not a guarantee of permanent rent escalation.

The downsides are real too: turnover when tenants PCS out, occasional VA-loan-buyer offers that pull your tenant into homeownership, and the need to actually understand what military families look for (storage, garage, fenced yard, finished basement for the at-home spouse's office). None of these are dealbreakers — but they shape which property you should buy.

Decision framework

If you're an out-of-state investor evaluating Anne Arundel County, the question to answer first isn't "STR or LTR?" It's "what am I optimizing for?"

Optimizing for cash flow & cap rate → long-term rental near Fort Meade. Odenton, Severn, Hanover, and Glen Burnie all work.

Optimizing for appreciation in a supply-constrained waterfront market → Annapolis primary residence with a hosted-STR overlay, accepting that operating income will be modest at best.

Optimizing for diversification across both → start with the Odenton long-term rental to build cash flow, then add Annapolis later when you actually want to live there part-time.

Optimizing for hospitality-style operating income → look outside Annapolis city limits, or look at a different market entirely. The 2018 "buy a waterfront Airbnb" thesis is harder to execute legally in 2026 than it has been in years.

The honest takeaway

On a pure investor return basis, the boring play wins right now. A $475K Odenton single-family rented to a Fort Meade military family generates roughly double the cap rate of a $750K Eastport condo run as a regulated owner-occupied STR — with a fraction of the operational complexity, regulatory exposure, and capital required.

That doesn't make Annapolis waterfront a bad asset. It makes it a different asset. Treat it as a primary-residence appreciation play with optional hosted income — not as an income-producing investment property — and the math reconciles. Treat it as the next "$60K Airbnb" you saw on YouTube, and you'll likely be writing a five-figure check every year to subsidize someone else's vacation.

Working with Porchlight Property Group

At Porchlight Property Group, we work with out-of-state investors and military families across Anne Arundel County, with deep experience on both sides of the math above — coordinating military-tenant long-term rental purchases near Fort Meade and helping primary-residence buyers in Annapolis structure realistic STR-overlay expectations. With nearly 20 years of combined full-time experience in Maryland's real estate market, we've watched what works for real investors and what looks great on a spreadsheet but quietly bleeds cash.

The principle is simple: committed to clients, powered by principles. Investment property decisions, especially out-of-state ones, are exactly the kind of transaction where local context matters more than national pitch decks. Knowing which Odenton streets actually attract military tenants, which Eastport condo buildings carry the highest STR-friendly HOAs, and which county-versus-city zoning lines run through the same neighborhood — those aren't details you find in a YouTube video.

If you're an out-of-state investor evaluating Anne Arundel County and want to walk through your specific math — Annapolis STR feasibility under the current rules, Fort Meade military tenant strategy, or a hybrid approach — we'd be glad to help.

Schedule a no-pressure investor consultation: https://porchlightpropertygroup.com/contact-us/

For related reading, our companion piece on VA loans in Maryland covers the military buyer side of the Fort Meade rental ecosystem: https://porchlightpropertygroup.com/va-loans-in-maryland-what-military-buyers-get-wrong-and-how-to-get-it-right/

For Maryland landlord-tenant law updates that affect every long-term rental purchase: https://porchlightpropertygroup.com/first-time-buyer-programs-in-maryland-you-probably-dont-know-about/

For Anne Arundel and surrounding community context: https://porchlightpropertygroup.com/communities/