Buying A Vacation Rental Home In Sedona

Thinking about turning your love for Sedona into a vacation rental that pays for itself? You are not alone. The red rocks draw steady visitor demand, but the rules, taxes, and true operating costs can feel murky on your first pass. In this guide, you will learn exactly what to check before you buy in 86336, how permits and taxes work, what seasonality means for your cash flow, and a practical step-by-step plan to run the numbers with confidence. Let’s dive in.

Why Sedona 86336 attracts vacation demand

Sedona is a high-demand, high-ADR resort market with limited supply compared to big metros. Recent market trackers show median occupancies in the high 50s to high 60s and average daily rates in the mid to high hundreds. For example, one recent window shows about 69 percent median occupancy with an ADR around $294 across roughly 1,740 active listings. These headline figures are useful for sizing, but they are not a substitute for address-level analysis. You should validate results for the specific property type and location you plan to buy. This Sedona market snapshot is a good starting point.

What does this mean for your underwriting? Expect strong spring and fall revenue, softer summer monsoon months, and some winter lulls. Build a monthly revenue model rather than annualizing a single peak month. Use at least three scenarios for risk control: best case, typical case, and conservative.

Jurisdiction check: City vs County

Before you fall in love with a listing, confirm whether the parcel is inside the City of Sedona or in unincorporated Yavapai County. Rules and processes differ.

• City of Sedona: Short-term rentals require a city permit for every advertised unit. The city also sets owner obligations, neighbor notices, and safety standards. Start with the city’s short-term rental program page to see the current requirements and forms.
• Unincorporated Yavapai County: The county allows short-term rental of permitted, habitable structures with its own zoning, septic, and well rules. Check the county’s Development FAQ and verify any transient-lodging tax or special use needs.

You also need to confirm any private restrictions. Many neighborhoods and condo associations in Sedona limit or prohibit short-term rentals in their CC&Rs. Always obtain the recorded CC&Rs and written HOA policy before you rely on STR income.

Permits, taxes, and owner obligations

If your target property sits inside city limits, plan for two immediate steps before hosting your first guest: register for an Arizona Transaction Privilege Tax (TPT) license and obtain a City of Sedona STR permit for each advertised unit. The city outlines the full process, including application, renewal, and posting rules, on the short-term rental owner page.

Key owner obligations include:

• Holding a current Arizona TPT license and a valid city STR permit for every advertised unit.
• Listing your city permit number on all ads.
• Maintaining a 24/7 emergency contact.
• Neighbor notification for adjacent single-family properties.
• Liability insurance with a city-stated minimum aggregate coverage of $500,000.
• Evidence of required sex offender background checks, provided by you or a marketplace.
• No advertising or hosting of special events such as weddings, retreats, or conferences.

On taxes, Sedona uses Arizona’s statewide TPT framework and also applies local lodging taxes by ordinance. The Arizona Department of Revenue posts rate and code updates, and Sedona’s official tax code shows a hotel tax provision and an additional transient lodging tax. Review the Sedona tax code PDF to understand classifications that can apply to your parcel. Platforms sometimes collect and remit some taxes, but the city makes clear that owners remain responsible for proper licensing and timely payment or for ensuring that a vendor does so on their behalf.

ADUs, casitas, and legal occupancy

Always confirm that every sleeping area you plan to rent was legally permitted for overnight habitation and has a certificate of occupancy. Sedona’s accessory dwelling unit rules changed in 2024. ADUs issued a certificate of occupancy on or after September 14, 2024 may not be used as a short-term rental unless the owner’s primary residence is on the same parcel. Earlier guest quarters may be legal nonconforming uses, but you should seek review. The municipal code explains the ADU limits and enforcement context for STRs. See the city’s ADU and STR rules in the code for details.

Seasonality and pricing strategy

Sedona’s booking calendar follows the weather and visitor patterns. Spring, especially March and April, often ranks as the busiest period. Early fall, including September and October, is another strong stretch. July and August commonly soften due to heat and monsoons, and winter can bring lulls outside of holidays.

Plan pricing and promotions with this in mind. Build a month-by-month revenue schedule that aligns rates, minimum stays, and discounts to expected demand. Consider midweek offers and longer-stay discounts during shoulder months. Expect a mix of lead times, from advance planners to last-minute weekend bookings. If your property suits larger groups, confirm parking limits and noise rules, and remember the city’s ban on special events in STRs.

Budgeting your pro forma

Your operating plan should cover all costs that impact net cash flow. Use these typical ranges as placeholders until you gather local quotes.

• Management fees: If you use a full-service vacation-rental manager, budget 15 to 35 percent of gross revenue, depending on the service level and local competition. Compare proposals, performance metrics, and what is included. Typical national full-service offers range near 25 to 30 percent, while a co-host can be closer to 15 percent. See common ranges in this property management fee overview.
• Cleaning and turnovers: Plan for $100 to $300 or more per stay, based on home size and labor. These fees are often billed to guests, but you should still model the expense impact and any discounting you may offer. Reference ranges appear in this vacation-rental cost guide.
• Insurance: Sedona requires a minimum of $500,000 in aggregate liability coverage for STRs. Standard homeowner policies often exclude STR activity, so get quotes for short-term rental or landlord coverage early. Requirements are listed on the city’s owner responsibilities page.
• Utilities and services: Internet, power, water or septic, landscaping, and pool or spa care if applicable. Budget roughly $200 to $800 per month depending on size and guest usage. See estimates in the same vacation-rental cost guide.
• Maintenance and reserves: A common rule of thumb is 1 to 2 percent of property value per year, adjusted by age and finishes. Set aside a separate capital reserve for furniture and appliance replacement.
• Platform and payment fees: Model 3 to 15 percent depending on platform and processing terms. Verify what can be passed through to guests.
• Taxes and remittances: Model state TPT and local Sedona lodging taxes. Confirm what your platform or manager remits and what you must remit directly. Use ADOR’s rate and code updates and the city’s tax code to frame your assumptions.

Due diligence checklist for buyers

Use this step-by-step process to protect your deal and your permit path.

1. Confirm jurisdiction and zoning. Check whether the parcel lies inside the City of Sedona or unincorporated Yavapai County. Start with the city’s STR program page if it is inside city limits.

2. Verify legal occupancy. Confirm that the dwelling, casita, or converted space has a valid certificate of occupancy for overnight use. Review the city’s ADU and STR code limits for any guest quarters or accessory units, especially for COs issued after September 14, 2024. See the municipal code for rules.

3. Obtain CC&Rs and HOA policy. Ask for the recorded documents and any board resolutions. If CC&Rs prohibit STRs, the income plan ends there.

4. Map the permit and tax steps. Register for Arizona TPT and apply for the City of Sedona STR permit before advertising. Align filing frequency and remittance responsibilities with your platform or manager.

5. Get insurance quotes. Secure short-term rental or landlord coverage that meets the city’s minimums and covers guest-caused damage and host liability.

6. Build an address-level revenue model. Use a market intelligence tool to estimate ADR and occupancy by month for your specific property type and neighborhood. Start with the Sedona market overview and refine from there.

7. Create a conservative pro forma. Lay out monthly gross revenue, then subtract platform and management fees, cleaning, utilities, insurance, maintenance, marketing, and taxes. Include a 5 to 10 percent reserve for enforcement, legal, or repair surprises.

8. Compare management options. If you plan to hire a manager, get at least two proposals with performance comps, start-up costs, and payout schedules. Match cost to services that protect your revenue.

9. Inspect logistics. Verify parking, access, fire department access and signage, septic or sewer details, and posted quiet hours. Noncompliance can lead to citations or permit issues.

10. Confirm lending and legal. Ask your lender how they classify the loan for a short-term rental. Have closing counsel review recorded restrictions and tax classifications that could affect your operations.

Common pitfalls to avoid

• Relying on city averages alone. Your property’s size, location, and amenities can swing results widely. Always run address-level comps.
• Ignoring CC&Rs. An HOA prohibition makes STR income a nonstarter, even if zoning allows it.
• Underestimating taxes and filings. You must plan for state TPT and Sedona lodging taxes and confirm who remits what.
• Assuming events are allowed. Sedona prohibits advertising or hosting special events at STRs.
• Overlooking ADU rules. Newer ADUs have limits unless the owner lives on the parcel.
• Forgetting reserves. Budget for repairs, replacements, and unexpected compliance costs.

Your local advantage

Buying a vacation rental in Sedona can be both a lifestyle win and a solid investment when you plan the details. You need clarity on permits, taxes, and ADU rules, a monthly revenue model that matches seasonality, and a realistic operating budget that accounts for management, cleaning, utilities, and maintenance. With the right due diligence, you can enjoy your time in the red rocks while your property does solid work the rest of the year.

If you want a local, broker-led team to help you source the right property in 86336 and plan the handoff to operations, we can help. Our boutique brokerage pairs acquisition experience with in-house property management, so you have continuity from offer to guest check-in. Reach out to Adobe Group Realty to start your plan and Get Your Free Market Report.

FAQs

What permits and licenses do I need to run a vacation rental in Sedona 86336?

• Inside city limits you need an Arizona TPT license and a City of Sedona STR permit for each advertised unit, along with insurance, neighbor notices, and on-listing permit number posting.

Do Sedona HOAs allow short-term rentals across 86336?

• Policies vary by association; many CC&Rs restrict or prohibit STRs, so you must obtain the recorded CC&Rs and written HOA confirmation before you rely on rental income.

How much revenue can a Sedona vacation home earn in 86336?

• Market trackers show strong ADRs and above-average occupancy, but results depend on address, size, and amenities; build an address-level model with monthly seasonality and run best, typical, and conservative cases.

What months are busiest for Sedona vacation rentals?

• Spring months like March and April and early fall months like September and October often perform best, while July and August are typically softer and winter can include lulls outside of holidays.

Can I rent a casita or ADU as a short-term rental in Sedona?

• ADUs with a certificate of occupancy issued on or after September 14, 2024 cannot be used as STRs unless the owner’s primary residence is on the same parcel; always verify legal occupancy and code details.

Who is responsible for Sedona lodging and sales taxes on bookings?

• Owners are responsible for proper licensing and tax remittance or for ensuring a platform or manager remits on their behalf; confirm exactly which taxes are covered by vendors and which require your filings.