What are the main risks and regulations investors face with short-term rental properties (such as Airbnb or VRBO listings)?

Cities like New York, Los Angeles, San Francisco, Barcelona, and Amsterdam have implemented strict short-term rental regulations including outright bans in many areas, caps on rental nights per year, requirements that the host's primary residence be the listed property, and mandatory registration. HOA governing documents frequently prohibit short-term rentals entirely, and violations can result in substantial fines. Insurance is also a critical issue: standard homeowners policies typically exclude commercial rental activity, so investors need specialized short-term rental insurance. Income can be highly seasonal and volatile compared to a long-term lease, making cash flow projections less reliable.