For the last decade (or two) Austin has been in the news as a cool place to live. It’s been at the top of lists and people have been coming here to visit and see what is causing all the hyple. If you are looking for a property to use as a vacation rental house in Austin, here are some tips and tricks you might find useful.
A short term rental is any property that is rented for 30-days or less. Frequently they are used for a vacation over a wekend or event. They are also called STR, AirBnB, VRBO, or Homeaway (although the last 3 are companies that rent them).
Real Estate agents are not used in the day to day booking of an STR. Instead there are companies that owners list their properties on. VRBO and AirBnB are the two largest, however there are also several smaller and more specialized companies.
Is Austin a good place to own an AirBnB?
There are several companies that evaluate the best cities to own a short-term rental. AirDNA and Mashadvisor are the two most popular.
Both say that Austin is a good place to own an AirBnB. As of Q2 2022 the average revenue is $3,217 per month with only a 68% Occupancy Rate. That comes out to about 230 per day or so.
This is much higher yield than a long term rental which is only about $1,750 or so for the same time frame (MLS Data).
AirDNA has a great dashboard that gives an overview of an area, but for really detailed info, you need to register and pay about $12 per month for full access. I do, and it is totally worth it.
What is considered a short-term rental in Austin
According to the City of Austin STR Ordinance the law applies to all properties (including rooms and guest houses) rented for less than 30 consecutive days.
There are three types of short-term rentals in Austin
Type 1 is for Owner Occupied Houses. This is where you rent out a room in your home, or your entire house when you are away for a weekend or so.
Type-2 is for an investment house – this is a not owner occupied house. Something you would buy just for short term rentals. NOTE: Austin is not currently allowing any more permits for this kind.
Type-3 is for multifamily and apartments.
If you are looking for an investment Short Term Rental I have a list of all the cities near Austin and their STR regulations. There are also some other strategies in that article.
Is AirBnB legal in Austin?
Yes, an AirBnB is legal in Austin. There are requirements that needs to be followed:
- Fee $643
- Proof of Property Insurance
- Proof of paying Austin Hotel Tax
- Certificate of Occupancy
- Copy of Driver’s license
These are just the initial set-up requirements. Every year the license also needs to be renewed. But there are companies in town who can help you manage your rental. I’ve also written more about the Austin STR regulations in a separate article
Also be aware that there may be HOA or condo rules that need to be followed. These are not always published on-line but can be requested from the realtor selling the house, or the HOA management company.
Is Rental Arbitrage Legal in Austin?
One question I often get is about rental arbitrage. This is where you don’t own the house, but instead do a long term rental from the owner. Instead of living there, you rent out the house short term.
My understanding is that Rental Arbitrage is legal in Austin, however you need the permission of the landlord (property owner) in order to not break the terms of the lease.
There really isn’t much information on short term arbitrage – you are pretty much on your own if you choose this route.
Buying a Dedicated Vacation Rental House in Austin
Because of the current regulations getting a house in Austin to use as a stand alone short term rental, I would personally reccomend looking just outside the city to neighboring towns, or even unincorporated areas.
These ETJ (Extraterritorial jurisdiction) regions are not part of the ordinance, and can be in some incredible areas. Use the websites I mentioned above to navigate to the best locations for your purchase.
When it comes to buying the house itself, you don’t need to do anything unusual. It is just a regular property purchase. Use your favorite website (I use Redfin.com) to search for homes, then contact a good agent to help you see the house and write a contract.
In the contract itself you can write a provisition that the house has to be able to be used for a Short Term Rental – if it’s not you can back out, and only loose your option fee. Again a good agent can help with this process.
If this is a 2nd home purchase you will probably have a higher interest rate. It will be considered an investment property, and the numbers are always a little higher for that kind of purchase
A Vacation Rental House is a great way to make money with an investment property in Austin. It only makes sense that the city wants to make a little tax revenue from the process. As the regulations develop and change I’ll be updaiting these posts, so be sure to either bookmark them or subscribe to get updates.