Rental Property Investor · Austin, TX · Member since 2014 · 127 posts · 55 votes
A while back, my wife and I decided to rehab one of our long-term rentals in central Austin and convert it to a short-term vacation rental. After months and months of work, our first vacation rental property is now up and running!
We've had two parties stay with us so far, and both have left sparkling reviews. And we've got a couple bookings for South by Southwest next week. We're looking forward to settling into our new roles in the hospitality industry (we're self-managing), and tweaking amenities/rates to generate maximum revenue from the property going forward. Exciting stuff!
@Jon Klaus I frequently rent an airstream in Palm Springs that is on a SFR lot. The airstream is far enough from the home for privacy.
A big attraction of short term vacation rentals is the option to stay in a unique space like an airstream, a treehouse, a boat, etc. next to location, the kitsch factor is a huge selling point. If you google "airstream AIRBNB" most of the listing have 100+ positive reviews.
Looks like you have quite a few upcoming weekends booked. Have always wanted to do something like this in FL, NYC or Vegas, however figured if I"m not onsite to take care of mgmt, unless I had some economies of scale working for me with a few in each area, probably would not make financial sense.
Hi, @Gary Ennis, I'm jumping back into an old conversation. We are putting in a vacation rental in an unincorporated area of our county, so there will be no city taxes. Would the state of Texas hotel tax be in lieu of sales tax?
I also wondered if you have an update on how your property is doing after the long, hot Austin summer. Are you getting bookings related to UT events like football games?
Congrats! Have you also considered Airbnb for bookings? My husband and I rent out our spare bedroom on Airbnb and love it. We also have used it several times when traveling. I'd highly recommend!
Hi Gary: The house is beautiful; you really stayed true to the Mid-Century motif. I was wondering if you opened the space up and put in a beam or was it already open?
Thanks, Maggie
Yes, we did open up the space. It was a very cramped and boxed-in kitchen before the renovation.
Hi, @Gary Ennis, I'm jumping back into an old conversation. We are putting in a vacation rental in an unincorporated area of our county, so there will be no city taxes. Would the state of Texas hotel tax be in lieu of sales tax?
I also wondered if you have an update on how your property is doing after the long, hot Austin summer. Are you getting bookings related to UT events like football games?
As far as I know, sales tax would not need to be charged. But you will be responsible for paying the 6% State of Texas hotel occupancy tax at the end of each quarter.
July and August were surprisingly strong months. We had several guests who stayed a week or two, as they were moving to Austin but their new homes weren't quite ready. Summer is a significant transition time for folks who are moving.
We anticipated more bookings related to UT football, as we are 10 minutes from campus/stadium. All of those weekends filled up, but with guests who booked for some other reason. The one UT-related event that books consistently is graduation weekend in May. We just had a guest book that weekend for next year.
Congrats! Have you also considered Airbnb for bookings? My husband and I rent out our spare bedroom on Airbnb and love it. We also have used it several times when traveling. I'd highly recommend!
We do also use AirBnB, and have seen a marked increase in bookings via AirBnB in recent months.
Our ultimate goal is to launch our own website to promote/book our VR properties.
@Gary Ennis, you mentioned possibly lowering your rates in July and August because you initially thought they would be slow months. But they ended up being busier than you thought. Were they busier because you did end up going with the lower rates? I'm curious to see if you've had a chance to test different rates and noticed any correlation yet. Or are you waiting a full year to get a baseline first?
@Michael Le from my experience lowering rates always works when filling up certain vacant days on short term rentals. I use that strategy every month on mine and as an example October is a slow month for me and I have 25 days rented out. Although you have to lower rates at least a month in advance. If you do it last minute there is a lower chance of you actually renting the unit out.
Thanks @Juan Duque. I'm assuming you know October is slow for you because of historicals. And I assume that the first year you owned the property, you priced October higher because you didn't know this information yet.
In the end, how do it compare? On one hand you have a higher daily rate but less days versus lower rates but less vacancies.
@Michael Le yes we did lower the rates in the summer months and I think it did help. Of course I do want to have 12 months of data before I start making significant decisions based on the data.
@Michael Le for me every time I wait to get higher rates it only happens sometimes, meanwhile if I lower the rates just in time I always have a better chance of reserving more days in a given month. For this particular scenario and property the lower daily rates give a real good and profitable enough return so that I don't have to chase the high rates. I think if this particular property was only profitable with high rates then in my opinion a short term rental strategy would not be the best option.
Thanks @Gary Ennis and @Juan Duque for the feedback. My question was based on the assumption that the property would cash flow with either lower or higher rates and more about maximizing profits.
Maybe I'm simplifying things but this is one scenario I was thinking of.
#1 - 20 days rental in a month at $150 a night
#2 - 25 days rental in a month at $120 a night
They both give you $3000 a month gross rental income but scenario #1 has less costs for you due to less make ready work you'd have to do. Or are you finding it's not worth chasing the difference?
@Michael Le the way I do it is if I have 20 days rented out the only thing left to do is lower rates because the only days you have left are the little gaps in between stays. Unless the remaining 10 days are continous. One thing to keep in mind with short term rentals is in my opinion your number one goal should be to minimize vacancy. Time will give you the proper knowledge in regards to what your rate should be but the market will dictate the price and educate you. The way I look at it is if I price it too high I know for a fact my property most likely wont be rented. In regards to maximizing your profits it should always be your priority but focus on lowering vacancies first.
Thanks @Juan Duque. I think I was looking at this wrong. I was looking at it too much like a normal SFR lease. With the STR/VR market you have immediate feedback on how your pricing is affecting your rentals and you can immediately change that and rather quickly see results. So that makes a lot more sense now.
@Gary Ennis@Scott Sutherland Do either of you know if their are different taxes or permits for owner occupied vacation rental? (i.e. Duplex, renting out spare side)
@Jared Crouch you would pay the same 15% in hotel occupancy taxes (9% City of Austin plus 6% State of Texas). But the STR licensing with the City of Austin would be different - you would need a Type 1 license, which is for owner occupied single family, duplex or multifamily.
FYI, Type 2 is for non-owner occupied single family or duplex, and Type 3 is for non-owner occupied multifamily.
You can find more information here: City of Austin STR info
@Jared Crouch you would pay the same 15% in hotel occupancy taxes (9% City of Austin plus 6% State of Texas). But the STR licensing with the City of Austin would be different - you would need a Type 1 license, which is for owner occupied single family, duplex or multifamily.
FYI, Type 2 is for non-owner occupied single family or duplex, and Type 3 is for non-owner occupied multifamily.
Thanks for the info Gary. Did you have trouble getting the license for renting your properties as Short Term Rentals in Austin? I have a property in Austin I've been tossing around thinking of converting it into a Short Term Rental. Would love to know!
@Gonz Trevino The process is a bit of a hassle, like all other dealings with the city bureaucracy. But if you have the necessary forms/documentation filled out and pay the required fee, the process generally takes about 2-3 weeks.
That said, this could all change very soon, as the Austin City Council is considering passing legislation that would effectively ban Type 2 STRs in Austin. This is despite the fact that they passed in 2012 what many around the country consider to be model legislation on STRs, which allows the city plenty of leeway to enforce code violations and address problem properties.
I will start another thread with details on what could possibly happen during the counsel's meeting on October 15, during which they will consider this legislation.
@Gonz Trevino The process is a bit of a hassle, like all other dealings with the city bureaucracy. But if you have the necessary forms/documentation filled out and pay the required fee, the process generally takes about 2-3 weeks.
That said, this could all change very soon, as the Austin City Council is considering passing legislation that would effectively ban Type 2 STRs in Austin. This is despite the fact that they passed in 2012 what many around the country consider to be model legislation on STRs, which allows the city plenty of leeway to enforce code violations and address problem properties.
I will start another thread with details on what could possibly happen during the counsel's meeting on October 15, during which they will consider this legislation.
I heard the City Council meeting was this week. I must have been off. I would love to have a conversation Gary I have a few strategies that I think are very good for implementing STR's in Austin. Hopefully the city does not ban them. I heard they only give a limited amount of licenses per zip code and its based on how many they have in that area already. I would love to connect over the phone with you. :)