Newb to STR in Houston Market

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Newb to STR in Houston Market

Ryan Anders
Member since 2023 · 13 posts · 4 votes

Hello BiggerPockets Community!

I am reposting something I sent to the general starting-out community because it is specifically about STR. I figured I would get better responses here:

I am deeply appreciative of the wealth of knowledge and experience that this community shares. It truly is a treasure trove of information.

Anyhow, I am posting because I want to connect with people who have successfully done STR for their first investment. We live in the Houston market, so if anyone is in the area, I'd love to take you to lunch and learn from you. The $100 steak is on me :). I'd also be willing to throw some cash into any charity you choose.

I have been trying to pick a lane for the last 6 months and keep going into analysis paralysis. At this point, I realize I just need to pick a lane and take action. I know everyone will be biased toward the strategy they prefer, but I want to hear from those successfully generating income from STR specifically.

What books did you read to help you start? How did you find the right market? How do you know you are going to make money and avoid a trap? What is the time commitment to be successful in this strategy? I have heard it is more active than some of the others.

I am looking for someone willing to come along beside me and talk to me about the basics.

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Lee HamptonPro Member
Developer · Houston, TX · Member since 2020 · 94 posts · 105 votes
2y

Short-term rentals (STRs) can be lucrative, though there are headwinds ahead in Houston. The current city administration has telegraphed plans to introduce regulations this year. The initial phase will involve a registration requirement and an as-yet-undetermined annual permit fee per unit. The second phase will introduce modest restrictions, with continued data analysis to inform further regulatory measures. The era of unrestricted, unregistered STR operations in Houston is coming to an end. Based on my observations, there appears to be sufficient support among council members to implement registration and some restrictions. It looks like they are taking cues from recent regulations implemented in Arlington, TX.

That being said, the success of short-term rentals (STRs) boils down to fundamental factors such as location, pricing, and execution. I manage both long-term rentals (LTRs) and STRs, currently operating seven STRs, all of which are profitable. My approach is somewhat unique since I'm a builder; I build my units from the ground up and then decide whether to use them for LTRs, STRs, or sell them outright. Managing STRs involves more effort due to high turnover. I've shifted my focus from weekend stays to targeting guests who need accommodations for 30+ days. However, I still occasionally offer shorter stays.

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13 Replies

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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    2y

    STR is not the easiest niche to make money in especially in the current environment.

    You could still be sucessful but you need to pick a great market and a great property at a great price.

    1Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    2y

    I make much more money buying the fixer upper (abandoned, condemned, unwanted) properties for a song and paying cash. Not having a mortgage is very powerful.

    I also like buying properties in my ROTH IRA and not ever owing any further tax or capital gains.

    1Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    2y
    Quote from @John Underwood:

    I make much more money buying the fixer upper (abandoned, condemned, unwanted) properties for a song and paying cash. Not having a mortgage is very powerful.

    I also like buying properties in my ROTH IRA and not ever owing any further tax or capital gains.

    Check out @Chad Carsons book "The small and mighty investor"
    0Reply
  • Lee HamptonPro Member
    Developer · Houston, TX · Member since 2020 · 94 posts · 105 votes
    2y

    Short-term rentals (STRs) can be lucrative, though there are headwinds ahead in Houston. The current city administration has telegraphed plans to introduce regulations this year. The initial phase will involve a registration requirement and an as-yet-undetermined annual permit fee per unit. The second phase will introduce modest restrictions, with continued data analysis to inform further regulatory measures. The era of unrestricted, unregistered STR operations in Houston is coming to an end. Based on my observations, there appears to be sufficient support among council members to implement registration and some restrictions. It looks like they are taking cues from recent regulations implemented in Arlington, TX.

    That being said, the success of short-term rentals (STRs) boils down to fundamental factors such as location, pricing, and execution. I manage both long-term rentals (LTRs) and STRs, currently operating seven STRs, all of which are profitable. My approach is somewhat unique since I'm a builder; I build my units from the ground up and then decide whether to use them for LTRs, STRs, or sell them outright. Managing STRs involves more effort due to high turnover. I've shifted my focus from weekend stays to targeting guests who need accommodations for 30+ days. However, I still occasionally offer shorter stays.

    2Reply
  • Ryan Anders
    OP
    Member since 2023 · 13 posts · 4 votes
    2y

    Lee, thank you for the response. I am thinking more towards Galveston. Just from my basic research, it seems as though Galveston continues to break previous years tourism spending records. I believe Galveston is an area more setup for STR's, but I still have a lot of research to do.

    0Reply
  • Lee HamptonPro Member
    Developer · Houston, TX · Member since 2020 · 94 posts · 105 votes
    2y

    @Ryan Anders

    Galveston is generally more welcoming to short-term rentals (STRs) due to its status as a tourist destination. While a few homeowners associations in Galveston prohibit STRs, they are largely permissible. Ironically, in line with your interest in Galveston, I am about halfway through constructing a beach home there (Beachside Village), which I plan to use as an STR / vacation rental.

    0Reply
  • Ryan Anders
    OP
    Member since 2023 · 13 posts · 4 votes
    2y

    Very cool! Have you done the Galveston area yet? Have you found success out there.

    0Reply
  • Travis TimmonsPro Member
    Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
    2y

    I just moved out of Houston (Sugar Land) after living there for the last 12 years. I went down this road a few years ago and ultimately landed on an out of state market for STRs (Maine). As much as I wanted to make something in Texas work, there was just too much demand from 2nd home buyers that drove up prices to a point where investment returns, even in 2021-2022, were tight (vacation home buyers that didn't care about the investment return and just wanted a beach/lake/hill country home for personal use). 

    Out of state is hard. It's not as simple as many make it seem. It is not for everyone - you need to spend a lot of time at the property getting it to market. We purchased in a different market a few years ago as well. We bought a fixer in Dec 2021 to get to market in the summer of 2022. 

    It's sucks and is really expensive to start. You're going to bleed cash before you make a dime in booking revenue. You'll have that, "Holy crap, this is expensive; this better freaking work" feeling for a while. 

    I have nothing to sell and would be happy to help if you think I can be a resource. We've since added a mid term and long term property along with a fixer STR that turned into a bit of a live in flip that we just moved to in Maine. I'm no expert, but have learned a few things, had some success, and live in reality. Send me a direct message if you want to chat further.

    0Reply
  • Garrett BrownPro Member
    Rental Property Investor · Houston, TX · Member since 2024 · 505 posts · 551 votes
    2y

    Hey Ryan! I am a short term rental investor and agent in the Houston, Texas area for over 5 years now. I think the people that have soured on STR's did not expect it to be as much as it requires. With that being said, you can build a successful STR if you win on two fronts (to simplify it)

    The real estate side and the hospitality side (operations).

    The real estate side is buying a very good deal in a market that has a history of vacation rentals in my opinion. 

    There is alot of chatter in Houston about them shutting down STR's but I believe it will go into a paying for a permit phase more realistically. There are a few areas that have long been unrestricted in spots (Heights, Montrose, EADO, etc) that may work. These numbers have risen tremendously though and with interest rates it is harder.

    I like your Galveston idea because of the area and the amount of people that will probably be selling as they see it takes way more work than they expected. My concern with Galveston is definitely insurance costs though for you. I would 100% price that out before making a move anywhere there.

    I think Lake Conroe and Lake Livingston are two places to check out as things progress in the area. That is where most of my investments are and my smaller experience based cabins crush it compared to my regular SFH that I rent. I think STR is an experience based travel and with the right marketing /design, it can 100% be a viable investment. Be prepared to learn the systems you need and deal with some headaches though compared to other forms of renting. One of my glamping sites brings in around $25,000 a month but we also spend around $15,000-20,000 per month. Insurance, weather related events, and labor costs for cleaning have been a big cost this year for us. We have supplemented our income with plenty of add on packages, local partnerships (jet ski/boat rentals, breweries, restaurants, etc)

    [email protected]
    BiggerPockets
    2Reply
  • Ryan Anders
    OP
    Member since 2023 · 13 posts · 4 votes
    2y
    Quote from @Travis Timmons:

    I just moved out of Houston (Sugar Land) after living there for the last 12 years. I went down this road a few years ago and ultimately landed on an out of state market for STRs (Maine). As much as I wanted to make something in Texas work, there was just too much demand from 2nd home buyers that drove up prices to a point where investment returns, even in 2021-2022, were tight (vacation home buyers that didn't care about the investment return and just wanted a beach/lake/hill country home for personal use). 

    Out of state is hard. It's not as simple as many make it seem. It is not for everyone - you need to spend a lot of time at the property getting it to market. We purchased in a different market a few years ago as well. We bought a fixer in Dec 2021 to get to market in the summer of 2022. 

    It's sucks and is really expensive to start. You're going to bleed cash before you make a dime in booking revenue. You'll have that, "Holy crap, this is expensive; this better freaking work" feeling for a while. 

    I have nothing to sell and would be happy to help if you think I can be a resource. We've since added a mid term and long term property along with a fixer STR that turned into a bit of a live in flip that we just moved to in Maine. I'm no expert, but have learned a few things, had some success, and live in reality. Send me a direct message if you want to chat further.


     Thx for the input Travis. I will be reaching out to you soon!

    0Reply
  • Ryan Anders
    OP
    Member since 2023 · 13 posts · 4 votes
    2y

    Hey Garret, thank you for the input. I have priced insurance in the past in Galveston. You're right. It is extremely expensive. It is funny you mention Conroe. I was about to mention that to my wife. I think that would be another great spot. Houston is moving north, too.

    0Reply
  • Ryan Anders
    OP
    Member since 2023 · 13 posts · 4 votes
    2y
    Quote from @Garrett Brown:

    Hey Ryan! I am a short term rental investor and agent in the Houston, Texas area for over 5 years now. I think the people that have soured on STR's did not expect it to be as much as it requires. With that being said, you can build a successful STR if you win on two fronts (to simplify it)

    The real estate side and the hospitality side (operations).

    The real estate side is buying a very good deal in a market that has a history of vacation rentals in my opinion. 

    There is alot of chatter in Houston about them shutting down STR's but I believe it will go into a paying for a permit phase more realistically. There are a few areas that have long been unrestricted in spots (Heights, Montrose, EADO, etc) that may work. These numbers have risen tremendously though and with interest rates it is harder.

    I like your Galveston idea because of the area and the amount of people that will probably be selling as they see it takes way more work than they expected. My concern with Galveston is definitely insurance costs though for you. I would 100% price that out before making a move anywhere there.

    I think Lake Conroe and Lake Livingston are two places to check out as things progress in the area. That is where most of my investments are and my smaller experience based cabins crush it compared to my regular SFH that I rent. I think STR is an experience based travel and with the right marketing /design, it can 100% be a viable investment. Be prepared to learn the systems you need and deal with some headaches though compared to other forms of renting. One of my glamping sites brings in around $25,000 a month but we also spend around $15,000-20,000 per month. Insurance, weather related events, and labor costs for cleaning have been a big cost this year for us. We have supplemented our income with plenty of add on packages, local partnerships (jet ski/boat rentals, breweries, restaurants, etc)


     I didn't quote you in my response. My fault. I am still figuring out this forum. See above reply.

    0Reply
  • Garrett BrownPro Member
    Rental Property Investor · Houston, TX · Member since 2024 · 505 posts · 551 votes
    2y

    No worries @Ryan Anders ! It takes a little getting used to. I think Conroe is a great market to get ahead on in our area. Galveston will take getting a screaming deal to make sense to me with the rates and saturation there. 

    [email protected]
    BiggerPockets
    0Reply
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