Airbnb Investing in Austin

Austin, Texas
Austin Real Estate Forum
5yFollow

Airbnb Investing in Austin

Kevin Y.
Member since 2020 · 26 posts · 0 votes

Hi Everyone,

I'm still learning about real estate investment and appreciate all of the great advice I've received from the group. I was wondering if anyone has had experience with Airbnb'ing their property in Austin and how the process was like. I did some research on it and it seems it involves applying for the Short term rental license, paying the proper fees, and hotel taxes. How difficult was the process of getting these licenses and was there any unanticipated setbacks that you experienced? Is Austin friendly to Airbnb and other short term rentals? I know COVID has put the breaks on a lot of vacations, but what are some areas that you can't go wrong with investing your property as an Airbnb? In other words, great areas/destinations that are attractive? I assume Zilker, Barton Creek, and Downtown? I'd appreciate any advice or feedback to start this conversation. 

Thanks!

0Reply
193 views

Most Popular Reply

Austin Stowell
Developer and Real Estate Broker/ Investor · Austin, TX · Member since 2015 · 22 posts · 8 votes
5y

Sorry on vacation with bad wifi. It apparently didn’t post yesterday. 

Here it is on YouTube

Austin STR rules

2Reply
See this reply in the discussion

25 Replies

Jump to latestLatest
  • Austin Stowell
    Developer and Real Estate Broker/ Investor · Austin, TX · Member since 2015 · 22 posts · 8 votes
    5y

    I just posted a video about the STR rules in Austin. I hope this is helpful.

    0Reply
  • Qui Chau
    Realtor · Austin, TX · Member since 2014 · 20 posts · 11 votes
    5y

    STR's are my specialty. Unfortunately, Austin is no longer a STR friendly city if it's a Type 2 license/non-owner occupied. However, good news was that the Texas higher courts have ruled some of Austin's STR ordinances illegal. I think it's still in limbo at this point but don't hold me to it. You're better off doing it in STR friendly cities close by such as Round Rock and Pflugerville. San Antonio has its restrictions too but a little better off then Austin. Good luck!

    1Reply
  • Diana Martinez
    Member since 2020 · 13 posts · 15 votes
    5y

    @Austin Stowell where can we see your video?

    0Reply
  • Austin Stowell
    Developer and Real Estate Broker/ Investor · Austin, TX · Member since 2015 · 22 posts · 8 votes
    5y

    Sorry on vacation with bad wifi. It apparently didn’t post yesterday. 

    Here it is on YouTube

    Austin STR rules

    2Reply
  • Kevin Y.
    OP
    Member since 2020 · 26 posts · 0 votes
    5y

    Thanks for the information @Austin Stowell and @Qui Chau. Could you clarify why it is good news that TX courts have ruled some of Austin's STR ordinances illegal? And just to confirm: if I were to make the home my primary residence, and rent the entire property out occasionally when I'm out of town, that would be considered owner-occupied correct? Is Type 2 the scenario where I have the property as a pure investment and I'm not living inside of it at all? Also, if I purchase the property using an LLC and live inside of it, and occasionally rent it out as mentioned, would that qualify me as Type 1 (owner occupied)? How easy is it to get the Type 1 license? Thanks!

    0Reply
  • Jeffrey Schnabel
    Member since 2020 · 2 posts · 0 votes
    5y

    @Kevin Y. If you hold the deed as an LLC you cannot declare Homestead, thus you cannot qualify for an owner-occupied STR Type-1 license. If you own it as a natural person, you can declare Homestead as long as you comply with the occupancy requirements and getting an STR Type-1 license is pretty straightforward, but fraught with redtape.

    0Reply
  • Jeffrey Schnabel
    Member since 2020 · 2 posts · 0 votes
    5y

    @Kevin Y. If you hold the deed as an LLC you cannot declare Homestead, thus you cannot qualify for an owner-occupied STR Type-1 license. If you own it as a natural person, you can declare Homestead as long as you comply with the occupancy requirements and getting an STR Type-1 license is pretty straight forward, but fraught with red tape.

    0Reply
  • Kevin Y.
    OP
    Member since 2020 · 26 posts · 0 votes
    5y

    Thank you @Jeffrey Schnabel

    0Reply
  • Kevin Y.
    OP
    Member since 2020 · 26 posts · 0 votes
    5y

    If there are three owners of the house, do all three of them need to be in Texas and have an address matching the property? Or does one suffice. Also, my understanding is that owner-occupied means the address of the property matches say the driver's license of the individual. Am I able to rent out the entire house if I'm out of town so I'm technically not "occupying" it at the time. Thanks!

    0Reply
  • Austin Stowell
    Developer and Real Estate Broker/ Investor · Austin, TX · Member since 2015 · 22 posts · 8 votes
    5y

    The way city of Austin approved Type 1 Permits is by referencing TCAD to see if there is a homestead exemption. If you go to www.Traviscad.org and search the address and find “HS” under exemptions you will be good for the type 1.  In order to file for the Homestead - generally TCAD will want a drivers license with one of the owners with the property address listed on the license. 

    0Reply
  • Kevin Y.
    OP
    Member since 2020 · 26 posts · 0 votes
    5y

    Thanks for explaining @Austin Stowell. I read this line below. Does that mean if I buy this property next month, I will not qualify for a homestead exemption and therefore cannot be granted Type I license?

    General Residence Homestead Exemption

    A general residential homestead exemption is available to taxpayers who own and reside at a property as of January 1st of the year. To apply for this exemption, taxpayers must submit a completed application along with a driver’s license or state-issued personal ID certificate that has the same address as the property they are applying for the exemption on.


    0Reply
  • Austin Stowell
    Developer and Real Estate Broker/ Investor · Austin, TX · Member since 2015 · 22 posts · 8 votes
    5y

    No but it will be less straight forward to prove it is your homestead without that. You are correct in that if you purchase a property after Jan 1 you cannot file the homestead exemption until the following year. You would have to coordinate with the STR office and fill out an affidavit that it is your primary residence and probably provide the drivers license with the address on it and potentially your utility bills and or closing statement.

    0Reply
  • Jeff Orr
    Member since 2021 · 2 posts · 0 votes
    5y

    What are your thoughts on the Natiivo project going on there in Austin?  

    0Reply
  • Kevin Y.
    OP
    Member since 2020 · 26 posts · 0 votes
    5y

    Thanks @Austin Stowell. There's a lot of numbers with regards to occupancy taxes and other short-term rentals. I was hoping I could run a simple example by you to make sure I understand what is collected/paid by me. 

    1 Night $1,000
    Clean Fee $100
    Total $1,100
    State Hotel Tax (6% of 1100) $66.00
    City Hotel Tax (11% of 1100) $121.00
    Airbnb Fee (3% of 1100) $33.00
    Net Total $880.00
    State Hotel Tax Pay back to State $946.00
    • Am I correct in: 
    • 1. Computing the state hotel tax of 6% of the total $1100. 
    • 2. Computing the city hotel tax of 11% of the total $1100
    • 3. Airbnb 3% fee of the total $1100. 
    • 4. Since the state hotel tax is collected at check-out from the buyer, pass it back over to the state? So it cancels out. 

    So my total take home is $946 - are we essentially only paying the city tax (11%) and the airbnb fee (3%)? Would appreciate any insight on this or comments if I'm way off. This is how I interpret reading the rules on taxes and Airbnb fees. Thank you!

      0Reply
    1. Hanna Lupico
      Investor · Austin, TX · Member since 2019 · 9 posts · 3 votes
      5y

      @Austin Stowell - Thank you for posting the video explaining Type 2 rentals. Have there been any notable updates in permitting of Type 2 rentals? Has the City of Austin resumed issuing permits for Type 2 rentals?

      0Reply
    2. Hanna Lupico
      Investor · Austin, TX · Member since 2019 · 9 posts · 3 votes
      5y

      I think I may have found the answer, on https://www.austintexas.gov/page/types-short-term-rentals, Type 2 has an '*' next to it, scrolling down the page, you can find the following:
      ⁠
      *Only allowed in the following commercial zoning districts:
      Central Business District (CBD)
      Downtown Mixed Use (DMU)
      Planned Unit Development (PUD)
      General-Retail - Mixed Use (GR-MU)
      Commercial Services - Mixed Use (CS-MU)
      Commercial Services - Vertical Mixed Use (CS-V)
      General Retail - Vertical Mixed Use (GR-V)
      ⁠
      If I am understanding correctly, a property would need to be in one of the zones listed above to be eligible for Type 2 permits today. Is that correct? 

      0Reply
    3. Sarah Davis
      Member since 2021 · 35 posts · 34 votes
      5y

      @Hanna Lupico Yes, that is correct. You'll find some that are in residential neighborhoods (SF) but they are either grandfathered in or not licensed.

      0Reply
    4. Vid Sista
      Member since 2022 · 7 posts · 5 votes
      4y
      Quote from @Sarah Davis:

      @Hanna Lupico Yes, that is correct. You'll find some that are in residential neighborhoods (SF) but they are either grandfathered in or not licensed.


       Sarah, when you say you might find some that are in SF but are grandfathered in, do you mean an investor can purchase one of those homes and get a license or are you saying that you might find an existing AirBNB listing in those neighborhoods because they are grandfathered in?

      0Reply
    5. Sarah Davis
      Member since 2021 · 35 posts · 34 votes
      3y

      Hi Vid, no the licenses are not transferable between owners. The sale would trigger the property out of this exception. 

      0Reply
    6. Eliott Elias
      Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
      3y

      It's virtually impossible unless it's your primary, its less impossible. I would target areas in the Austin MSA like Round rock, Liberty Hill, Cedar park 

      0Reply
    7. Ryan KellyBusiness Member
      Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes
      3y

      @Kevin Y. in short, Austin is not a very friendly STR city. Most of my clients have switched away from short-term rentals to mid-term rentals or longer to avoid being caught up in the red tape. There are currently around 1,900 homeowners that have an official STR license, but approximately 10,000-11,000 total STR's trying to operate in the city according to a recent report. This means over 80% of STR's are considered illegal by the City of Austin. The council continues to debate what to do about it and likely would start to get more strict to manage or restrict STR growth. Most big metros are trending in this direction.

      [email protected]512-674-5478
      Ryan Kelly Group - Keller Williams5112 Reviews
      WebsiteView Page
      0Reply
    8. Vid Sista
      Member since 2022 · 7 posts · 5 votes
      3y

      Thanks everyone. I ended up buying just outside of Austin city limits. Still close in proximity to a lot of the attractions (Lake Travis, Domain, etc.) but not subject to the same restrictions within City limits. Appreciate all the feedback! 

      2Reply
    9. Jordan MoorheadBusiness Member
      Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
      3y

      Nice @Vid Sista! We have a few clients doing that and @Conner Olsen and I actually both run the *legally* in Austin

      [email protected]512-888-9122
      The Moorhead Team5140 Reviews
      WebsiteView Page
      0Reply
    10. Conner Olsen
      Real Estate Agent · Austin, TX · Member since 2020 · 1k+ posts · 941 votes
      3y
      Quote from @Vid Sista:
      Quote from @Sarah Davis:

      @Hanna Lupico Yes, that is correct. You'll find some that are in residential neighborhoods (SF) but they are either grandfathered in or not licensed.


       Sarah, when you say you might find some that are in SF but are grandfathered in, do you mean an investor can purchase one of those homes and get a license or are you saying that you might find an existing AirBNB listing in those neighborhoods because they are grandfathered in?


      I've only heard of one person who is able to sell their property and keep the license legally. The property was owned by an LLC and they applied for the permit back when permits began and got it under the name of the LLC. Now if they want to sell the home, they'll just sell ownership to the LLC which has the grandfathered in permit attached. They had a lot of foresight to set up their property this way.

      0Reply
    Join the conversationCreate a free account to reply, vote on answers and follow this thread.
    Log InJoin for Free