With Texas being one of the best states for short term rentals, the question of how to start an Airbnb in Texas is on the minds of many investors.
There are a number of factors that make The Lone Star State one of the best places to invest in vacation rentals across the US. Texas Airbnb hosts continue to benefit from strong rental income and high ROI, making new investors want to join and generate similar profits.
Table of Contents
- Is Airbnb Profitable in Texas?
- Short Term Rental Regulation in Texas
- How to Start an Airbnb in Texas in 9 Steps
- Top 5 Cities in Texas for Airbnb
- Starting an Airbnb Business in Texas in 2023
While the process of starting a short term rental business is relatively the same in each market, there are certain local peculiarities and requirements that savvy investors need to consider.
In this article, we’ll focus on the steps and actions it takes to become a successful Airbnb property investor in Texas. Importantly, we’ll show you how the tools available on the Mashvisor real estate investment platform can help you and support you each step of the way to guarantee the best results.
Finally, to make the process faster and easier for beginner investors with no previous experience in the Texas real estate market, we’ll show you the five best markets for the said strategy. The ranking is based on Mashvisor state-wide data from April 2023 and reflects the cities with the highest ROI potential.
Is Airbnb Profitable in Texas?
Before getting into how to start an Airbnb business in Texas, investors need to know whether the strategy is worth it at all. In other words, we need to establish if Texas short term rentals are profitable.
There are two main factors that determine how profitable vacation rentals are: 1) The popularity of a location among visitors and 2) Average property prices. First, the more travelers come to a place, the higher the Airbnb occupancy rate and the more income hosts are able to make. Second, the lower the property values, the higher the return on investment.
The Texas Airbnb market combines both of these factors to make it one of the best short term rental markets in 2023.
First of all, Texas has always been one of the most visited US states, and this trend continued in 2022. Last year, it was the 4th most popular state among tourist and business travelers in the US. Prior to the pandemic, Texas used to welcome over 200 million domestic visitors each year, in addition to some foreign visitors as well.
With expectations for an increase in domestic and foreign tourism in 2023, there many reasons to believe that Texas will continue to be a popular travel destination. Such optimism, in turn, makes it a top market for Airbnb investment properties.
Second, property prices in the Texas housing market are relatively affordable. The current median property price in Texas (as calculated by Mashvisor) is around 40% above the national value of $334,269, as reported by Zillow. Nevertheless, it is significantly below the level of many other top Airbnb destinations, making Texas a good market even for beginner investors.
Texas Airbnb Market Data 2023
To confirm that Airbnb is profitable in Texas, we gathered state-wide data on the performance of short term rentals there. Collected and analyzed by Mashvisor in April 2023, the data reflects the performance of all active Airbnb listings in the state.
- Median Property Price: $468,584
- Average Price per Square Foot: $380
- Days on Market: 86
- Number of Airbnb Listings: 55,475
- Monthly Airbnb Rental Income: $2,754
- Airbnb Cash on Cash Return: 3.01%
- Airbnb Cap Rate: 3.06%
- Airbnb Daily Rate: $175
- Airbnb Occupancy Rate: 40%
- Walk Score: 48
- Number of Long Term Rental Listings: 67,215
- Monthly Long Term Rental Income: $2,018
- Long Term Rental Cash on Cash Return: 2.89%
- Long Term Rental Cap Rate: 2.94%
- Price to Rent Ratio: 19
An average Airbnb host can expect to make $2,754 per month if renting out an entire property (non-owner occupied short term rental).
They can also expect an ROI of 3.01% in terms of cash on cash return and 3.06% in terms of cap rate. Though the figures might seem low, it’s important to keep in mind that they are just state-level averages. If you put the right effort into choosing a winning property and apply dynamic nightly pricing, you can earn much more.
Related: 20 Best States to Buy Investment Property in 2023
Short Term Rental Regulation in Texas
Now that we know that running an Airbnb business in Texas makes financial sense, it’s key to check out the local Airbnb laws and regulations.
The State of Texas defines short term rentals as residential properties that are rented out entirely or partly for a fee for a period of no more than 30 consecutive days. They can include single family homes, condo units, coops, and timeshares.
The state does not impose any regulations or restrictions on operating a vacation rental business. Moreover, the State of Texas prohibits local municipalities or counties from introducing laws that expressly or effectively prevent short term rentals. It makes Texas a good place to invest in Airbnb homes for sale.
The only state-wide requirement on how to start an Airbnb in Texas is to register with the Texas Comptroller’s Office and pay state hotel occupancy tax, as well as local lodging tax.
However, different Texas cities also introduced their own laws and regulations that limit vacation rentals. So, before buying a property, it’s important to check out local rules. The Mashvisor short term rental regulations page provides a quick summary of the rules in all major cities. You can also find links to resources with more detailed information.
3 Texas Cities With the Most Lenient Short Term Rental Regulations
The three cities in Texas with the most favorable laws for Airbnb hosts include the following:
- Dallas: No Airbnb laws or regulations
- San Antonio: Generally positive legal environment for non-owner occupied short term rentals
- Galveston: Easy and relatively unrestricted process of starting an Airbnb business
Related: Should You Buy a Short Term Rental in Dallas in 2023?
3 Texas Cities With the Strictest Short Term Rental Regulations
The three Texas markets that regulate vacation rentals the most include the following:
- Houston: Prevents non-owner occupied vacation rentals in Class A dwellings
- Fort Worth: Prohibits short term rentals in residential areas
- Austin: Limits the density of non-owned occupied Airbnb properties
How to Start an Airbnb in Texas in 9 Steps
It’s time to take a look at the steps that are needed in order to start an Airbnb business in the State of Texas.
1. Find the Best Texas Market for Airbnb
First and foremost, you need to choose the best location for buying an Airbnb property in the Texas market. It includes both the city and the neighborhood. Since you want to run an Airbnb business, you need to focus on places with a lot of visitors, proximity to tourist attractions, and accessibility. Moreover, look for areas that are affordable and safe.
To help you out with the city Airbnb market research, in the next section, we’ve listed the best Texas short term rental markets.
After selecting a city, you can use the Mashvisor real estate heatmap to search for neighborhoods with:
- Low property prices
- High Airbnb income
- High Airbnb occupancy rate
- High Airbnb cash on cash return
Sign up for a 7-day free trial of Mashvisor to start a successful Airbnb business in Texas in no time.
2. Study the Local Short Term Rental Laws
As we mentioned above, Airbnb laws vary from one Texas city to another, so as a next step, you need to check out the regulations in your selected market. Make sure that non-owner occupied short term rentals are not only legal but also unlimited in terms of zoning and renting out throughout the year.
You cannot start a profitable Texas Airbnb business if you need to be present on the property or if you can only rent out for a few days per year. For a quick reference, start with the Mashvisor short term rental regulations page and then expand your research.
Depending on your market, you might need to apply for local short term rental permits once you buy your investment property.
3. Search for Properties for Sale
The third step in starting an Airbnb in Texas is finding the best investment property for sale. Usually, in this process, it’s worth checking out different sources like local newspapers, house-hunting websites, and real estate agents. You can also look at real estate events, auctions, networking, and others. The problem with most of the said methods is that they don’t focus on Airbnb for sale in specific.
To make your investment property search as targeted and focused as possible, you can use the Mashvisor Property Finder. The Property Finder tool uses AI and machine learning to provide you with a list of the most profitable vacation rentals for sale in up to five markets simultaneously. All you need to do is to enter your requirements like location, price, and property type and size.
Then, you’ll get a list of MLS listings available for sale that match your exact expectations. They’ll be ordered from the highest Airbnb cash on cash return down to ensure you get immediate access to the best deals.
Related: The Investor’s Guide to Finding Active MLS Listings Without a Realtor
4. Analyze the Airbnb Investment Potential of Listings
As soon as you find a few potentially profitable opportunities, you should conduct detailed short term rental property analysis to choose the best Texas property for your needs.
On the one hand, you need to factor in the property price, closing costs, and recurring operating expenses. On the other hand, you need to analyze the monthly rental income based on the average Airbnb daily rate and Airbnb occupancy rate. It is the only way to ensure positive cash flow and good return on investment.
Analyzing multiple properties for sale requires not only access to a lot of reliable Airbnb data but also a lot of data organization and calculations.
An easier and more efficient way to conduct investment property analysis is to use the Mashvisor Airbnb profit calculator. With the tool, you can analyze the investment potential of any residential property in the US market, whether listed on Mashvisor or not.
You will get detailed data on all costs, as well as revenue based on the performance of similar Airbnb listings in the local Texas market, known as rental comps. All data comes right from the Airbnb website and reflects active listings.
In this way, with just a few clicks of a button, you can find the property that will bring you the highest cash on cash return and cap rate within your budget.
5. Contact an Agent
Unless you have experience in buying real estate, your best course of action is hiring a real estate agent. They’ll be able to help you with home inspections, the best loans for property investment, appraisals, and negotiations. An agent will get you a better price and more favorable terms than you can negotiate yourself.
The best part is that property buyers do not pay agents and brokers, whose commissions are covered by the property seller in the US housing market.
You can find the best residential real estate agents in Texas here.
6. Buy the Property
Once you’ve figured out the financing and you’ve reached an agreement with the property seller, it’s time to close the deal and become the proud owner of a Texas Airbnb property. Your agent will be able to take you through the process and support you through all the legalities.
7. Furnish Your Texas Vacation Rental
The next step in starting a Texas Airbnb business is getting your property ready for renting. It means furnishing it in full, as well as providing all the necessary appliances and utilities. You need to make sure that your property stands out from the competition to maximize your occupancy and profitability.
8. List Your Texas Property on Airbnb
As soon as your property is ready to welcome guests and you have all necessary legal documents, it’s time to list your rental on Airbnb.
It requires taking professional photos and writing an enticing title and property description. It’s important to list all amenities and extras. Highlight local attractions. Show how your Airbnb experience is different from and better than what other short term rentals in the local Texas market are offering.
Moreover, you need to price your property competitively, especially as a beginner Airbnb host. The Airbnb search engine algorithm factors in the daily rate of your property when deciding how high to rank it in the search results of guests.
9. Set Up Dynamic Pricing
To strike the best balance between nightly rate and occupancy, you need to implement dynamic pricing to your Texas Airbnb property. You must consider trends in demand and supply, local events, and your competitors. While the said process is a must for Airbnb hosts, it can take a lot of hard work and tons of time.
Alternatively, you can import your Texas Airbnb listing into Mashvisor and use our dynamic pricing tool. The Mashvisor Airbnb pricing tool can automatically adjust your daily rate for each night available on your calendar based on your base, minimum, and maximum rates. The pricing uses AI to optimize your property’s revenue rather than occupancy.
Top 5 Cities in Texas for Airbnb
After going through the process of how to start a successful Airbnb business in Texas, you now know that the very first step requires finding the best market.
Below, we ranked the top five Airbnb markets in The Lone Star State for this year based on Mashvisor’s April 2023 data. We gathered state-wide data from the MLS, Airbnb, and public records to calculate the performance of individual cities. We focused on the markets that promise the highest return on investment, as well as affordable prices (below $1 million).
The best Texas cities for running an Airbnb business include the following, ranked from the highest to the lowest cash on cash return:
1. Waco, TX
- Median Property Price: $385,446
- Average Price per Square Foot: $205
- Days on Market: 94
- Number of Airbnb Listings: 452
- Monthly Airbnb Rental Income: $3,517
- Airbnb Cash on Cash Return: 5.59%
- Airbnb Cap Rate: 5.69%
- Airbnb Daily Rate: $198
- Airbnb Occupancy Rate: 51%
- Walk Score: 37
2. Wichita Falls, TX
- Median Property Price: $250,963
- Average Price per Square Foot: $137
- Days on Market: 56
- Number of Airbnb Listings: 144
- Monthly Airbnb Rental Income: $2,325
- Airbnb Cash on Cash Return: 5.09%
- Airbnb Cap Rate: 5.23%
- Airbnb Daily Rate: $132
- Airbnb Occupancy Rate: 53%
- Walk Score: 65
3. Woodway, TX
- Median Property Price: $541,362
- Average Price per Square Foot: $210
- Days on Market: 61
- Number of Airbnb Listings: 243
- Monthly Airbnb Rental Income: $4,476
- Airbnb Cash on Cash Return: 4.98%
- Airbnb Cap Rate: 5.04%
- Airbnb Daily Rate: $192
- Airbnb Occupancy Rate: 52%
- Walk Score: 43
4. Tyler, TX
- Median Property Price: $463,706
- Average Price per Square Foot: $197
- Days on Market: 122
- Number of Airbnb Listings: 152
- Monthly Airbnb Rental Income: $2,934
- Airbnb Cash on Cash Return: 4.31%
- Airbnb Cap Rate: 4.39%
- Airbnb Daily Rate: $141
- Airbnb Occupancy Rate: 52%
- Walk Score: 78
5. Forest Hill, TX
- Median Property Price: $310,197
- Average Price per Square Foot: $157
- Days on Market: 88
- Number of Airbnb Listings: 216
- Monthly Airbnb Rental Income: $2,536
- Airbnb Cash on Cash Return: 4.23%
- Airbnb Cap Rate: 4.31%
- Airbnb Daily Rate: $150
- Airbnb Occupancy Rate: 50%
- Walk Score: 29
Before investing in any of the above markets, make sure to check out the local short term rental regulations.
Starting an Airbnb Business in Texas in 2023
Owning a short term rental property in the Texas market can be a winning real estate investment strategy in 2023. As a result of the strong demand from visitors and reasonable property prices, vacation rentals can yield great ROI.
If this is your first time investing in The Lone Star State and you’re not sure how to start an Airbnb in Texas, just follow the steps outlined above. In order to optimize your processes and results, you should get access to the top real estate investing tools. With Mashvisor’s help, you’ll be able to find and analyze markets and properties and apply dynamic Airbnb pricing.
Schedule a demo of Mashvisor to learn how our tools can help you start a profitable Airbnb business in Texas.