Owning a short term rental can be a great investment strategy. However, buying a short term rental in Austin can be challenging for the novice STR owner. There are rules and regulations, zoning ordinances and homeowners associations that make it hard to navigate the maze of red tape. If you want to invest in an STR in Austin, the best thing to do is to find a qualified real estate agent who can lead you through the maze and deliver the best STR properties for your unique needs. If you’re more of a do-it yourself person, here are the steps I take to identify STR options in the greater Austin area.
Step 1: Decide on how the STR will be used. Is this going to be a primary residence or a pure investment property?
The primary use of the property makes a big difference in how they are regulated, so you will need to start there. Short-term rentals are regulated on the municipal level in Central Texas, which means that cities can decide if they want to create their own STR ordinance. Many of the cities in the greater Austin area incorporate the idea of owner-occupants into their short-term rental policies. There’s a difference between a property that you live in most of the time and STR during SXSW and a full-time vacation rental investment. You could also have a property that you live in full-time with a guest house that is used full-time as a short-term rental. If you’re looking for a pure investment property that will not be your primary residence, you will want to isolate your search to properties that will allow this.
Step 2: Limit your location search.
If you are looking for a primary residence STR, skip ahead to Step 3. For everyone else looking for a full-time STR investment property, you will want to make sure you are searching for properties in areas that allow for full-time short term rental use. I have a full breakdown of the rules and regulations throughout central Texas here. Once you have identified the areas with rules that are favorable for your circumstances, you can start looking for homes in those cities. Just remember that the city name in the mailing address is not necessarily the same as the municipality that regulates the property. Homes in the extraterritorial jurisdiction (ETJ) are generally not subject to municipal STR rules, but they often are addressed as if they are in that city’s full jurisdiction. Properties in the ETJ are often good contenders for viable STR investment purchases.
Step 3: Confirm HOA Rules
Homeowners’ associations have the ability to regulate leasing conditions, too. HOAs will always have an official document known as the declaration that outlines the restrictions on use within the community. These are public records filed with the county clerk. It’s common to see provisions such as a minimum 6-month lease term. However, some HOAs do not have restrictions on short-term rentals. That being said, I generally advise clients to stay away from properties in HOAs. HOAs can generally change their rules with a certain percentage of the homeowners voting to amend the declaration. Thus, buying a home you intend to use as a short-term rental in an HOA is a risky decision.
Step 4: Verify Deed Restrictions
Even if the property you are interested in buying is not located in an HOA, it is possible that there are deed restrictions that could limit your ability to use the property. It’s rare that I see deed restrictions that limit leasing duration restrictions that limits leasing duration, however, it’s common to see the “residential use only” clause. While often frightening, this should not be a cause for concern. It was argued in the Texas Supreme Court that leasing, no matter the duration, is a residential use. However, if you have intentions for creating a short term rental compound with an event space or adding a tiny home to the property you will want to make sure the deed restrictions allow this. Title companies can usually help you track down the deed restrictions, and you can always contractually protect yourself from potential deed restriction limitations in the purchase contract.
Finding a property that you can legally use as a short term rental may appear to be an ambitious task, but with the right information and professional guidance it’s a whole lot easier.
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Erika Rae Albert is the broker and owner of E-Rae Realty. She is a native Austinite who has built her business around one guiding principle, YOU always come first. She has worked with a diverse array of clients, helping buyers find the perfect properties for their unique needs and sellers earn top-dollar for their homes with ease. Her attention to detail, exceptional negotiation skills, and strong pulse on the local market conditions contribute to superior results for her clients.