How Much Money Can You Charge for an Airbnb in Houston?
So you've decided to dip your toes into the fast-growing world of Airbnb rental ownership. Whether you want to rent out a property as a profitable side hustle or as a form of full-time income, it's no secret that being an Airbnb host is a great way to earn income.
While that's an exciting development, you probably have plenty of questions regarding how much you can (or should) charge your guests for using your vacation home. Apart from the base rate, you also have to consider cleaning fees, cancellation policies, and more when determining your pricing.
And that's without taking into account the local market, any municipal or state laws that may affect your rates, and similar concerns that will impact your Airbnb pricing. If you want to get started renting out an Airbnb property in Houston, you need to know the rules so that you can set a fair price that will still net you a nice profit.
2023 Airbnb Houston, TX Rental Market
As the fourth most populous city in the USA and with a thriving economy totaling over $463 billion in GDP, Houston has a lively housing market and also presents a desirable destination for all manner of tourists and other short-term visitors.
Both of these factors mean that Houston is a great venue for an Airbnb investment property. Even though the COVID-19 pandemic had a major impact on both home prices and rates of unemployment, rental vacancies in the Houston area have remained low while median rents have held steady. In fact, economic uncertainty has actually made some potential homeowners choose renting over ownership.
Although Houston was affected like the rest of the country during the housing supply shortage immediately post-pandemic, the market there had mostly bounced back by the end of 2022. With an upward climb in its housing supply, Houston seems to be developing a positive climate for buyers and sellers alike.
All of these factors combine to suggest that Houston will be a healthy region for Airbnb investment for a long time to come. The key is making sure to take advantage of the best locations within Houston to make the most of your Airbnb hosting potential (more on that farther down below!).
Occupancy Tax Collection and Remittance by Airbnb for Texas
Houston, Texas has several types of taxes that apply to booking an Airbnb listing. Like any business, you'll need to understand how taxes affect the final price of your listing in order to make sure you still successfully obtain bookings.
The entire state of Texas requires a 6% hotel occupancy tax applied to the listing price (including any cleaning fees), so long as the reservation is under 30 total nights. In addition, Harris County imposes a similar hotel occupancy tax for short-term and vacation rentals, whether the buildings fall into incorporated areas (2% tax) or unincorporated areas (7%).
Finally, the City of Houston also levels a 7% hotel occupancy tax that also needs to be included in the final price of any hotel, motel, or vacation rental booking. As the host, you are responsible for collecting these taxes and then remitting them to Airbnb, which in turn will remit these taxes to the government on your behalf.
Rental Housing Standards in Texas
As you might imagine, there are several rules governing the health and safety standards of any hotel or short-term rental property within Houston, Texas. For instance, the statutory definition of "short-term" is a residential dwelling unit that is rented out to guests for no more than 29 days.
There is no legal limit to the number of legal vacation rental properties that a commercial investor can own within Houston city limits. This is also the case with multi-family units, duplexes, etc. With that being said, you need to obtain a vacation rental license, and each property or individual unit will have to comply with the aforementioned short-term rental regulations and local safety and construction codes.
Similarly, Houston doesn't limit your property in terms of zoning laws, so you just have to make sure everything is up to code. For instance, each short-term rental property needs at least one working smoke detector and one functioning carbon monoxide detector in each individual bedroom, as well as covering each level of the house/rental unit.
As long as you maintain safety standards and obtain a vacation rental license through the proper legal channels (i.e. by applying with the administration and regulatory affairs department and undergoing a property inspection), you'll be in the clear.
Other Rules Governing Texas Airbnb Rentals
There are some additional regulations controlling how you register your vacation rental property for Airbnb purposes. As mentioned above, you can only obtain a short-term rental/vacation rental license following an in-person inspection conducted by a city inspector. This individual is responsible for making sure the dwelling is up to code, including smoke and carbon monoxide detectors, fire extinguishers, and a working HVAC system.
Another important rule is Houston's "responsible agent requirement." The city requires the property owner to authorize an individual to act on his or her behalf, making sure that the property meets all applicable short-term rental rules and regulations. If you have any further concerns, check out Houston's Hotel and Motel Ordinance for further information.
Finally, if you're part of an HOA, you'll also need to check for any relevant bylaws or other rules that could affect your ability to act as an Airbnb host.
Making a Profit on Airbnb in Houston, TX
As with any industry, the question of profitability when running an Airbnb rental property business will be determined by a variety of factors. For instance, your particular location within the city of Houston, the visual style and type of property you own, the amenities on hand, and the occupancy rate will all contribute both to your overall pricing and your long-term profit.
For Houston in particular, the local market demand for short-term housing makes property ownership for a vacation rental business an attractive proposition. The real question is, how do you maximize your profit?
Best Areas for Airbnb Rentals in Houston
One of the biggest factors is, of course, location. If you're currently searching for a rental property to use for Airbnb income, look for a neighborhood with affordable properties combined with higher Airbnb rental income.
Examples include the Fourth Ward, the Second Ward, and Midtown. For instance, the median price for a Fourth Ward property is $443,266, while the average monthly Airbnb rental income is $2,072 and the Airbnb Cash on cash-on-cash return is 1.38%.
Setting a Price on Airbnb
Once you have a property, there are a few major steps you'll need to follow when setting a price for your Airbnb property. You need to determine a price that's high enough to net you a profit without being so high that no one will book with you.
First, determine your base rate by determining your costs per night (fixed costs such as mortgage or rent plus average utility costs, all added together and then divided by 30 to represent the average number of days in a month). If your per-night ownership costs for a living space equaled $35, you'd want to charge no less than that just to break even.
Next, decide your cleaning fee based on how much time you'll need to spend cleaning, as well as how much cleaning supplies will cost you. You may also want to charge more if you have bookings spaced closer together, which puts more pressure on you to get your property cleaned out between guests.
Airbnb offers three primary cancellation policy settings for hosts to choose from: flexible (full refund if canceled at least a day in advance), moderate (full refund if a five-day buffer is met), and strict (50% refund if canceled a week in advance, 0% refund any sooner than that). While your cancellation policy doesn't directly affect the price, it does affect the attractiveness of your listing.
Consider offering a long-term discount for any guests who use your vacation property for an extended amount of time, such as for an entire week or even a whole month. By lowering your rates for such long intervals, you'll secure more overall days booked and come out ahead even with a lower price.
Contact Us Today!
If you want to get started investing in Airbnb hosting, contact the real estate experts at Vello! We'll be happy to help you list your Houston property at the right price, secure bookings, and take care of your guests from check-in to check-out and every time in between!
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