How to Start an Airbnb in Texas: A Step-by-Step Guide

If you've ever considered becoming an Airbnb host, you might have assumed it was easier than starting any other kind of business. While hosting an Airbnb presents many advantages for creating an additional income stream, there is still some time and upfront investment required to start a profitable short-term rental business.

In this article, we're going to explore some of the most important steps to take in order to start an Airbnb business in the state of Texas.

Texas Laws and Taxes for Short-Term Rentals

Texas is a great state to host an Airbnb in for several reasons. For starters, it has a thriving economy (nearing $2.4 trillion in size!) and a fast-growing population (roughly the fourth-fastest-growing state in the nation as of the last few years) coupled with beautiful weather and solid infrastructure.

At the state level, Texas gives would-be Airbnb entrepreneurs and other vacation rental property owners considerable leeway when it comes to rules and regulations governing the industry. For the most part, the state government has seen fit to delegate regulation of the vacation home industry to individual cities.

The State of Texas officially defines a short-term rental (aka an "STR") as a dwelling space that is rented out to overnight guests for no more than 29 days, which qualifies the space as a vacation rental. Most major cities use this same definition.

Unlike other large states that use this type of definition for a vacation home rental, such as California or Florida, Texas does not require the registration of a vacation rental at the state level, nor does it restrict maximum transient occupancy to the same extent.

In addition, Texas does not have any state-level regulations governing how a person goes about starting an Airbnb business within the state's jurisdiction. Once again, each municipality has the right to set up its own rules for governing the vacation rental industry.

The only notable state-level rule to mind is to register with the state's Comptroller Office, which is necessary so that you can acquire a hotel tax permit and collect the state's hotel occupancy tax. It is not necessary to form an LLC in order to register with the state comptroller, though you can certainly still form your own LLC if you desire.

These minimal state-level rules make Texas an appealing location for STR entrepreneurs who want to provide outstanding guest services without wrestling with a lot of red tape and administrative fees.

Local Operational Requirements

As mentioned already, you don't need a business license or any special permits at the state level in order to start an Airbnb in Texas. However, if you live in a major metropolitan area, there may be specific licensing requirements you have to meet at the city level. In addition, there may be additional rules you have to follow at the city level that don't apply statewide.

For example, Airbnb businesses in Dallas need to follow certain city ordinances and local regulations that have been established to ensure appropriate levels of safety and rental fairness within city limits. To that end, Dallas-area Airbnb entrepreneurs need to register their short-term rental properties with the city government. This entails going through an application process to make sure your vacation property meets health, zoning, and safety standards.

Local Hotel Occupancy Taxes

In addition, Dallas levies its own Hotel Occupancy Tax (which is currently sitting at 7%) on top of the same type of tax already required by the state government (which is currently sitting at 6%).

Airbnb hosts are required to include this tax in the final price of the listing and remit the amount taxed to Airbnb. Airbnb itself will then remit the tax payments to the government within an appropriate period.

Depending on the size of the county, you may also have to take a county-level Hotel Occupancy Tax (HOT) into account. For instance, a Downtown Houston-area Airbnb falls within Harris County, which requires a 2% Hotel Occupancy Tax for any STR located within an incorporated part of the county. Regardless of the local region your property is located in, you shouldn't expect to pay more than 7% for the HOT.

Whichever city or town you decide to host an Airbnb experience in, you'll need to check the licensing and tax requirements of the local market before you can rent your short-term property on Airbnb. You'll also need to know how long a city-level vacation rental license lasts for (in most cases, these short-term rental licenses last for one year) and factor any renewal costs into your overall business scheme.

Bear in mind that many of the fees you collect as part of hosting an Airbnb are taxable, including cancellation and cleaning fees, laundry fees, and even pet fees. However, certain fees, such as those for early or late departures, are not taxable.

How to Start Your Own Airbnb Business

Once you've examined the various rules, regulations, and tax laws associated with running an Airbnb within the State of Texas, you'll be ready to go through the major steps associated with starting your Airbnb hosting journey in the Lone Star State. If you need help with managing your AirBnb property, we can help.  

Analyze Your Local Market

Before you jump into Airbnb, you need to understand the current makeup and projected outlook of your local rental market. Take into account the city or other area you live in, including average monthly revenue for Airbnb hosts in your area, average daily rates, and average occupancy rates.

You can follow the same procedure for conducting research for any potential Airbnb location in Texas. Performing comprehensive research in your local market is essential for noticing major rental trends and the level of competition you can expect to face. This will in turn let you set up a business strategy that is appropriate to the market you find yourself in.

This type of market research will also help you after you've started your Airbnb by equipping you with the data points you'll need to adjust your pricing and make decisions in the future about investing in additional short-term rental and vacation properties.

If you already own an Airbnb property (such as if you're renting out a section of your primary residence) and have determined that the winds of the local rental market are blowing in your favor, you can move on to the next step.

However, if you still need to secure a rental property for hosting an Airbnb, you'll need to work with the appropriate real estate personnel to purchase a property so you can start earning.

Prepare Your Airbnb Property

Once you've secured a vacation rental property, you'll need to invest some time, money, and elbow grease into your pad to make it the best Airbnb venue it can possibly be. If the space doesn't already have a full-size refrigerator, microwave, or coffee maker (whether drip, Keurig, or both!), you'll almost certainly want to purchase those amenities for the convenience of your future guests.

Similarly, installing a keyless lock (such as a wireless SimpliSafe door lock with keypad entry) will make Airbnb guest check-in pain-free. The SimpliSafe lock makes it easy to create a temporary access code for guests that can then be removed from the system after your guests have checked out.

Depending on its current layout, getting your Airbnb property into shape may require some higher-level renovations, as well. For instance, if the residential dwelling unit doesn't already have a dedicated living room area, you may need to build a wall or furnish a room in order to create that separate entertainment space.

Even at the simpler end of pre-booking preparations, you'll still have plenty to do. Customers will always expect a guest house to be fully stocked with the essentials, such as fresh bed sheets, clean and folded towels, and plenty of toilet paper and rolls of paper towels.

If you want to score higher ratings, you'll need to go above and beyond in the level of amenities you provide. Cover the basic toiletries, but also provide free secured Wi-Fi, stock the kitchen, and (if possible) make sure your guests have access to free parking.

There will be other recurring expenses that you must be ready for. Since you'll constantly have people coming, going, and using your Airbnb space, you can expect to pay for higher utility bills, as well as pay to clean up the space between bookings (whether that's hiring a cleaning service or just buying your own DIY cleaning supplies).

You'll also need to make sure your property has any additional insurance in the event that you need to cover repairs for any damages to personal property caused by an unruly guest who doesn't follow your prescribed house rules. Airbnb & VRBO both offer forms of damage protection for hosts that use their platforms. Familiarizing yourself with these policies regarding protection is beneficial for hosts starting out.

Set Your Price and List Your Space

Set Your Price

Deciding on the right price for your Airbnb property is one of the trickiest yet most important parts of the vacation rental business. You'll learn more about creating an effective pricing strategy from experience, but there are plenty of things to consider upfront when setting the price for your STR property.

As you might imagine, vacation homes located in high-demand areas (such as Uptown Houston or the Deep Ellum entertainment district in Dallas) are expected to be listed for higher prices than a property located in suburbia. After all, guests are willing to pay more so they can be closer to unique eateries, local attractions, and major events such as concerts or football games.

Location is far from the only determining factor. Depending on the amenities your property includes, you may be able to ask for more than the average daily rate. For example, giving guests access to a full-size swimming pool or a hot tub is a great way to command a premium price for your Airbnb rental.

Third, the local competition will also have a major effect on the price of your listing. The law of supply and demand for vacation rentals will help inform your decision to price your pad higher or lower. Keep an eye on the average daily rate in your area, which can vary depending on the season and any local events (such as state or county fairs, major sports events, and the like).

List Your Space

Setting the price for your Airbnb space is only half the battle, however. You also need to market your short-term rental listing effectively in order to secure a booking and start making some dough. Social media is a great way to do this, especially on a visually-based platform like Instagram. Invest in high-quality photography to show off your property's good side.

Whichever marketing method you use, don't be afraid to take advantage of time-tested Search Engine Optimization (SEO) techniques that can boost your listings rankings in major search engines. By using the right combination of general and specific keywords, optimized titles, and similar tactics, you can increase your listing's visibility and catch the eyes of potential guests.

Finally, use the listing description to emphasize the perks and unique benefits of your property by describing the clear reasons why your Airbnb experience stands out. Be honest and avoid exaggerating, but don't be afraid to brag about the parts of your vacation home that you think guests will like.

Contact Us Today!

And that's it! By understanding state and local laws, studying the market, preparing your property with love and care, pricing your property competitively, and optimizing your listing, you'll be well on your way to earning extra income through your Texas Airbnb business!

Of course, if you want an expert team to help guide you through the process and take the stress out of managing your Airbnb properties, you'll want to talk to the team at Vello. Schedule a consultation with us to learn how much we can do for you!

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