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As a home owner it can seem frustrating that you can't just do whatever you want with your property. Texas law in general thinks you should. Short term rentals do end up creating extra traffic and can being people into a neighborhood who simply don't care about the impact they will make to a community with higher traffic and noise that tends to come with short term rentals. It is a hot issue.


Personally I think some regulation to keep the market from being abused and transforming residential neighborhoods unintentionally to commercial ones makes sense. It is an amazing new market and home owners can prosper from it even with the licensing and taxes that go with it.


There are three types of classifications for short term rentals in the City of Austin.


Type 1 - Single Family, Duplex, Multi Family owner occupied


This is by far the most common scenario for short term rentals in Austin. As a home owner you want to lease your home, a secondary unit, or room in your home for a few days. These are easy to permit and the City of Austin will generally grant these because you are the owner and live there. This aligns itself with the Texas Supreme Court decision about leasing your home in the short term as well. To do this you just need to fill out the application with the City of Austin and make sure there are no HOA restrictions prohibiting short term rentals.


Many HOA's were created well before AirBnB and VRBO came on the scene, so they don't have any language prohibiting them. Newer associations are aware of this and will very likely have language specifying rules on short term rentals. Even with the restrictions, some people will break them and still lease out their homes. If the HOA finds out and decides to penalize you, make sure you know how that will be enforced. A HOA can fine you and attach a lien against your property for infractions. If those liens get large enough they can even legally foreclose on your property. So if you plan on just sticking it to your HOA and letting that bill get large never planning to pay it because you don't want to sell, you can still get stung.


If an HOA pursues a foreclosure, you will have to pay off the lien or be forced to sell the house. Usually this will only happen once the lien becomes large enough that the legal expenses to pursue it are worth it. That probably starts at about $3,000. So if your HOA has a $1,000 fine for doing a short term rental and you get slapped three times in a year, they could force you to pay the fine or sell your home.


Type 2 - Single Family, Duplex not owner occupied


The City of Austin only allows a fixed number of these to exist per zone. Those licenses are already issued at this point, so you would have to wait for one to expire or hope that Austin increases the number of permits allowed. The difficult part about this type of permit is that it is only allowed in certain commercial zones. Most single family and duplex homes are not in commercial zones, so it is rare to find a property that would qualify for this type of license.


This is a true investment property where you do not live there. Austin want's to keep this activity in commercial areas, so if you are planning to do this in a neighborhood, plan on getting caught at some point.


Type 3 - Multi Family not owner occupied


This is basically a hotel. If you don't live there and it is a multi-family structure, this is going to be a large commercial building with very specific requirements and tax liabilities.


Do it right


In most cases you are free to lease out your home as a short term rental especially if you are an owner occupant. The City of Austin wants to prevent the entire city from becoming a short term hotel. Intentions aside, you need to register your home as one if you are going to take income from this amazing new market. Get your application in, keep it up to date, stay on the right side of the law, and profit nicely.


Resources


Texas Short Term Rental Case


Austin Short Term Rental Licensing

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