Airbnb Austin: Should You Invest in 2022?

After two years, people are starting to feel comfortable with traveling again. Is this the year to start investing in an Airbnb Austin property?

Airbnb did suffer a huge negative impact during the COVID-19 pandemic, but now it’s making a comeback. Airbnb is back in business and Austin is one of the best Airbnb investment locations in 2022. Being the capital of the state, Austin is a huge city that attracts thousands of new residents and tourists.

If you, like many other investors, are considering Austin to be a prime target for making money on Airbnb, join us on this short guide. Keep reading, and you’ll learn the latest trends and statistics about the rental market in Austin, its COVID-19 guidelines, and more.

Airbnb Performance in Austin in 2021

2020 and 2021 were not the best years for short-term rentals in the US or anywhere in the world. When the pandemic hit and most states implemented lockdown orders and travel guidelines, the tourism industry was hit hard.

Austin was not an exception. With 27 million visitors in 2017, the city received practically no business from tourists in the first half of 2020 due to lockdown orders and people generally being afraid to travel. Things did improve later on, though. Airbnb investment property was booked 21% of days in 2020, with most apartments likely being booked during the summer.

In 2021, the city started bouncing back with a 34% occupancy rate during the year. It’s still not the best number in the country, but this occupancy rate puts Austin at above average in the previous year. LA and New York Airbnb rentals were booked only around 25% of days, for instance.

Overall, the average Airbnb occupancy rate in Austin did drop sharply during the first couple of months of the pandemic but bounced back to pre-pandemic numbers pretty quickly.

How COVID-19 Shaped the Austin Rental Market

COVID-19 has been the defining factor in the tourism industry. In some places where the lockdown rules were very strict, it nearly killed the industry. The pandemic and lockdowns did make the Austin tourism numbers fall, but it wasn’t for long.

By October 2020, Airbnb Austin bookings were back to pre-pandemic levels and have been fluctuating around that spot since. This is partly because of vaccination becoming more and more widespread in the country overall, and partly because the Texas governor has a pretty relaxed view on lockdown rules. Currently, Austin is under stage 2 risk-based guidelines that allow being outdoors and indoors without a mask or a face covering when fully vaccinated.

The governor even tried to ban businesses from imposing mask mandates, but that decision was later overturned by the federal court. Now, with the vaccination rate in Austin approaching 70% and COVID-19 guidelines being made more lenient, tourism is going to start growing.

Tourism in Austin

How to invest in real estate this year? Apart from small investment opportunities like partnership funds, there are two main ways of making money on real estate—putting up a long-term lease and using the unit for short-term rentals. In cities with a lot of tourism, the latter is a great way to make money, and Austin fits in just right.

Austin may not have the beaches of LA or Miami or the casinos of Las Vegas. But it’s still a prime destination for tourism. A historic city, the capital of the second largest state, and one that has 300 sunny days in a year is bound to become a tourist hotspot.

Most people think about New Orleans as the music capital of the US, but Austin is trying to compete for that title. It has long been trying to develop its music scene and looking at the recent results, the mission was a success. Both Austin’s autumn and spring music festivals draw in over 400 thousand visitors per year, adding to the already large number of clients of Airbnb Austin hosts.

Since the city is actively trying to earn the badge of the capital of live music, nightlife—in general—is pretty dynamic in Austin. The city has over three hundred bars and 250 music venues. One Austin neighborhood even has the highest number of bars per capita (yes, that’s a real statistic). It houses 88 bars, and while it’s not the highest number in the country, within this neighborhood, 88 bars equal one drinking establishment per 67 residents. That’s enough for every local to go to sleep at six in the morning, and then some.

Austin doesn’t stop at bars and music venues, though. The city officials are actively pursuing any and all tourism opportunities they can get. For instance, they take pride in being named one of the most dog-friendly vacation destinations, best winter vacation destination, and one of the best cities for conferences.

The latter is quite an important factor as Austin attracts plenty of businessmen who come to attend conventions, conferences, and meetings, contributing to billions of tourism revenue. What’s more important to you: business trips are giving Airbnb Austin hosts another opportunity to book out their rental.

The Big Move to Austin

Tourism isn’t the only reason Austin is growing in size. Recently, there’s been a huge growth in population due to rather massive migration from multiple states, primarily California, to the city. Why do almost a thousand people move to Texas daily? There are two main components.

The first one is practical. Texas is one of the freest states both in terms of taxation and COVID-19 restriction. As exemplified by the governor’s decision to ban mask mandates, Texans are not required to take safety precautions. A larger amount of freedoms as envisioned by many Americans such as a lower tax burden and a more lenient firearms legislature also play a role. 

The second component has to do more with fashion than with practicality. The thing is, the big move to Austin probably started with multiple tech companies moving their headquarters from Silicon Valley to Texas. The reason behind that was purely economical, but it started a trend.

As people who wanted to work for Tesla and Oracle followed the companies to the Austin area, they found that it’s a cheap outdoors city with a local flair that is a pleasure to live in. Once most tech companies opened up offices in the Silicon Hills, a tech hub near Austin, celebrities started following the trend as well.

All of that combined makes Austin not only a reasonable place to live in but one that is always present in the media. It’s smart to move from California to Nashville because you’ll pay less in taxes, but Austin is the city everybody is talking about. That alone can influence your choice, and, evidently, it does for thousands of Americans.

During the last decade, 4 million people moved to Texas, and the number is expected to rise given the current trends. This makes Texas, and Austin in particular, a prime target for real estate investors.

Austin Real Estate Market Overview

This huge influx of people from both US and foreign countries can’t help but create demand for real estate. With the city not doing enough to keep up in terms of supply, it creates both problems and opportunities for the investors and developers.

The demand is really growing—there were over 40 thousand homes sold in 2021 in the larger Austin area. That’s a 2.5% growth since 2020. There are plenty of housing projects in the city as well, around 18 thousand homes were being built at the start of 2021. The number of closings (homes that are finished and sold to the happy owners) was also around 18 thousand, a 15% growth from the previous year.

The construction is breaking records, but so does the demand for Austin housing. With 18 thousand housing units built and 40 thousand potential short-term rentals for sale, this leaves a huge gap between the supply and the demand. What this leads to is home appreciation. Just last year, property prices rose anywhere between 33% to 39% depending on the neighborhood.

This means that if you want to get into the Austin real estate market, you have to do it fast. Otherwise, you’ll end up paying 30% more next year. According to the data from the Austin Board of Realtors, the busiest time on the city’s real estate market is from April to August—in this time period, there are significantly more properties on the market.

This does leave you with a lot more choice, but as a result, the price is going to be higher as well. If you want to get a bargain while buying Airbnb property in Austin, shop off-season. This way, you can save anywhere between ten and twenty thousand dollars.

When it comes to the profitability of your rental, the Austin market shows pretty decent results. According to Mashvisor’s data, the average occupancy rate in the city is around 50%, which is amazing considering we’re living through the largest pandemic in recent history. However, due to most properties being slightly overpriced, cash on cash return does not exceed 4%.

Overall, a rental Airbnb in Austin TX makes for a great investment. Despite being overpriced, Airbnb in the city is pretty popular, and renting out your housing unit is guaranteed to turn a profit. The Airbnb Austin property will also appreciate in value, and if the current trend keeps going for at least a couple of years, it can more than double in price by the time the mortgage is paid out.

Is Austin Airbnb Friendly?

Despite the status of the state that is quite lenient when it comes to regulations, Austin authorities make turning a profit on Airbnb a bit harder than it should be. To start off, to open an Airbnb business you need to get a permit for using your property as a short-term rental. The initial charge for the permit is $572, with the renewal fee being $313. You also need to have valid insurance on your rental and be prepared to pay hotel occupancy taxes.

Austin’s city council also tried to implement additional regulations on Airbnb-type housing back in 2016. Some of the regulations included a ban on renting out properties where the host does not reside, a ban on having more than two adults per bedroom, and a ban on assembly in the rental between 10 PM and 7 AM. Luckily for the investors, these regulations were later deemed grossly unconstitutional and overturned by the state appeals court.

The major reason behind these rules was to fight the nuisance that many Airbnb guests caused neighbors, namely loud partying. Remember, Austin is quite heavy on bars and the music scene, so partying all night long is not something out of the ordinary. One of the said rules did remain in place, and it’s actually implemented by Airbnb.

In 2021, over three thousand bookings were rejected by the platform itself without the city council having to interfere. Within Texas as a whole, Airbnb rejected over 40 thousand bookings. The reason behind this is the “under 25” policy. The platform won’t let guests below 25 years of age rent the entire house to themselves, only private rooms. This is done in an effort to combat loud partying that annoys both the neighbors and the hosts.

5 Best Neighborhoods for Airbnb in Austin

Now that you know what you’re getting into with Austin rental market, let’s take a look at a couple of neighborhoods with the highest rent and cash-on-cash return. You can see more detailed data with Airbnb analytics on each neighborhood and each property on Mashvisor. 

MLK

MLK is a very green and walkable neighborhood 22 minutes away from Austin downtown. The infrastructure is also great with several schools, a large convenience store, and multiple restaurants and music venues. That luxury comes at a price, though. When it comes to Airbnb comps, the average Airbnb income in the area is slightly over $4,000 per month at a 70% occupancy rate. Combined with the home prices averaging $500,000, this yields a 4% cash on cash return.

East Cesar Chavez

This historic Latino neighborhood is 60% residential housing. The other 40% is taken up by music venues, Tex-Mex restaurants, and craft cocktail bars. This makes East Cesar Chavez a prime target for Airbnb guests. Local Airbnbs are booked 63% of the year, making landlords an average of $3,700 per month. With the price of Airbnb Austin property being around $560,000, the cash on cash return is 2.7%.

Garrison Park

Garrison Park is a quiet idyllic neighborhood that’s 30 minutes away by car to Austin downtown. It does have plenty of restaurants, but not much nightlife is going on here. It’s more of a place for people who want to take frequent walks in the local huge park than bar aficionados. The prices are a bit higher here, with the average price of a home being around $580,00 and rental income being over $3,800. That returns quite a robust ROI of 3%, making it one of the most appealing areas for starting an Airbnb in Austin.

Central East Austin

This is an up-and-coming area within 10 minutes by car from the city center that combines both old-fashioned single-family housing units and trendy bars. Due to the proximity to the downtown, prices here bite — the average home costs just short of a million dollars. The rental income does cover that, but not by much, the average cash on cash return is just 2%.

South River City

South River City is one of, if not the hottest neighborhoods in Austin right now and one that can generate a decent cap rate. The rental income being over $6,000 offsets home prices reaching up to one million dollars. That’s a 3.5% return, one of the highest in the city. The prices are so high because the neighborhood has a really great quality of housing, fashionable restaurants, and hiking trails. It’s also close to the Colorado River and to the city center.

Airbnb Austin: Is It Worth It in 2022?

If you’re wondering whether to get into Austin rental market, you have to know a couple of downsides first. The process of registering as an Airbnb host is not as smooth as it should be, and you may not be able to rent to every guest as per local guidelines. However, the market is really hot right now, and your property is going to appreciate really fast.

So if you wondered whether to get into the market, the best time to do it is now. Browse for the best deal on Mashvisor, and use the Airbnb calculator to get an understanding of what your income can be with each property.

To get access to Mashvisor’s Airbnb calculator and other real estate investing tools, sign up now.