For a while, Austin’s growth had been catching national attention. Big companies were constantly announcing big scale operation moves to the capital of the Lonestar state, and Austin consistently ranked on lists of the top places to live in the U.S. As such it’s no surprise that over the past five years we've had substantial investor interest in Austin real estate. However, now the big media outlets have changed their tune about Austin, Texas. Lately, headlines such as this one, “Once America’s Hottest Housing Market, Austin Is Running in Reverse” are circulating fervently. Many people are scratching their heads wondering if it still makes sense to buy in Austin, and for those interested in purchasing a property to use as a short term rental investment this matter is further complicated by the increase in airbnbs in the Austin metro area.
The Surge in Austin Airbnbs
The number of short term rentals in Austin has seen a significant uptick over the past few years. According to airdna.com, The number of active listings has increased 15% year over year. In May of 2024 there were 17.4K active listings compared to 13.3K in 2022.
Market Saturation Concerns
With this surge in popularity, the number of available short term rental properties in Austin has ballooned. This has led some investors to worry about saturation and the viability of entering the market now. Here’s what you need to consider:
Increased Competition: More listings mean more competition, which can drive down occupancy rates and nightly prices if your property does not stand out.
Regulations and Compliance: Austin has implemented less stringent regulations for short term rentals, this allows for more supply currently, but I would not be surprised to see more restrictive rules re-emerge in 2024.
Market Dynamics: The Austin real estate market has seen significant property price decreases. Lower purchase prices can affect your return on investment (ROI).
Finding the Right Property
Despite these challenges, there is still potential for lucrative investments if you purchase the right property at the right price and manage it properly. Here are some strategies to maximize your success:
Location, Location, Location: Properties close to downtown, popular neighborhoods like South Congress (SoCo), or near major event venues will likely see higher demand. Proximity to attractions and amenities can justify higher nightly rates.
Unique Features: Stand out from the competition by offering something unique. This could be a stylish design, luxury amenities, or an epic backyard. The more unique and desirable your property, the higher the occupancy and rates you can command.
Professional Management: Effective management is key to success in the STR market. Consider hiring a professional management company to handle listings, guest communication, and maintenance. High ratings and positive reviews can significantly boost your property’s performance.
Pricing Strategy: Dynamic pricing tools can help you adjust your rates based on demand, ensuring you remain competitive and maximize your revenue. Keeping an eye on local events and seasonal trends can also help optimize your pricing.
Compliance and Insurance: Stay updated on local regulations and ensure your property is compliant. Adequate insurance is also crucial to protect your investment.
Should You Purchase a STR Investment in Austin?
While the increase in the number of Airbnbs in Austin has created a more competitive market, there is still potential for lucrative short term rental investments. Success hinges on purchasing the right property at the right price and managing it effectively. By focusing on prime locations, offering unique features, and employing smart management and pricing strategies, investors can navigate the challenges and capitalize on Austin’s dynamic and thriving market. As always, thorough research and due diligence are your best tools in making an informed investment decision. Need help, contact us today.
