Short term rental (STR) properties with more than one unit can be highly advantageous to investors for a variety of reasons. With multiple units on one property, investors have the flexibility to rent each unit separately or rent the entire property together, which results in higher income. Owning an STR with multiple units is also advantageous because it allows owners the flexibility of using a unit for personal use either full or part time. However, the complex regulatory process for Austin properties with more than one unit can be a nightmare to navigate.
STRs with more than one unit could be a traditional attached duplex, a fourplex, or a property with two or more separate units on one lot. In the City of Austin, the short-term rental licensing regulations for each of these property types differ. To further complicate matters, the City of Austin also has different rules depending on when the property was built.
Traditional Attached Duplexes: If the duplex was built before December 7th, 2023, the entire property can be used as a short-term rental. Owners must apply for two separate STR permits, one for each side. If the duplex was built after December 7th, 2023, only one full-time STR permit can be issued. The other unit can only be used as a short-term rental for a maximum of 30 calendar days per year.
Two-Unit Properties: When a property has two detached units on one lot and was constructed after October 1, 2015, only one unit can be used as a full-time short-term rental. The other unit can only be used as an STR for 30 calendar days per year.
Three-Unit Properties: The three-unit property classification is a new development passed with the City’s HOME initiative in December of 2023. Three-unit properties were not explicitly prohibited from being entirely utilized as short-term rentals. However, this was likely an oversight that will be regulated in the near future.
Four-plexes: The City of Austin classifies fourplexes as multifamily for short-term rental regulatory purposes. Thus, they follow Type 3 STR permit guidelines. Essentially, only one unit in a fourplex can be used as a full-time short-term rental.
Navigating the Regulatory Maze
Understanding and complying with Austin's STR regulations can be challenging, but it is essential for investors to avoid potential fines and legal issues. Here are some steps to help navigate the regulatory maze:
Consult with a Knowledgeable STR Specific Realtor: Before purchasing a multi-unit property, link up with someone with local STR regulation experience. Spoiler alert, that’s us, give us a call today to simplify your process!
Check the City of Austin Property Profile: You can use this tool to determine how a property is technically classified.
Utilize the City of Austin Permit Search: You can use this to determine the exact year a property was built. It’s also great to check and see if there are any open or expired permits on a property you are considering purchasing.
Stay Updated: Regulations can change, so it’s crucial to stay informed about any updates or amendments to STR laws in Austin. Subscribe to local government newsletters or join real estate investment groups to stay in the loop.
Maximizing Multi-Unit Potential For Investment and Personal Use
Despite the complexities, multi-unit STR investments in Austin can be highly profitable. Here are some strategies to maximize your investment potential:
Diversify Rental Strategies: Utilize different rental strategies for each unit, such as long-term leases for some units and short-term rentals for others. This approach can provide a steady income while maximizing profits.
Enhanced Property Offerings: If you’re utilizing the entire property as a short term rental, create multiple listings for different property configurations. For example, you could list the property as two 2 bed/1 bath units and as a 4 bed/2 bath property. This strategy allows you to make extra revenue on the smaller units during the week and maximize revenue by leasing the entire property on the weekends.
Leverage Personal Housing Needs: If you find a great property with a large home and an ADU that was built after 2015 or a duplex that was built after 2023 you could live in one unit and rent the other as a short term rental.
Should you invest in a multi-unit STR property in Austin?
Investing in multi-unit STR properties in Austin offers significant benefits, including increased rental income and flexibility for personal use. However, navigating the regulatory landscape can be complex. By understanding the specific regulations for different property types, staying informed, and developing a compliance plan, investors can successfully manage multi-unit STRs and maximize their investment potential. With careful planning and strategic management, multi-unit STR investments can be a lucrative addition to any real estate portfolio.
