If you're considering investing in a studio or one-bedroom short-term rental (STR) in Austin, you're likely asking: is it a good opportunity, or are there better plays out there? As with any STR investment, the answer depends on multiple factors—from HOA fees and market saturation to amenities and location.
Here’s my take on what’s happening in the Austin market for small-format STRs right now:
You're Competing with Hotels—and That Matters
One of the biggest challenges with studios and one-bedroom STRs is the direct competition with hotels. Travelers looking for these smaller accommodations are often price-sensitive and value convenience. Unless your unit offers a unique experience or location advantage, it’s hard to beat the consistency and amenities of a hotel.
Watch Out for High HOA Fees
Many studios and one-bedroom units are located in condo buildings, and HOA fees can make or break your ROI at this price point. With limited nightly rate potential, high monthly dues can quickly erode profits. Always run the numbers carefully, factoring in both recurring and special assessments.
Inventory Trends: Moderate Growth, Limited Supply
Over the past five years, Austin has seen moderate cycles of growth and correction in this segment—but overall, the increase in listings has been fairly insignificant. That’s in part due to regulatory limitations that continue to constrain supply, especially in condo buildings.
Price Reductions and DOM: A Citywide Trend
Asking prices on smaller STR-eligible units are following broader market trends:
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Price Reductions: We're seeing consistent cuts due to high inventory levels and more cautious buyer behavior.
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Days on Market (DOM): Expect longer listing times, especially if the property isn’t turnkey or lacks differentiating features.
Condo Regulations: What Investors Need to Know
Condos in the Austin area can make great short-term rental investments. Many condo associations handle exterior maintenance and shared amenities, which can reduce your management burden. However, not all condos allow short-term rentals, and it's critical to do your due diligence before purchasing.
Before investing in a condo for STR use:
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Confirm that the HOA allows short-term rentals (some restrict or outright prohibit them).
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If the condo is located within the City of Austin, check whether STR permits are still available for that building.
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Always review the condo documents and bylaws to ensure they align with your intended use.
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Buyer should independently verify all rules, regulations, and permit caps for any given property.
The City of Austin does allow investor-owned condo STRs, known as Type 3 STR permits. These are specifically for full-time, non-owner-occupied rentals in multifamily buildings. Permit caps apply based on zoning:
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In residentially zoned buildings, only up to 3% of the total units may receive STR permits.
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In commercially zoned buildings, that cap increases to 25% of total units.
Because of these limits, STR-permissible condos remain in relatively short supply—making them more competitive and, in some cases, more valuable.
So, Where Is the Opportunity?
Despite the challenges, there are standout opportunities in this category. One example is The Mirador, a newer development offering pickleball courts, cold plunges, and curated community features that set it apart from cookie-cutter condos. This type of experience-based positioning is what today’s STR traveler craves. If you want to see other condo units available for sale that allow short term rental use, click here.
High-performing studio and one-bedroom units can achieve impressive results, with ADRs typically hovering around $140–$150 and occupancy rates nearing 85%. The key is differentiation. If you can create a memorable guest experience in a walkable or lifestyle-rich location, there’s still room to win.
Final Takeaway
Studio and one-bedroom STRs in Austin aren't necessarily a slam —but for the right investor, with the right strategy, they can still deliver. Focus on units with:
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Low HOA fees
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STR-permissive HOA bylaws
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Unique amenities or design
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Proven rental history or compelling projections
And above all, confirm the property is legally eligible for STR use. With strong fundamentals and careful vetting, small-format STRs can still be a profitable part of your portfolio.
