Looking for an easy way to start a real estate investing business? Buying a vacation home might be the answer to your quest. Besides giving you a free accommodation for your holiday travels, a vacation home also offers you the opportunity to rent out the vacant property for the rest of the year. In addition, you can benefit from tax deductions. When it comes to vacation homes, Texas is definitely a dream place for owning one. It is actually among the top 5 most popular US states for tourism, which makes it a perfect place for going on your own vacation as well as for having an Airbnb rental. Now, there remains the question of where you should look to buy your vacation home in The Lone Star State. So, let’s take a look at the best places to buy a vacation home in Texas.
Related: The Future of Vacation Rental Investment Properties
What Do We Mean with the “Best Places to Buy a Vacation Home in Texas”?
At the very beginning, we should clarify what we mean when we say the “best places to buy a vacation home in Texas”. There are so many possible factors and indicators depending on your purpose and preferences. In this case, a vacation home has a dual purpose: a place where the owner spends his/her annual holidays and a rental property for the time of the year when the owner is not using it. This should automatically make any real estate investor think about Airbnb rentals as this rental strategy would allow you to still use your investment property for your own purposes during your vacations. Moreover, from the plethora of real estate metrics of return on investment, we focus on the cash on cash return which vacation homes offer when rented out through the Airbnb rental strategy in order to find the best places to buy a vacation home in Texas. So, the best places to buy a vacation home in Texas would be those cities which have the highest Airbnb cash on cash return.
Is Airbnb Legal in Texas?
Then comes the question about the legality of Airbnb in The Lone Star State. As a real estate investor considering purchasing a vacation home in Texas, you will be glad to know that Airbnb rentals are legal in Texas. The spring of 2017 witnessed positive changes in the local Airbnb regulations from the viewpoint of real estate investors. In April 2017 Senate Bill 451 by State Senator Kelly Hancock prevented Texas cities from banning Airbnb rentals as well as other short-term rentals. At the same time, the Airbnb platform announced that it would add the cost of the hotel tax previously charged to Airbnb hosts by the state (6%) on its end of the transaction, while Airbnb hosts will continue paying hotel tax to the city authorities. Thus, things are looking good for potential Airbnb rentals owners in Texas after the changes which took place earlier this year.
So, What Are the Best Places to Buy a Vacation Home in Texas?
Now, let’s take a look at the cities which offer the highest Airbnb cash on cash return throughout The Lone Star State as these are the best places to buy a vacation home in Texas. Following is a list of the most profitable locations for owning a vacation home in The Lone Star State, based on the expected Airbnb cash on cash return. The expected cash on cash return along with the other important real estate investing metrics have been computed by Mashvisor’s investment property calculator. This investment property calculator saves real estate investors lots of time and effort by eliminating the need to conduct complicated real estate market analysis (as well as investment property analysis) to get real estate comps.
Related: Mashvisor’s Investment Property Calculator: Real Estate Investing Made Easier
(You should note that Mashvisor’s investment property calculator yields the same numbers for cash on cash return and cap rate because it assumes fully cash investment property purchases).
1. Lubbock
- Median Property Price: $152,000
- Airbnb Rental Income: $1,890
- Traditional Rental Income: $1,020
- Airbnb Cash on Cash Return: 11.6%
- Traditional Cash on Cash Return: 2.9%
- Airbnb Cap Rate: 11.6%
- Traditional Cap Rate: 2.9%
Mashvisor’s investment property calculator places Lubbock as #1 among the best places to buy a vacation home in Texas because of high Airbnb rental income and very affordable median property price. It comes as no surprise that the estimated return on investment as measured by the Airbnb cash on cash return is more than excellent at 11.6%. Lubbock exhibits a rich artistic, cultural, and tourist scene which makes it a great location for spending your holidays as well as for owning an Airbnb rental property.
2. Waco
- Median Property Price: $145,000
- Airbnb Rental Income: $1,920
- Traditional Rental Income: $1,010
- Airbnb Cash on Cash Return: 11.5%
- Traditional Cash on Cash Return: 3.5%
- Airbnb Cap Rate: 11.5%
- Traditional Cap Rate: 3.5%
The second among the best places to buy a vacation home in Texas is Waco, with cash on cash return from Airbnb rentals just 0.1 percentage points below Lubbock, as calculated by Mashvisor’s investment property calculator. If real estate investors find Lubbock affordable, then they would like the median property price in Waco even more, with actually higher Airbnb rental income. The local museum and attractions as well as outdoor activities will keep visitors busy for days, making Waco an ideal location to own a vacation home.
3. Arlington
- Median Property Price: $243,000
- Airbnb Rental Income: $2,270
- Traditional Rental Income: $1,440
- Airbnb Cash on Cash Return: 7.3%
- Traditional Cash on Cash Return: 3.4%
- Airbnb Cap Rate: 7.3%
- Traditional Cap Rate: 3.4%
Arlington ranks as #3 in the best places to buy a vacation home in Texas according to data from Mashvisor’s investment property calculator. While Arlington is more expensive than the previous two cities in The Lone Star State, it offers high Airbnb rental income. The return on investment for Airbnb rentals here is excellent in terms of cash on cash return.
Now is the best time to mention that real estate investors should forget about what real estate experts always say about a good cash on cash return rate – that it has to be around 8-12% at least. We have to be realistic, and such a rate is rarely achieved in the current US housing market. Cash on cash return above 4-5% is actually excellent and makes a rental property worth the investment.
Coming back to Arlington, baseball, football, and roller coasters are just a few of the attractions which start telling the story of the endless opportunities for a fun vacation with your family.
4. Round Rock
- Median Property Price: $356,000
- Airbnb Rental Income: $3,090
- Traditional Rental Income: $1,790
- Airbnb Cash on Cash Return: 5.9%
- Traditional Cash on Cash Return: 1.8%
- Airbnb Cap Rate: 5.9%
- Traditional Cap Rate: 1.8%
Mashvisor’s investment property calculator places Round Rock as the #4 among the best places to buy a vacation home in Texas. Although the median property price is less affordable, the Airbnb rental income is very high at above $3,000, which eventually leads to good return on investment for Airbnb rentals in the form of Airbnb cash on cash return of nearly 6%. Round Rock is a city close to Austin, which offers great outdoor activities and historic sites – the best combination for the ideal vacation home location.
5. Corpus Christi
- Median Property Price: $229,000
- Airbnb Rental Income: $1,660
- Traditional Rental Income: $1,520
- Airbnb CoC Return: 5.5%
- Traditional CoC Return: 3.8%
- Airbnb Cap Rate: 5.5%
- Traditional Cap Rate: 3.8%
Corpus Christi is yet another city you should consider when you look at the best places to buy a vacation home in Texas. Corpus Christi offers great beaches, beautiful natural sights, and many activities both inside and outside – what more can a real estate investor ask for in a location for a vacation home?!
Related: Understanding Real Estate Return on Investment
Overall the State of Texas offers amazing real estate investment opportunities for real estate investors in favor of Airbnb rentals, as measured by the Airbnb cash on cash return. Here we have provided real estate investors with the best places to buy a vacation home in Texas, based on cash on cash return estimates by Mashvisor’s investment property calculator. Once you’ve settled on buying a vacation home in Texas, check out Mashvisor for important figures on the best neighborhoods and actual available investment properties within these best places to buy a vacation home in Texas.
