San Antonio is a major city in south-central Texas. With a population of over 1.5 million people, it is the 7th most populous city in the United States and the 2nd most populous city in both Texas and the Southern United States. The city is expected to experience a population growth rate that is over two times the national rate, which is highly beneficial to current and future San Antonio real estate investors. According to NeighborhoodScout, more than 45% of residents in the city live in rental properties as opposed to owning their own homes, meaning the tenant pool for rental properties is large. Investing in a San Antonio rental property is, therefore, a great option.
Alamo City enjoys a healthy and diversified economy, with a highly-skilled workforce and strong employment growth. The defense industry is the largest employer in the region, employing over 89,000 workers. With three Air Force bases and one Army post, San Antonio is home to one of the largest concentrations of military bases in the US. The life science and healthcare sector accounts for the largest part of the city's economy, contributing approximately $40 billion to the area in 2017. Home to the South Texas Medical Center, San Antonio features a diverse mix of healthcare systems, hospitals, life science companies, research facilities, and higher education institutions.
San Antonio is the headquarters of many Fortune 500 companies, including Valero Energy Corp., Andeavor, USAA, and iHeartMedia. It is also the headquarters of many other companies, spanning across various industries including financial services, cybersecurity and technology, new energy, aerospace, and advanced manufacturing. San Antonio’s central location within the US and business-friendly climate make it a prime destination for business relocation and expansion, and also a hub for new startups.
San Antonio is one of America’s most popular tourist destinations, drawing more than 34 million visitors a year. The Alamo Mission in Downtown San Antonio is the top tourist attraction in Texas. Another famous landmark in the city is the River Walk, a 15-miles long walkway along the San Antonio River lined with shops, restaurants, boat tours, and hotels. Other attractions in the city include SeaWorld San Antonio, Six Flags Fiesta Texas, San Antonio Missions National Historical Park, and San Antonio Zoo.
The San Antonio real estate market was ranked among the Top 20 US Markets to Watch by PWC in its annual Emerging Trends in Real Estate: United States and Canada 2019 report. According to the report, the strong local job market and the high concentration of young people were the main reasons behind property investors’ increasing confidence in the performance of the San Antonio housing market. In fact, San Antonio has been attracting millennials and younger generations in recent years, and this increasing young population has been supporting economic growth in the city. Nevertheless, the rising housing costs were cited as an area of concern.
|Facts and Market Trends in San Antonio|
|Homes For Sale3,118|
|Traditional Vacancy rate5.50%|
|Airbnb Occupancy Rate54.77%|
|Median Rent Price$1,499|
|Median Days on Market76|
|Price to Rent Ratio14.9|
|Average Cap Rate|
|Average Rental Income|
|Median Household Income$56,774|
|RENTAL STRATEGY||STUDIOS||1 ROOM||2 ROOMS||3 ROOMS||4 ROOMS|
The San Antonio real estate market has witnessed a strong real estate appreciation in recent years. Since Q1 of 2000, San Antonio properties have experienced a total appreciation of 115.22% according to NeighborhoodScout, which is an average annual home appreciation rate of 4.06%. Property value is still climbing in the San Antonio housing market as Zillow reports an appreciation of 5.7% over the past year. This housing market trend is expected to continue, which makes San Antonio a hot seller’s market with large opportunities for long-term return on investment.
There is a limited number of homes for sale on the market, while demand from homebuyers and real estate investors continues to rise as the population grows. This shortage of housing supply is what contributes to the high real estate appreciation that a San Antonio real estate investor will enjoy.
Considering the importance of tourism in San Antonio, it comes as no surprise that the San Antonio Airbnb business has witnessed major growth in recent years. Nearly 420,000 guests stayed at short-term rental properties in the greater San Antonio region in 2018. Two-thirds of those were in Bexar County, the county where San Antonio is located, where the local Airbnb hosts earned a total of $27.6 million in income.
The San Antonio City Council passed an ordinance in November 2018 that officially regulates and legalizes short-term rentals in the city. The ordinance requires San Antonio Airbnb operators to register with the city by applying for a Short-Term Rental Permit. The permit costs $100 and must be renewed every three years at that same fee.
The City of San Antonio recognizes two types of vacation home rentals. Airbnb hosts have the possibility of renting out their primary residence to guests while residing on-site (Type 1 short-term rental), or they can choose to operate a non-owner occupied short-term rental (Type 2 short-term rental). Nevertheless, the law limits how many Type 2 rentals can exist within a certain area. Only one Type 2 rental is permitted in a multi-family property with less than 8 units. If the property is more than 8 units and on a residential block, Type 2 rentals are limited to no more than 12.5% of housing. If the limit is reached, hosts can ask for a special exception from the Board of Adjustments.
San Antonio Airbnb hosts must pay a 16.75% hotel occupancy tax that includes a 6% state lodging tax, 9% San Antonio city lodging tax, and a 1.75% Bexar County lodging tax. Note that the Airbnb platform collects the state occupancy tax on behalf of its operators, but not the county or city taxes. Other short-term rental platforms do not collect any taxes for their hosts. Therefore, hosts need to make sure to collect all the relevant taxes from guests and pay them to the city.