Lake LBJ / Lago Vista Vacation Rental - Should I buy?

Question

Hi all!

I'm an Austin investor looking to possibly purchase a short-term rental on Lake LBJ and was wondering if anyone else has a vacation home there or in Lago Vista or the neighboring areas. I currently own 2 long-term rentals, one in Round Rock and one in Louisiana, but a business partner and I like the idea of acquiring a short-term rental somewhere around the lake. I’ve been to Horseshoe Bay on several occasions, but I don’t know much else about the area, specifically how the VRBO’s perform and the short-term market there. I really like the idea of being able to use it a couple times a year, but am also interested in getting a good ROI for my partner as this would be his first investment property. I would love to get some insights on the market, specifically:

• What are the annual occupancy rates?
• What means to you use to come up with your nightly rates?
• Thoughts on AirDNA?
• Anyone using Evolve Vacation Rental management or other companies?
• What's your ROI?
• Specific areas to watch out for?
• Any better or worse?
• I heard taxes are high, is that so?
• Is a short-term rental a good idea for a first time investor? I don't want to put a sour taste in my partner's mouth on his first purchase.

Thanks and have a great week!

Mark S. · Answer

@William Brock  We rent out a property in Wimberley -- so not too far from where you are looking.  And we self manage from 3 hours away in Houston.  I can tell you that IMO, the area is only getting more and more STR-friendly in terms of demand.  The wedding business, wineries, etc are all growing the area as a must-see destination.  The comments above are fairly spot on.  It's about location and amenities.  For instance, we aren't on the water.  And I can tell you that anything on a river, lake or has a pool ALWAYS gets booked before we do.  That said, we offer a high quality experience on a quiet 10-acres and we do well.  We work on highlighting other benefits to our place.

When we looked, we specifically wanted something with lower taxes and no restrictions.  That is getting harder and harder in the hill country.  I agree with the one comment above about being NEAR the attractions but not in them.  That will reduce your chances of an HOA or other issues that may give you challenges.

Lastly, I will add that we wanted a place that would be OUR get-away place that we could rent out when we aren't using it.  So profit wasn't our sole motivator.  That said, I haven't had to pay the mortgage yet from my own pocket so its working out.  And we bought just over a year ago -- my concern was that with the growth in the area and prices rises, we would miss out if we didn't get in while we could.  If you want something for profit, then I'm told a 2/2 is the best way to go in the hill country.  The lower nightly rate attracts the greatest number of bookings.  Multiple people have mentioned this to me.

Sorry for all the rambling!  Let me know if I can answer any questions for you.

Timothy Church · Answer

@William Brock A large part of STR markets are locations that have an economy based on tourism. The negatives of STR typically show in markets that while they are tourist spots have other primary drivers or a larger resident to tourist ratio. The issue is when a market has the availability to greatly expand their STR inventory without a corresponding demand, rates due to competition can drop dramatically.

Currently, I'm investing locally in the Galveston Market. I like the market because while we have est 50,000 residents, we receive over 7 million tourists in a year and that number is rising. We are also landlocked so expansion and additional inventory are restricted.

Your rates should be competitive in the market with a steady occupancy rate. The rate should be a controlling factor. I wrote a post about this a while back. https://www.biggerpockets.com/forums/530/topics/55...

Just do plenty of research and run your numbers every way you can. Here are some good tools to check out:

Pricing - BeyondPricing & Wheelhouse

Cleaning schedule - TurnoverBnB

Ryan Rabideau · Answer

I would agree. Generally you shouldn't make blanket statements--except for this one.

Short Term rentals can offer great cap rates if you are willing to put some work in and get creative. Often what does not work in the long term market can be great for the short term as long as the amenities and occupancy is right, for example that den can be converted into a bedroom or shoving more bunk beds into weird spaces, adding games, looking at what the market lacks and add etc. Keep an eye on what is rare in the market are 10+ people houses rare, are pets rare etc etc and target adding those amenities.

I would caution that looking at name brand markets can push cap rates down but being close enough to them can help, ie everyone wants a Park City home this can drive negative cap rates be being near enough to capture some of that demand might help on price.

AirDNA is a great resources though when it comes down to it finding your own comps by hand and evaluating their performance would be the best bet as no two vacation rentals are created equal.

I would recommend keeping an eye out for HOAs, these can come with restrictions, extra hurdles when it comes to guest process or could add new restrictions/create fines etc. However being right next to the HOA with out all the restrictions can help shift demand to you.

As far as taxes guests booking often pay those so if they are deciding to go to LBJ they should be paying. Check with an accountant but there are some things your can deduct for a short term rental.

As far as first purchase goes, if he can earn a positive cap rate and get some free family vacations out of it might not be bad!

-Ryan

Daniel Tisdale · Answer

Hi @William Brock,

Any updates on if you moved forward with getting a STR in the Horseshoe Bay area? I'm looking for one myself right now.

Leo Lanchava · Answer

Hi all,

I just found this thread and wanted to revive it. How is Lago Vista STR market going? AirDNA is a great tool but I look at it with a hefty level of skepticism because it averages out all of the data which can sometimes be misleading where the real revenue and ADRs might be diluted by lazy or occasional host data.

Can anyone who has seen success in the STR world in the area pitch in and share their experience?

Thank you!

William Brock · Answer

Sounds like a plan, I've started stashing stuff around the house and reminding the wife not to get rid of certain items. And yeah, that sounds like not a bad problem at all haha.

Mark S. · Answer

@William Brock  We furnished it by accumulating furniture/decor in our garage in Houston.  Then once we closed, we just rented a uhaul and drove it up.  Spent the whole weekend cleaning, moving, setting up, decor, etc.  Then once done, we took pictures and had it online for rent the next day.  It was a lot of work, but not very hard.

I know I mentioned above that we bought it as 'our' place to rent when we're not there.  But I'm starting to have the "problem" where it rents so well that in order for us to use it, we have to turn down $800-1000 for that weekend we're there.  It's a trade off between the money, and do we really need to go.  So I guess that's not the worst problem to have.

William Brock · Answer

@Mark S. I was recently married in Dripping Springs so I can agree when you say that everything out there is always in high demand. It was hard to find availability for all my family and friends from out of town last spring because of it. Yes the STR is definitely going to be a getaway for my wife and I, and the other investor and his wife. How did you initially furnish the home living 3 hours away? Lots of driving back and forth? Payed to have it furnished? And that's interesting that a 2/2 does the best in hill country, I hadn't thought a specific size would do better, but there's always a million ways to analyze an area :)

And as always the more info the merrier!

Thanks again!

William Brock · Answer

@Timothy Church Really insightful regarding the current population vs annual tourist numbers. I've heard good things about Galveston, but it's not extremely local to me. That's a problem I'm finding with STRs, is that they need to be relatively close so I can furnish the properties to get them onto the market quickly.

I'll definitely be checking out those tools. Everything seems pretty straight forward with regards to setting up a system to operate STR except the cleaning schedule which is the last topic I need to begin researching, so your recommendation is appreciated!

Thanks,

Bill

William Brock · Answer

@CP Chou Thanks for the info. I'll be trying my hand at setting up my own system to get the rentals filled at first. If I don't see it being the proper route, I'll definitely give a VR property management company a try. I didn't know about TurnkeyVR, but have started looking into them and I like what I see. Yes let's absolutely grab a beer soon. I'll message you. thanks!

Lake LBJ / Lago Vista Vacation Rental - Should I buy?

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