Houston Short-Term Rentals Yield 9.4%, Beating Long-Term Rental

Estimates for a typical 3-bedroom house. Figures are modelled from market data; not guaranteed outcomes.

Annual long-term rental revenue is monthly rent × 12 × tenanted occupancy (91%). Annual short-term rental revenue is nightly rate × occupancy × 330 available nights. Both match the Dashboard's calculation.

Short-term rental grosses around 51% more than long-term rental in Houston, but operating costs (platform fees, furnishing wear, higher insurance, utilities) consume more than double the share of revenue, erasing the gross advantage entirely, long-term rental ends up ahead on a net basis.

Short-Term Rental Only Wins Above 25% Occupancy in Houston

Short-term rental in Houston only outperforms long-term rental on gross revenue if occupancy exceeds 25%. Below that threshold, a steady tenant paying $1,680/month produces more revenue than the nightly model. The Harris County average sits at 38%, which is comfortably above break-even, but city-wide averages hide enormous variation between ZIP codes near downtown, the Medical Center, and IAH airport versus quiet residential pockets where Airbnb demand is thin.

Occupancy is the single biggest swing factor. At a softer 23%, short-term rental gross drops to $16,753, below the long-term rental annual figure of $18,386. At a stronger 48%, gross climbs to $35,054, well clear of the long-term rental baseline. The verdict is conditional on execution, not guaranteed by the city average.

Suburban Houston ZIPs Deliver Both Demand and Affordability

Houston's mid-density suburban ZIPs offer the best balance of investor economics in this market: enough rental demand to push monthly rents above $1,800–$2,200, but sale prices low enough to keep gross yields in double digits. This is the suburban-balance sweet spot that the inner-loop premium pockets (River Oaks, West University, the Heights) cannot match because their sale prices run two to five times higher than the Harris County median of $293,815.

Greenspoint/North (77067) leads the 132 ZIPs ranked in this market with a 12.5% gross long-term rental yield, sustained by sale prices around $205,000 against rents near $2,130/month. South Park/Sunnyside (77033) and Greenspoint/North (77050) sit just behind on similar arithmetic. These suburban ZIPs sit in a different category from inner-loop areas where 3-bed houses can clear $2,159,500 but rents only stretch to roughly $2,300/month, compressing gross yields toward 1–2%.

These are averages per ZIP. The dashboard breaks it down further, by bedroom count and property type, so you can model your specific property.

View Houston in the dashboard → Free preview · every bedroom count and property type

Houston's 2025 Registration Rule Adds Friction, Not a Cap

Houston's regulatory environment is permissive compared to the bans and night caps in coastal cities, but it is no longer rule-free. Permit required ($308) in Houston. Houston adopted its first short-term rentals ordinance in April 2025. Certificate of Registration required ($275 + $33.10 admin fee). Compliance deadline was January 1, 2026. Unhosted rentals not permitted in multifamily buildings. Platforms must delist unregistered properties. Critically, there is no annual night cap, so the 330 available nights in our model reflects modelling for cleaning and turnover gaps, not a regulatory ceiling. The Texas Hotel Occupancy Tax of 6.0% (plus 6.25% sales tax) applies to short-term stays under 30 days and must be remitted, with major platforms typically collecting state-level tax automatically.

The practical implications for an investor: budget the $308 registration cost upfront, factor in the time to obtain it before listing, and avoid multifamily buildings if you intend to operate unhosted (this rules out condo-tower investing for short-term rental). Single-family houses in suburban ZIPs remain the cleanest path.

Operating Costs Cut Houston's Short-Term Rental Net Yield to 1.8%

Short-term rental's gross premium over long-term rental largely evaporates after costs. Total annual short-term rental operating costs of $22,564 are more than double long-term rental's $10,088, driven by Airbnb host fees at 15.5% of bookings, higher insurance ($4,438 vs $2,938), utilities the host absorbs ($2,640), property tax of $4,285, and accelerated maintenance and furnishing replacement.

The numbers above assume self-management on both sides, which matches the dashboard's default. If you choose to hire a professional manager instead of self-managing the short-term rental, add approximately $6,101 per year (around 22% of gross), which would push net yield below 1.8%. Houston's short-term rental economics trail long-term rental on a net basis even for hands-on operators; passive investors who pay a manager fall further behind.

Property tax is the single largest fixed cost on either strategy. Harris County's effective property tax bill on the $293,815 median works out to $4,285 per year, well above national norms because Texas funds public services through property tax instead of state income tax.

Houston Yields Beat the Texas and National Averages

Houston's gross yield of 6.3% for long-term rental sits above the Texas state median of 6.1% and the national median of 5.3%. The combination of moderately priced houses and strong rental demand ($1,680/month versus $1,070/month nationally) gives Houston a structural yield advantage. While the Harris County median ($293,815) sits above the national median ($242,500), rents run well above national norms, and prices remain a fraction of coastal-metro levels.

Comparison of key investment metrics.

Houston's mid-density suburban ZIPs sit between two extremes: the inner-loop areas where prices are coastal-metro level but rents lag, and the rural exurbs where short-term rental demand is too thin to support nightly economics. For broader context, see Texas rental market insights. Comparable Texas peers include Austin Apartments Yield 6.6% vs Houses at 5.9% on Short-Term Rental; for cross-state comparisons, see Fort Worth's Short-Term Rental Ban Makes Long-Term the Only Play and After All Costs, Dallas Airbnb Beats Long-Term Rentals.

Tax Implications for Houston Investors

Texas levies no state income tax, which is one of the most material features of Houston rental investment. Net rental income flows through to your federal return only, with no additional state-level layer on top, and capital gains on sale similarly avoid state tax. Investors comparing Houston to California, New York, or Oregon should weigh this against the higher property tax rate of 1.5%: Houston pays its public services through annual property assessments rather than income tax, which front-loads the tax burden into the holding period.

Federal depreciation on the building portion of the purchase (around 80% of $293,815, or roughly $235,052) deducts on a 27.5-year straight-line schedule, producing about $8,547 per year of paper deduction. For a Houston long-term rental at the median, that paper loss often turns the property into a tax-neutral or tax-negative asset on Schedule E even when cash flow is positive, particularly once mortgage interest is added (fully deductible against rental income, with no SALT cap).

Material participation in short-term rental operations (typically achieved by averaging guest stays under 7 days and meeting active involvement thresholds) can reclassify the property out of passive activity rules, allowing losses to offset W-2 income. This is the standard "short-term rental loophole" and is one reason high-income investors run short-term rental in property-tax-heavy states like Texas. 1031 exchanges remain available for tax-deferred swaps when you eventually sell.

Investment Bottom Line

Houston is a yield market, not an appreciation market. Short-term rental wins on gross revenue by roughly 51%, but once platform fees, furnishing wear, utilities, and registration costs are included long-term rental's 2.8% net yield actually edges ahead of short-term rental's 1.8%. Long-term rental delivers a more reliable 2.8% net yield with substantially less operational overhead. Suburban ZIPs like Greenspoint/North (77067), South Park/Sunnyside (77033), and Pasadena (77502) are where the math works hardest on either strategy.

Methodology details are available in our market score methodology and data sources pages. Explore rental data in the dashboard to model your specific Houston ZIP. Data reflects market conditions as of May 2026.

This information is for educational purposes only and should not be considered financial or legal advice. Regulations and market conditions change frequently. Verify current rules with local authorities before making investment decisions.