Houston's Short-Term Rental Premium Shrinks After All Costs

Houston (Harris County) 3-bed houses gross roughly 51% more on short-term rental than long-term, but after Airbnb fees, higher insurance, utilities, and the 6% hotel tax, the net yield picture flips. This article walks through the real after-costs numbers for both a 3-bed house and a 2-bed apartment, because the cost structures differ materially: apartments add HOA fees but have roughly half the entry price of houses.

All figures below assume self-management (0% management fee), which is what the dashboard shows by default. Professional management costs are covered separately further down.

3-Bed House: Short-Term Rental Net Yield of 1.8% Trails Long-Term Rental at 2.8%

The headline finding for a Houston 3-bed house: gross revenue favours short-term rental ($27,734 vs $18,386 annual rent), but after costs, long-term rental actually delivers a higher net yield. Here is the full breakdown:

Airbnb's host fee is 15.5% of gross revenue in this model. Other platforms charge differently: Vrbo takes around 5% and Booking.com around 15%, with direct bookings paying 0%. Most operators use a mix, but 15.5% is a reasonable weighted estimate when Airbnb is the primary channel.

Costs That Eat the House Premium

Four cost categories explain why the roughly 51% gross premium compresses to a net yield deficit. Insurance runs at $4,438 for short-term rental versus $2,938 for long-term, because short-term policies cover commercial-use liability and guest-related claims. Maintenance is higher at $5,238 versus $2,865, reflecting weekly turnover wear and furnishing replacement that long-term landlords do not face. Utilities of $2,640 are borne entirely by the short-term operator, where long-term tenants pay their own.

Then there is the Houston hotel tax at 6%, plus the 6.25% Texas sales tax applied to short-term stays, which together add $1,664 to the short-term cost column that long-term rentals avoid entirely. Airbnb fees of $4,299 come off the top. Add it all up and short-term rental costs are more than double long-term rental costs, which is why the roughly 51% gross premium does not translate into higher take-home income at Houston's average occupancy of 38%.

2-Bed Apartment: Lower Entry Price, HOA Adds to Both Columns

Houston 2-bed apartments sell for around $146,876, roughly half the price of a 3-bed house at $293,815. Lower entry price means smaller absolute dollar yields, but often a better percentage yield because the denominator shrinks faster than the numerator. HOA fees, absent from houses, apply equally whether the apartment is rented short-term or long-term:

Note that HOA fees appear in both columns. They are a property-level cost tied to ownership, not to rental strategy: a dormant apartment still pays HOA. Houston's regulatory environment also matters here, because the April 2025 ordinance prohibits unhosted short-term rentals in multifamily buildings. That rule effectively bars most apartment condos from short-term letting unless the owner is hosting on-site, so the short-term column should be treated as illustrative rather than operational for much of Houston's apartment stock.

House Vs Apartment: The Apartment Entry Price Advantage Wins on Percentage Yield

The apartment's lower entry price at $146,876 versus $293,815 for a house produces a structurally different yield profile. On long-term rental, the apartment delivers 4.7% net versus 2.8% for a house. On short-term rental, the comparison is 1.2% versus 1.8%. Apartments lose some of this advantage to HOA fees of $2,439 per year, which houses do not pay.

In absolute dollar terms, a Houston 3-bed house still generates more cash flow than a 2-bed apartment, because the rent base is larger. But for investors deploying a fixed capital pool, the apartment's higher percentage return compounds faster and lets you diversify across multiple units. The trade-off is regulatory exposure for short-term use and HOA rules that can restrict or ban rentals outright. These are city medians across 132 ZIP codes, and individual suburbs diverge significantly. The dashboard shows suburb-level data for every bedroom count and property type.

Short-Term Rental Break-Even Sits at 28% Occupancy, Below the Market Median of 38%

For a 3-bed house, short-term rental gross revenue equals long-term rental gross revenue at 28% occupancy. That is the floor, not the target: you need to clear break-even on gross before the higher short-term cost structure is offset. Houston's market median occupancy is 38%, which is above the break-even on gross revenue but still leaves a narrow margin once the full cost stack is applied. Operators consistently below market median occupancy would be better served renting long-term.

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Professional Management Cuts Short-Term Net Yield to -0.3%

The tables above assume self-management. For a 3-bed house, hiring a short-term rental manager adds around $6,101 per year, which is roughly 22% of gross revenue. That drops short-term net yield from 1.8% to -0.3%. For long-term rental, hiring an agent adds around $1,814, dropping long-term net yield from 2.8% to 2.2%.

These are typical market rates, not quotes. Individual managers charge differently, and short-term rental management fees in particular vary widely based on service level (some are full-service including cleaning coordination and guest communication; others are listing-only). The gap between self-managed and professionally-managed short-term rental in Houston is wide enough that anyone on the margin of profitability should assume they will be self-managing at least the first property.

Tax Treatment: Texas Has No State Income Tax, Depreciation Runs 27.5 Years

Texas imposes no state income tax, which means rental income is only taxed federally. Short-term rental income above the 14-day safe harbour is reported on Schedule E (or Schedule C if services rise to the level of a business, which affects self-employment tax). Residential rental property depreciates over 27.5 years, giving an annual deduction of roughly $8,547 on a depreciable basis of $235,052 (around 80% of the sale price, with land excluded). The dashboard calculates after-tax income using these rules.

The Houston ordinance adopted in April 2025 requires a Certificate of Registration ($275 plus a $33.10 admin fee) with a January 1, 2026 compliance deadline. Unhosted rentals are not permitted in multifamily buildings. Platforms are required to delist unregistered properties. For the latest rules, check with the City of Houston and a local tax professional.

Data reflects market conditions as of April 2026. Explore rental data in the dashboard. See also the market score methodology and data sources pages. For a nearby comparison where regulatory caps push investors toward long-term rentals, see Fort Worth Long-Term Rentals Yield 6.0%, Short-Term Caps Kill the Alternative. For a similar cost-compression story in the Dallas market, see Dallas Short-Term Rentals Gross 80% More, but Costs Narrow the Gap.

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.