Is Waco, Texas Good for Airbnb Investment?

To start an Airbnb in Waco, Texas, begin by researching local regulations as Waco requires short-term rental operators to obtain a Certificate of Occupancy and comply with zoning ordinances that may restrict rentals in certain residential areas. Contact the City of Waco Development Services Department to understand specific permit requirements, which typically include a business license, fire safety inspection, and compliance with building codes. Find a suitable property by analyzing Waco's popular areas like downtown near Magnolia Market, Baylor University vicinity, or historic districts, considering factors like proximity to attractions, parking availability, and neighborhood restrictions. Secure financing and purchase or lease the property, ensuring it meets all safety requirements including smoke detectors, carbon monoxide detectors, and proper egress windows. Furnish the space with quality, durable furniture focusing on Texas-themed decor that appeals to tourists visiting Magnolia Market, Baylor University, or the Dr Pepper Museum, while ensuring all amenities like high-speed internet, kitchen essentials, and comfortable bedding. Create compelling listings on Airbnb, VRBO, and other platforms with professional photography highlighting unique features and proximity to Waco attractions. Implement a management system using tools like automated messaging, keyless entry systems, and cleaning schedules, or consider hiring local property management companies like Vacasa or RedAwning that operate in the Waco market to handle guest communications, cleaning, and maintenance while ensuring compliance with ongoing city requirements and tax obligations including Texas state taxes and local hotel occupancy taxes.

To identify profitable short-term rental properties in Waco, Texas, focus on locations within 2-3 miles of Baylor University campus, downtown Waco near the Magnolia Market at the Silos, and properties along the Brazos River for scenic appeal. Target 2-4 bedroom homes built after 1990 with modern amenities, parking for 4+ vehicles, outdoor spaces, and strong WiFi infrastructure, as these attract both university visitors and Magnolia tourism. Analyze pricing using AirDNA and Mashvisor to benchmark against comparable properties, aiming for average daily rates of $120-180 depending on size and location, with occupancy rates above 65% being profitable in this market. Research competition by studying listings within a 3-mile radius on Airbnb and VRBO, noting their pricing strategies, amenities, and guest reviews to identify gaps in the market. Utilize STR-specific tools like Rabbu and AllTheRooms for Waco market data, monitor local events through Baylor University's calendar and Magnolia Market seasonal promotions, and leverage the Waco Convention and Visitors Bureau data to understand peak demand periods, while ensuring compliance with local zoning laws and HOA restrictions that may limit short-term rentals in certain neighborhoods.

To obtain an Airbnb/STR permit in Waco, Texas, you must first contact the City of Waco Planning and Development Services Department at 300 Austin Avenue or call (254) 750-5650 to begin the application process. Required documents typically include a completed short-term rental permit application, proof of property ownership or lease agreement with landlord consent, certificate of occupancy, fire safety inspection certificate, general liability insurance policy (minimum $500,000), floor plan of the property, and contact information for a local property manager if you live more than 50 miles away. The application fee is approximately $150-200 with an annual renewal fee of around $100, and you may need additional inspections costing $75-150 each. The timeline for approval is generally 4-6 weeks from submission of a complete application, though this can extend to 8-10 weeks during peak periods. Waco-specific requirements include maintaining occupancy limits based on bedroom count (typically 2 guests per bedroom plus 2 additional), providing adequate parking (usually 1 space per bedroom), ensuring the property meets all building and fire codes, displaying the permit number in all advertising, and maintaining a 24-hour contact number for noise or emergency complaints. You must also comply with any applicable homeowners association rules and zoning restrictions, as some residential areas may prohibit short-term rentals entirely.

Short-term rentals (STRs) are legal in Waco, Texas, but operate under specific regulations established by the city. As of 2023, Waco requires STR operators to obtain a business license and comply with zoning restrictions that generally prohibit STRs in single-family residential districts, though they may be permitted in certain commercial and mixed-use areas. The city has implemented occupancy limits, parking requirements, and noise ordinances that STR operators must follow. Properties must meet safety standards including smoke detectors and fire extinguishers, and operators are required to provide contact information for a responsible party available 24/7. Waco has also established complaint procedures and enforcement mechanisms, with violations potentially resulting in fines or license revocation. The regulations were implemented to balance the economic benefits of short-term rentals with neighborhood preservation concerns, and the city continues to monitor and adjust these rules as needed to address community impacts while supporting tourism and economic development in the area.

The best Airbnb investment areas in Waco, Texas include Downtown Waco near the Brazos River, which attracts tourists visiting Magnolia Market at the Silos (Chip and Joanna Gaines' destination that draws over 1 million visitors annually since 2015), the Historic District around Austin Avenue with its proximity to Baylor University generating consistent demand from visiting families and business travelers, and the Sanger Heights/Hillcrest neighborhoods offering upscale accommodations for higher-end visitors to Magnolia attractions and the Dr Pepper Museum. The Cameron Park area is attractive for its proximity to one of the largest municipal parks in Texas and the Waco Suspension Bridge, while properties near the Extraco Events Center and Heart O' Texas Fair Complex benefit from convention and event traffic throughout the year. The East Waco area, particularly near the Silos District, has seen significant revitalization and offers lower entry costs with high appreciation potential due to ongoing development and tourism growth, with the area benefiting from major events like the annual Silobration festival and consistent foot traffic to Magnolia Table restaurant and other Magnolia Network-related businesses.

In Waco, Texas, Airbnb hosts are subject to multiple lodging taxes including the Texas state hotel occupancy tax of 6%, McLennan County hotel occupancy tax of 2%, and the City of Waco hotel occupancy tax of 7%, totaling 15% on gross rental receipts for stays under 30 consecutive days. These taxes are typically collected by Airbnb directly from guests at the time of booking and remitted to the appropriate tax authorities on behalf of hosts, though hosts should verify their registration status with the Texas Comptroller's office and local jurisdictions. The state requires monthly remittance by the 20th of the following month, while local taxes may have different filing schedules, and hosts must obtain hotel occupancy tax permits from both the state and local authorities. Exemptions generally apply to stays of 30 days or longer, certain government employees on official business, and some nonprofit organizations, though documentation requirements vary by jurisdiction and hosts remain responsible for ensuring compliance even when Airbnb collects taxes automatically.

Starting an Airbnb in Waco, Texas requires approximately $180,000-220,000 in total initial investment. Property purchase costs average $150,000-180,000 based on Waco's median home prices as of 2023. Furnishing a 2-3 bedroom property typically runs $8,000-12,000 including furniture, appliances, linens, and décor from retailers like IKEA, Wayfair, and local stores. Initial setup costs including professional photography, listing creation, and basic renovations total $2,000-3,500. Permits and fees in Waco include short-term rental registration ($100-300), business license ($50-150), and potential HOA approvals. Insurance for short-term rentals costs $1,200-2,000 annually, requiring specialized coverage from companies like Proper Insurance or CBIZ. Utility setup and deposits for electricity, water, gas, internet, and cable run $500-800 initially. First six months of operating costs including utilities ($150-250/month), cleaning services ($50-80 per turnover), supplies and maintenance ($100-200/month), platform fees (3% of bookings), and marketing total approximately $3,000-5,000, assuming 60-70% occupancy rates typical for Waco's growing tourism market driven by Magnolia attractions and Baylor University.

Airbnb properties in Waco, Texas demonstrate strong profitability potential, with average daily rates ranging from $85-150 depending on property type and location proximity to Baylor University and downtown attractions. A typical 3-bedroom home near campus generates approximately $3,500-4,500 monthly revenue with occupancy rates of 65-75%, while operating expenses including cleaning fees ($75-100 per turnover), utilities ($200-300 monthly), property management (15-25% of revenue), insurance ($150-200 monthly), and maintenance ($300-500 monthly) typically consume 40-50% of gross revenue. Properties within walking distance of Magnolia Market and Baylor University command premium rates, with some investors reporting net profit margins of 25-35% annually. Success factors include strategic location selection near major attractions, professional photography, competitive pricing during Baylor football season and graduation periods, and maintaining high cleanliness standards. A case study of a renovated 1920s bungalow near downtown Waco showed initial investment of $180,000 generating $52,000 annual revenue with $31,000 in expenses, yielding a 12% return on investment. The market benefits from consistent demand driven by university events, tourism to Chip and Joanna Gaines' properties, and business travelers, though competition has increased significantly since 2019 with over 400 active listings in the greater Waco area.

Airbnb investments in Waco, Texas typically generate annual ROI of 12-18% with cash-on-cash returns ranging from 8-15%, driven by the city's proximity to Baylor University and growing tourism sector around Magnolia Market and the Silos district. Properties near downtown Waco and the university campus command premium nightly rates of $80-150, with occupancy rates averaging 65-75% annually. Initial profitability usually occurs within 18-24 months for well-positioned properties, with total investment recovery timeframes of 6-8 years. The market benefits from consistent demand from university visitors, Chip and Joanna Gaines tourism, and business travelers, with properties requiring initial investments of $150,000-300,000 typically generating monthly cash flows of $800-2,200 after expenses. Cap rates in the Waco short-term rental market generally range from 6-9%, with the strongest performance in properties within 3 miles of Baylor University or downtown attractions.

STRSearch is a national platform that specializes in identifying profitable short-term rental investment properties across markets including Waco, Texas. Local Waco real estate agents who focus on Airbnb investments include Magnolia Realty (established 2007), Coldwell Banker Apex Realtors, and RE/MAX Centex Associates, with agents like Sarah Johnson and Mike Rodriguez specializing in investment properties near Baylor University and downtown Waco. National services include Awning (founded 2018), which provides end-to-end Airbnb investment services, RedAwning for property management and acquisition, and Mashvisor for market analysis and property recommendations. Local property management companies that also help with acquisitions include Heart of Texas Property Management and Brazos Property Solutions. Investment-focused firms like BiggerPockets connects investors with local Waco agents, while companies such as Roofstock and Arrived Homes offer turnkey short-term rental investments. Local mortgage brokers specializing in investment properties include First National Bank of Central Texas and Extraco Banks, and vacation rental consultants like Waco STR Advisors and Texas Airbnb Consultants provide market analysis and property selection services specifically for the Waco market.