Texas has no state income tax, a 6% state hotel occupancy tax and some of the highest property taxes in the country. All three show up in a Texas STR file.
In short: LendingStreet finances Texas short-term rentals with DSCR loans that can qualify on projected rental revenue on some programs, starting at $150,000 with a 620 minimum credit score and LLC borrowers allowed. Rules depend on the city: Galveston, Fredericksburg and the beach towns license STRs, while Austin, San Antonio and Dallas have limits on non-owner-occupied rentals in residential areas. Budget property taxes with no homestead exemption.
In the Hill Country, Fredericksburg is a wine-country market with guest houses and historic homes, and Wimberley, Dripping Springs, New Braunfels, Gruene and Canyon Lake draw river and lake visitors. Lake Travis and Lake LBJ serve boaters from Austin and beyond.
On the Gulf Coast, Galveston, Port Aransas, Rockport and South Padre Island have beach houses and condos that rent by the night and the week. In the big cities, Austin, San Antonio, Houston and Dallas-Fort Worth draw event, sports and business travel, but local rules shape what investors can operate.
| Market | Typical property | What drives bookings | Rule to check |
|---|---|---|---|
| Fredericksburg and Hill Country | Guest houses, historic homes, cabins | Wineries, small-town weekends | City STR permits and inspections |
| New Braunfels and Canyon Lake | River homes, lake homes | Tubing, lakes, summer | City and county rules |
| Galveston | Beach houses, condos | Beach trips from Houston | City registration and hotel tax |
| Austin, San Antonio, Dallas | Single-family homes, condos | Events, sports, business travel | Non-owner STRs limited in residential zones |
Austin licenses STRs and has limited non-owner-occupied rentals in residential zones, though parts of its rules have been struck down or rewritten after court challenges. San Antonio caps the density of non-owner-occupied STRs on a block face, and Dallas adopted zoning limits on STRs in single-family areas that were challenged in court. Check current rules with each city before you buy.
Galveston requires registration and hotel tax filing, and Fredericksburg, New Braunfels and Port Aransas require permits or licenses with inspections. In unincorporated county areas, rules are usually lighter, but HOA deed restrictions often bar rentals under 30 days.
DSCR stands for debt service coverage ratio: monthly income divided by the monthly payment, including taxes, insurance and HOA dues. A 1.0x ratio means the income just covers the payment. For nightly rentals, some programs let that income come from a third-party revenue projection rather than a signed lease.
The projection should match the property you are actually buying: same bedroom count, similar finishes and a location that guests compare directly. Programs differ in whether they discount the projection, average it with market rent or require booking history on a refinance, so confirm the method early.
This example is illustrative and not a quote. The property is a permitted two-bedroom guest house in Fredericksburg, priced at $525,000. The revenue projection is $55,000 a year, so about $4,583 a month counts as income. The payment also includes $720 a month in property taxes and $210 for insurance.
A 75% LTV loan of $393,750 carries estimated principal and interest of about $2,794. All in, the payment is about $3,724 and the DSCR is about 1.23x, or about 1.05x if revenue lands 15% under the projection.
Dropping to 65% LTV makes the loan $341,250, the payment about $3,351 and the DSCR about 1.37x. More equity buys margin against a soft season.
| Item | 75% LTV | 65% LTV |
|---|---|---|
| Loan amount | $393,750 | $341,250 |
| Estimated principal and interest | $2,794 | $2,421 |
| Property taxes | $720 | $720 |
| Insurance | $210 | $210 |
| Total monthly payment | $3,724 | $3,351 |
| Projected monthly revenue | $4,583 | $4,583 |
| DSCR | About 1.23x | About 1.37x |
| DSCR if revenue is 15% lower | About 1.05x | About 1.16x |
Texas charges a 6% state hotel occupancy tax on stays under 30 days, and cities and some counties add local hotel taxes. Platforms collect some of it, but many cities require their own registration.
Investors do not get homestead exemptions, so budget the full combined tax rate on your purchase price, not the seller's bill. On the coast, wind coverage often comes through the Texas Windstorm Insurance Association, and many beach properties need flood insurance. Hail is a major insurance factor in Central and North Texas.
Gulf Coast rentals peak from spring break through Labor Day. The Hill Country is strongest in spring wildflower season, during fall wine and holiday events, and on summer river weekends. Austin and Dallas see spikes during major festivals, races and sporting events. A projection should not treat a festival week as typical.
Lenders size the loan on the payment, but you run the business. Expect to pay for turnovers and cleaning, linens, utilities and Wi-Fi, guest supplies, repairs from heavier use, platform service fees and, if you are not local, a property manager. Furniture and setup costs come before the first guest arrives.
Because most programs measure coverage on gross revenue, a thin ratio can hide a negative cash flow once those costs are paid. Give yourself margin by keeping leverage moderate or choosing a property with a strong revenue history.
Our investor loans are business-purpose loans on non-owner-occupied property. You qualify on the rental, not your job, and you can close in an LLC.
Send the address, purchase price or current value, target loan amount and whatever revenue data you have. The financing team will run the ratio at more than one leverage level and tell you which programs fit. You can use the form below or call (877) 298-1001.
Austin limits non-owner-occupied STRs in residential zones, and its rules have changed after court rulings. Confirm the license type available for the address before you buy.
The state hotel occupancy tax is 6%, and cities and some counties add their own. Platforms collect part of it.
Investors do not get homestead exemptions or the homestead appraisal cap. Budget the full combined rate on your purchase price.
Most do. Wind coverage often comes through the Texas Windstorm Insurance Association, and flood insurance is required in mapped flood zones.
No. LLC ownership is standard. You sign for the loan personally as the member.
Yes. Rate-and-term and cash-out refinances are available, with cash-out up to 75% LTV. Your booking history can support the income, and seasoning varies by program.
You can lower the loan amount, or a sub-1.0 DSCR program may fit. The financing team can run both options.
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