Waco became a short-term rental market almost overnight once Magnolia Market at the Silos began drawing visitors from across the country. Baylor football, graduations and family weekends keep demand going, but supply grew fast too, so the numbers need a careful look.
In short: LendingStreet finances Waco short-term rentals with DSCR loans that can qualify on projected nightly revenue on some programs, with no W-2s or tax returns and LLC borrowers allowed. Loans start at $150,000 with no stated maximum, purchases go up to 80% LTV and the standard minimum DSCR is 1.0x. The property must be able to operate legally under Waco's or the suburb's short-term rental rules, and Texas property taxes have to be budgeted at the full investor rate.
The City of Waco requires short-term rentals to register and separates owner-occupied rentals from non-owner-occupied ones. A whole-home rental that the owner does not live in generally faces more requirements in residential zoning districts, which can include a special permit, while commercial and mixed-use areas downtown are often simpler. Confirm the exact path for your address with the city's planning staff before you rely on nightly income.
All Waco rentals under 30 days owe Texas state hotel occupancy tax and the city's local hotel tax. Treat those as pass-through amounts collected from guests, not revenue.
| Area | Who sets the rules | Notes for investors |
|---|---|---|
| Downtown and East Waco near the Silos | City of Waco | Mixed-use areas; registration and hotel tax |
| Castle Heights, Sanger Heights, Baylor area | City of Waco | Residential zoning; non-owner-occupied rentals face added steps |
| Woodway, Hewitt, Robinson | Each city | Separate ordinances; HOAs may ban rentals under 30 days |
| China Spring, Lorena, rural McLennan County | County or small city | Fewer local rules; check deed restrictions and HOAs |
| Lake Waco and Lake Whitney areas | County, city or lake authority | Seasonal lake demand; check shoreline and HOA rules |
Magnolia Market at the Silos is open most of the year and draws heavy weekend traffic, especially in spring and around the holidays. Baylor University adds football weekends at McLane Stadium, homecoming, family weekend, and graduations in May and December, when hotel rooms near campus sell out. The Waco Mammoth National Monument, Cameron Park Zoo and the Dr Pepper Museum fill out family trips.
Midweek bookings are softer than weekends, and July and August can slow in the Texas heat. A projection should show monthly detail so a lender sees the full year.
Short-term rental listings in Waco grew quickly after the Silos opened, and some neighborhoods near downtown have many competing homes. A projection built on a few top performers can overstate what a new listing will earn. Lenders compare a projection with nearby rentals of similar size and quality, and a home with parking, space for a family and a short drive to the Silos and Baylor tends to hold up best.
Suburbs like Woodway and Hewitt offer quieter settings and newer homes, but HOA covenants there often prohibit rentals under 30 days. Read them before you make an offer.
Larger homes that sleep groups do well during Baylor events and wedding season, since many Waco-area wedding venues sit outside the city and guests need places to stay nearby. Smaller one- and two-bedroom units compete more directly with hotels.
This example is illustrative and not a quote. An investor buys a three-bedroom house a short drive from the Silos for $325,000. A third-party projection shows $42,000 in gross annual revenue, or $3,500 a month.
At 75% LTV the loan is $243,750, with estimated principal and interest of about $1,622. Property taxes with no homestead exemption are budgeted at $600 a month and insurance at $210. The total is about $2,432, for a DSCR of about 1.44x.
If the lender trims the projection to $36,000 a year, monthly revenue is $3,000 and the ratio is about 1.23x, still above 1.0x.
| Item | Full projection | Trimmed projection |
|---|---|---|
| Purchase price | $325,000 | $325,000 |
| Loan at 75% LTV | $243,750 | $243,750 |
| Monthly revenue used | $3,500 | $3,000 |
| Estimated principal and interest | $1,622 | $1,622 |
| Taxes and insurance | $810 | $810 |
| Total monthly payment | $2,432 | $2,432 |
| DSCR | About 1.44x | About 1.23x |
Texas has no state income tax, and local governments lean on property taxes. A Waco home can be taxed by the county, the city, the school district and McLennan Community College. Investors do not get homestead exemptions, so if the seller lived in the home, your bill will likely be higher than theirs.
Look up the property on the McLennan County Appraisal District site, add up every taxing unit and budget on the full rate without exemptions.
Central Texas sees regular hail and severe spring storms, and many policies carry percentage wind and hail deductibles. Homes near the Brazos River, the Bosque River or local creeks can fall in mapped flood zones. Get a quote that covers short-term rental use, since many landlord policies exclude nightly guests. A newer roof and impact-resistant shingles can lower the premium and make carriers easier to find.
On some programs, an STR can qualify on a third-party projection rather than a 12-month lease, and an operating rental can use its booking history. If a projection comes in low, a larger down payment can bring the ratio up, and sub-1.0 programs exist for some files. Waco homes are often priced near our $150,000 loan minimum, so confirm the loan amount works at your planned leverage.
Owners with an established Waco rental can refinance on its booking record through our STR refinance program.
Texas does not charge a state transfer tax on deeds, which keeps closing costs lower than in many states. Title insurance premiums are set by the state, so the base premium does not vary much from one title company to the next. Your main closing items are title, the appraisal, the survey if required, prepaid taxes and insurance.
Furnishing, supplies, cleaning and a local co-host are extra start-up costs on an STR. They do not enter the DSCR, but plan cash for them on top of the down payment.
Send the address, price, permit status and any projection or booking history. The financing team will confirm the rental can operate, run the ratio on realistic taxes and insurance and come back with options. Call (877) 298-1001 or use the form below. For statewide context, see our Texas STR page.
Yes, with registration and hotel tax filing. Non-owner-occupied rentals in residential zones generally face added requirements, so confirm with the city first.
They have their own rules, and many HOAs there ban rentals under 30 days. Check covenants before buying.
Yes. Graduations, football and family weekends are some of the busiest nights in Waco.
Investors do not get homestead exemptions, so the bill reflects the full value.
On some programs, yes, using a third-party projection or booking history.
DSCR loans start at $150,000, which matters in Waco where many homes are modestly priced.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
No. Texas does not charge a state transfer tax on deeds.
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