Posted: February 22, 2024

Short Term Rentals Guide: Fredericksburg, Texas

Rentals

Short Term Rentals

Welcome to the ultimate guide to investing in short-term rentals in the charming town of Fredericksburg, Texas! Nestled in the heart of the Texas Hill Country, this historic destination boasts a rich German heritage, world-class wineries, and breathtaking natural beauty. Whether you’re planning a weekend getaway or an extended stay, our comprehensive guide will help you find the perfect short-term rental property. This guide will cover recommended investment locations, how to finance these STRs with Easy Street Capital’s industry leading STR Loans and the latest updates on the rules and regulations for short term rentals in Fredericksburg, Texas! From cozy cabins to luxurious vacation homes, we’ve got you covered!

Why is Fredericksburg So Popular for Short Term Rentals?

When it comes to choosing where to invest in short term rentals – market matters – a lot! And the most important thing in choosing a market is “demand drivers.” What are demand drivers? These are things in the area that drive people to come to visit for short stays. These are the people booking your short term rental, paying the rents and providing the real estate returns. So its very important to choose a market with many demand drivers. Fredericksburg is a great market for STRs primarily because it has a lot of demand drivers through the year!

Top Things To Do in Fredericksburg, Texas (STR Demand Drivers)

Wineries and Vineyards

Fredericksburg is perhaps best known for its status as the center of Texas wine country. With more than 60 wineries, vineyards and tasting rooms located in the area, it lives up to the reputation. These pair very well with short term rental investments – since many people visit for short stays connected to wine tours and tastings. A growing hotspot for groups such as bachelorette parties, romantic weekend trips and other group outings, it is no wonder that Fredericksburg is a favorite for short term rental investors.

In addition to consistent wine tastings, many of the wineries in Fredericksburg host events throughout the year, such as grape stomps, live music, and food pairings. The town also hosts the annual Fredericksburg Food & Wine Fest, which celebrates the region’s rich culinary and winemaking traditions. With its stunning scenery, delicious wines, and warm hospitality, it’s no wonder that Fredericksburg has become a top destination for wine lovers from around the world.

Enchanted Rock and Other Nature Areas and Parks

Enchanted Rock State Natural Area is a stunning, 1,643-acre park located in the heart of the Texas Hill Country. This awe-inspiring natural wonder is centered around a massive pink granite dome that rises 425 feet above the surrounding landscape. The park offers a diverse range of recreational activities, including hiking, camping, rock climbing, and stargazing.

Visitors to Enchanted Rock State Natural Area can explore over 11 miles of trails, including the iconic Summit Trail, which leads to the top of the dome and offers breathtaking panoramic views of the Hill Country. The park’s unique geological features, such as the Enchanted Rock itself, provide a fascinating backdrop for an unforgettable outdoor experience. Guests looking for outdoor adventures (maybe to balance out a weekend of wine drinking) flock to Fredericksburg for its proximity to this natural wonder.

Other nature areas include Lady Bird Johnson Municipal Park and Lyndon B. Johnson National Historic Parks. Texas Hill Country’s temperate climate offers mild weather in the winter months, giving Fredericksburg an advantage over colder climate STR markets.

Historic Attractions

Fredericksburg is not just wine and rocks – its home to many historic charms that attract visitors year-round. Founded in 1846, Fredericksburg has a rich history of German-American pioneers. The charming downtown area features a rich and unique blend of American western and German culture and features famous place such as the Vereins Kirche Museum. This museum features a collection of artifacts, paintings, photos and more of the town and structure’s history. The Pioneer Museum is a comprehensive downtown attraction that features docents in period dress that are perfect for families!

Not only is Fredericksburg home to many family-friendly attractions centered around Texas pioneers – it also features the National Museum of the Pacific War! Featuring a large and well-curated experience about World War 2’s pacific theater – it’s a great demand driver for families and history buffs alike. USA Today named this museum in its Top 5 History Museums in the entire United States in 2021!

STR Rules and Regulations in Fredericksburg

As short term rentals have grown tremendously in popularity over the last few years, Fredericksburg has been at the forefront of the same growth. Always a vacation rental market, Fredericksburg is friendly towards short term rental investors. It has clearly stated rules and regulations, which provide clarity and certainty for investors. While Airbnb markets with little to no rules might seem attractive, its actually better in the long run for most investors to have a more structured regulatory regime. There is always a danger that those laissez-faire markets will suddenly impose rules and limits – which could really harm an investment in the long-term.

There are certain rules and hurdles in place when it comes to investing in short term rentals in Fredericksburg. The city’s website is one of the best available resources in laying out the rules and instructions in a clear and usable manner.

When looking to acquire a rental property in Fredericksburg – the process is made easy by the city’s top-notch portal.

How to Verify Property in Fredericksburg is Zoned for Short Term Rental?

The city of Fredericksburg provides a tool and color-coded map where you can instantly type in any address and instantly see if the address allows for short term rentals or vacation rentals.

What are the 2024 fees for Short Term Rental permits in Fredericksburg, Texas?

The fees for 2024 depend on the total number of bedrooms at the property. The fees are as following:

1 bedroom short term rentals – $300 plus processing fee
2 bedrooms short term rentals – $500 plus processing fee
3 bedrooms short term rentals – $700 plus processing fee
4 bedrooms short term rentals – $900 plus processing fee
5 bedrooms short term rentals – $1,000 plus processing fee

What documents do you need for a new or renewal STR permit in Fredericksburg for 2024?

- Your rental property’s parcel ID – Gillespie County CAD
- Your rental property’s Zone – FBG Zoning Map
- Your STR Type
- Floor Plan and a Parking Plan – hand drawn examples are accepted.
- A photo of the front of the STR property – street facing view, with numbers of the house showing if possible.

STR Rules and Regulations in Fredericksburg Resource Links

Short Term Rental Rules Summary for the April 1, 2022 STR Ordinance

This overview page provides great guidance on the basics and FAQs for short term rentals in Fredericksburg. Information includes definitions of “types of STRs.” Includes important nuances such as ADUs (Accessory Dwelling Units), Condos and using STRs in multi-unit properties.

It also provides solid overview information on permits, hotel occupancy taxes in Fredericksburg and parking rules. As any Short Term Rental owner knows – these “little things” are super important!

Investing in Short Term Rentals in Fredericksburg, Texas

While Fredericksburg is a great city for short term rentals – when it comes to investing, the numbers and data is of utmost importance. Investing in and operating a STR is a whole different ballgame than enjoying a trip at an STR! As every successful short term rental investor knows – underwriting and running the numbers on an investment is key to success.

Two of the most important aspects of evaluating STR investment are understanding and projecting both revenue (income) and expenses. The majority of an investor’s expenses is often the cost of financing the STR. Below, we’ll provide recommendations on how to think through each to be a short term rental investing pro!

Revenue Projections

One of the most exciting developments in the STR investing sector is the explosive growth of accessible data for investors. Companies such as AirDNA and Rabbu continue to make great strides in high-level actionable data for investors evaluating short term rental markets.

Key Metrics for every short term rental investor in evaluating revenue (earnings) from STRs include:

Occupancy Rate:

The percentage of days per year the STR will have guests (generally assuming market rates are charged)

Average Daily Rate:

The average price of a days’ stay at the property

RevPAR (Revenue per Available Room):

This is a common metric for hotels. RevPAR is calculated by multiplying occupancy rate and ADR to get total expected earnings over a year (per room).

Utilizing these metrics are key to evaluate the revenue potential of short term rentals. For short term rental projections in Fredericksburg, Texas – AirDNA (as of February 2024) provides great information. AirDNA is a great resource for this since it directly connects to actual performance data, giving estimates and tracking changes in near real-time.

As of February 2024, AirDNA gives the following metrics for Fredericksburg Short Term Rentals:

Market Score: 75 – this is determined to be a “good” rating and balances all of the overall market factors

Occupancy Rate: 45% – while this is generally lower than average, low occupancy markets such as Fredericksburg can still be great markets when paired with higher ADRs

Average Daily Rate: $353 – this is a very strong number indicating the large earning potential of vacation rentals in Fredericksburg. Demand drivers like high-end wineries and experiences attract a more affluent clientele.

Taken with a holistic view – investors can utilize this data to project revenue and tailor their investing strategy – with opportunities in the market to smartly utilize pricing strategies to provide great returns without worrying about a fully packed calendar.

Expense Projections

The largest and most consequential expense for many STR investors is the financing cost. This is typically the monthly payment of principal and interest to the lender financing the property. Many investors in vacation rentals cover the vast majority of the investment with a loan. The down payment on these loans is only around 20%-30%. Thus, its very important to get the best rates and terms on financing the short term rental to make sure the returns are worth it.

When financing a short term rental in Fredericksburg, there are several options. These can include loans from traditional lenders, such as banks, credit unions and “conventional” (i.e. Fannie Mae / Freddie Mac) lenders. However, counting on traditional loans can be a big mistake for STR investors. Because short term rentals are still a new and rapidly changing asset class, lenders that are flexible around STRs can be very valuable. Utilizing a lender that understands and embraces short term rentals is often key.

Unlike most lenders who offer loans on short term rentals, Easy Street Capital embraces the unique aspects of STR investing. Options to qualify based on projected short term rental revenue, from cutting-edge data sources such as AirDNA – can make or break success in STR. For more information, FAQs and free projected numbers for any potential STR address in Fredericksburg, Texas, check out our short term rental lending program resource page here!

In addition to making sure your lender understands and qualifies the loan based short term rental realities, utilization of advanced strategies to get the best rates and terms can be key to minimizing your monthly expenses.

Property Management for Fredericksburg, Texas Short Term Rentals

One major decision many short term rental managers face is self-managing their properties or hiring a STR management company. There are many pros and cons for each option.

Pros of managing your own short term rental include saving management fee expense, more control of the guest experience and obtaining valuable expertise through experience. However, there are downsides. By not hiring a short term rental management company, you are committing significant time to ownership. This can prevent scaling a portfolio and cause a lot of stress and excess workload. Additionally, top management companies know the ins and outs of the market, adding value and revenue from their local expertise. Finally, if you are not located in Central Texas, near Fredericksburg, you would miss out on this market if needing to manage yourself!

Luckily, Fredericksburg is home to several property management companies well equipped to successfully manage short term rentals. According to AirDNA, here are a few of the top options for investors looking to utilize STR property management:

Absolute Charm Luxury Accommodations is a family owned and operated business founded in 2007 that focuses on managing properties in Fredericksburg and the surrounding Hill Country. With over 200 units and a fantastic website with information on everything short term rental visitors could ask for. AirDNA reports as of February 2024 they have 187 STR listings in Fredericksburg alone with over 8,000 reviews and a top-notch 4.78 star rating.

Check out this Fredericksburg Calendar of Events published by Absolute Charm!

Cozi Vacation Rentals is another locally owned property manager in Fredericksburg. They also have a strong website and blog well designed to increase traffic to their managed vacation rentals. With a clear focus on guest experience and extremely strong reviews on STR platforms, Cozi Vacation Rentals is another very strong option for STR investors!

Check out this 12 Best Dinner Spots in Fredericksburg Guide published by Cozi!

Heavenly Hosts is an up-and-coming vacation rental property manager in Fredericksburg. According to AirDNA, as of February 2024 they feature a astronomical average STR platform star rating of 4.87! And not just a small sample size – this is over 7,000 reviews! Additionally, they sport a long and strong track record on Google reviews as well, showing diversification of marketing channels for STR listings.

Check out this Dog-Friendly Guide to Fredericksburg published by Heavenly Hosts!

Ready to Get Started?

Have your eye on purchasing a short term rental investment property in Fredericksburg? Easy Street Capital is America’s best lender for short term rentals – see options below to explore financing options!

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Disclaimer: The information provided in this article is not intended as financial or legal advice of any kind. Regulations regarding short-term rentals are subject to change and all investments are subject to risk. Information included in this article may contain information that has not been verified by licensed attorneys and should be subject to independent verification. Readers are advised to consult with qualified legal or financial professionals prior to investing in real estate investment properties.

Robin Simon

Partner at Easy Street Capital

Mr. Simon is a Partner of Easy Street Capital, overseeing the EasyRent division, which provides long-term financing on business-purpose 1-10 unit residential mortgage loans. He is responsible for managing all aspects of the EasyRent line, including the marketing, business development, operations and secondary/capital markets.