Legal Considerations for Vacation Rental Owners

Legal Considerations for Vacation Rental Owners

The vacation rental market has been on an upswing over the last few years and shows no signs of slowing. It is expected to increase another $56 billion by 2028.

Owning a rental property is a great source of passive income. Like any business though, there are risks. Property owners need to understand the legal aspects of operating such a business.

The good news is that, once you know what those are, you will have the confidence that you are operating within full compliance with the law. This article covers the legal considerations for vacation rentals. Keep reading to learn more.

Understanding Property Type

Vacation rentals generally fall under the category of "short-term rental." These have specific rules and regulations which can vary by state.

In Texas, for instance, the state lays out minimal requirements for short-term rentals. However, they also allow city governments to make their own laws and regulations. In general, a short-term rental in Texas is a residential dwelling or part of a building that is occupied for less than 30 consecutive days.

Drafting Rental Agreements

One of the most important legal considerations for vacation rentals is to ensure your rental agreement is clear and comprehensive. Like any other lease, you should be specific about all aspects of the arrangement.

This includes the rental period, security deposit, payment schedule, and rules for the property. This will guarantee that, should renters violate these rules, you will be protected from civil liability or local fines.

Filing Taxes

There are also laws dictating how short-term rental property is taxed in Texas. These are usually additional taxes that you pay on top of regular property taxes.

In Texas, this comes in the form of an "occupancy tax," the same that applies to hotels. It is 6 percent of the listing price, including any cleaning fees.

Keep in mind that this is the state tax. Counties and local governments may charge their own fees on the occupancy of the property.

Permitting, Licensing, and Zoning Requirements

Many locations in Texas require vacation rental owners to get specific licenses or permits to operate the unit. These might include business licenses and lodging permits. It is vital to research these for your specific location.

Some municipalities in Texas have outlawed short-term rentals. Many of these ordinances have been challenged and overturned in the courts.

It is important to understand what is and is not allowed. Violating local ordinances could result in legal action or hefty fines.


Finally, make sure that you have adequate insurance coverage for your rental property. Even if it is part of your home, most standard home or personal liability coverage does not extend to the rental. Getting the right policy will ensure that you and your real estate investment are protected.

Learn More About the Legal Considerations for Vacation Rentals

Now that you understand the legal considerations for vacation rentals, you can take the necessary steps. An experienced property management company can take on these responsibilities so that you can be sure you are operating within the bounds of state and local laws.

At PMI Big Tex, we specialize exclusively in short-term rentals in the Dallas-Fort Worth area. Besides handling legal matters, we offer marketing, accounting, property maintenance, and many other services. Reach out to us today to learn more about managing a property.