Located about 45-90 minutes south of the fourth-largest city in the United States, Crystal Beach and Galveston, Texas are popular destinations for the approximately 7 million people living in the Greater Houston area. People from Dallas, Austin, San Antonio, Oklahoma, Louisiana, and everywhere in between who are looking to escape city life and relax on the beach travel to these areas each year.
You can reach Crystal Beach by drive-on ferry from Galveston or by driving along the Bolivar Peninsula. This small beach town has everything that you need and a selection of restaurants and activities, like putt-putt, water slides, and festivals to enjoy. Guests spend about 90% of their time on the driveable 27 miles of beach shoreline and at their beach house. The area’s current lodging of concentration is short-term rentals – mostly beach homes. The beach house itself should provide a lot of entertainment since this is the primary focus. Not only is the State of Texas investing in this area with the addition of a sixth ferry in the summer of 2023, but a 110-acre mixed-use beach resort with a private airport is also planned for the Bolivar Peninsula. This also comes on the heels of Margaritaville acquiring an RV resort on the peninsula.
Meanwhile, Galveston Island is accessible by a major freeway and is a straight shot south of Houston. When visitors aren’t playing on its 32 miles of beach or walking along the seawall, they can visit the many attractions in the area, including The Pleasure Pier, The Strand, Moody Gardens Aquarium, Schlitterbahn Waterpark, historical mansion tours, museums, festivals, and highly rated restaurants. Guests in Galveston tend to spend more time frequenting area attractions, with the house doing a bit less of the heavy lifting in terms of entertainment.
This market is ripe for investing, as it is still somewhat affordable and isn’t completely overrun by other investors. Currently, a significant number of sellers own true vacation homes – their hideaways from the close major cities.
In Texas, bigger is better, and that often applies to STRs. Furnished, 3-bedroom properties start at around $400k, but they are plentiful. Some magic starts to happen when you get into 4-bedroom and larger properties. Not only can the beach house be more easily shared between two families, but the expenses for utilities, insurance, and taxes plateau while your revenue increases exponentially as your increase in bedroom count, leaving you with more net income in your pocket. Turnkey properties that are 4+ bedrooms and close to the beach are a hot commodity. If you’re willing to do minor renovations, refurnish a property, or wait for construction to be completed, you may be able to snag a great property others have written off because they don’t want to put in the work or the wait. Amenities such as pools, hot tubs, tiki bars, and the like will help set you apart from the competition.
An added benefit of investing in Texas is the lower regulatory environment. As a prime example, the residents of Crystal Beach voted to unincorporate the city in 1987, and it remains so to this day. As a result, there is no governing body at the city level to enact a local hotel occupancy tax for your guests, nor is there any requirement to register your STR or obtain a business license. The state hotel occupancy tax is 6%, which is what guests staying on the Bolivar Peninsula pay on their reservations.
In Galveston, there is more regulation. STR owners are required to register and renew registration annually at a cost of $250 per property, and owners must display their registration number within their listing. The City of Galveston has also levied a local hotel occupancy tax of 9%. This means that guests pay a total of 15% hotel tax on their bookings. Certain areas in Galveston do not allow Short Term Rentals, and more are being reviewed yearly. It’s important to know which areas do allow short-term rentals so work with your agent and confirm with the County before purchasing.
It depends. Both areas are excellent for investment. Galveston offers more infrastructure and attractions but taxes and regulations can be higher. Crystal Beach typically offers a lower price entry point, but the infrastructure and tourism are still ramping up. Overall, the Texas coast is still one of the most affordable beach markets in the US and a prime spot for short-term rental investors.