Should You Sell Your Lake Travis Vacation Home or Keep It as a Rental?

by Amanda Zito

Should you sell your Lake Travis vacation home or keep it as a rental?

There isn’t one answer that works for everyone.

But I would start with three questions:

Can you legally rent the home the way you want to?
Will the rental income cover the real cost of owning it?
And do you still use and enjoy the home?

If the answer to two of those is no, it may be time to seriously consider selling.

A lot of Lake Travis owners reach this point when the vacation home starts feeling more like work than a getaway.

The dock needs repairs. Insurance goes up. The house sits empty more than expected. And somehow you only made it out to the lake a couple of times all summer.

Keeping the home as a rental can be an option. But there are different ways to do that.

You could use it as a short-term rental, rent it long-term, or rent it part of the year while still using it yourself.

Each option comes with different rules, costs, taxes, and responsibilities.

Before you call a property manager or put the home on the market, here are a few things I would look at first.

1. Can You Actually Rent the Home the Way You Want To?

Start here because the answer can make the rest of the decision much easier.

Short-term rental rules around Lake Travis can change depending on exactly where the property is located.

Lakeway

Lakeway has tighter rules for short-term rentals than some surrounding areas.

The city limits the number of short-term rental permits available for single-family homes, requires spacing between permitted properties, and has additional requirements for owners.

So if your Lakeway home doesn't already have approval, don't assume you can simply list it on Airbnb or VRBO.

Check with the city first.

Bee Cave, Hudson Bend and Unincorporated Areas

Rules may be different in Bee Cave, Hudson Bend, and other parts of unincorporated Travis County.

But city and county rules are only part of the picture.

Your HOA or deed restrictions may also limit short-term rentals.

Before you build a rental plan around the property, make sure you know what is actually allowed.

2. What Is the Home Really Costing You?

Rental income isn't the same thing as profit.

Before deciding whether to keep the home, add up what it costs you over an entire year.

That may include:

Property taxes
Insurance
HOA dues
Utilities
Landscaping
Pool service
Dock maintenance
Septic service
Repairs and maintenance

If you're planning to use the property as a short-term rental, you may also have:

Cleaning costs
Property management
Booking platform fees
Supplies
Furniture replacement
Guest-related repairs
Hotel occupancy taxes
Accounting or tax filing costs

This is where the numbers can change quickly.

A property can look profitable based on the nightly rate you see online. But once you count everything it takes to own and operate the home, the actual profit may be much smaller.

3. Short-Term Rental or Long-Term Rental?

These are very different types of rentals.

Short-Term Rental

A short-term rental gives you more flexibility to use the home yourself.

It may also have higher income potential during busy times of the year.

But it usually requires more work.

You have guest communication, cleaning, turnovers, reviews, supplies, maintenance, and changing occupancy throughout the year.

Income can also be seasonal.

Long-Term Rental

A long-term rental is usually simpler.

You have one tenant for a longer period of time and fewer turnovers.

Income may be more predictable, but you'll usually give up the ability to use the home yourself while it's leased.

I've co-hosted short-term rentals for five years and owned long-term rentals in California and Texas for more than a decade.

One thing owners sometimes underestimate is how much work goes into a short-term rental.

It isn't just real estate.

It's also hospitality.

If you don't want to manage guests, cleanings, schedules, and maintenance, you'll either need someone else to handle it or you may be happier with a long-term rental or a sale.

4. How Often Do You Still Use the Home?

This is a big one.

If you still spend weekends at the lake, use the house during the summer, and enjoy having it for family time, keeping it may still make sense.

But be realistic.

If you're only using the home a couple of times a year, you may be paying a lot of money to keep a property you don't really use anymore.

Personal use can also affect how the IRS treats rental income and expenses.

For example, there are specific rules based on how many days you personally use the home compared with how many days you rent it.

So if you're planning to combine personal use with rental use, talk with your CPA about how those rules apply to you.

5. What Happens With Taxes If You Sell?

Selling a vacation home can have different tax consequences than selling your primary residence.

And if you've used the property as a rental, that can change things again.

You may have capital gains taxes to consider.

If you claimed depreciation while renting the property, depreciation recapture may also come into play.

And if the property qualifies as an investment property, a 1031 exchange may be worth discussing with your tax advisor.

The important part is to look at this before you sell.

Selling now, renting the property first and selling later, or exchanging it into another investment can produce very different results.

This is general information, not tax advice. Have your CPA look at your specific situation before you make the final decision.

6. Is Your Equity Working for You?

If you've owned your Lake Travis property for a while, you may have a good amount of equity sitting in the home.

That matters.

A rental can pay for itself and still not be the best use of your money.

For example, selling could give you money to pay down another mortgage, buy a different property, invest somewhere else, or simply reduce the amount of responsibility you have.

So don't only ask:

Can this house pay for itself?

Also ask:

Is this where I want this money tied up for the next five years?

That's a different question.

7. What Will the Property Need Over the Next Five Years?

Take a realistic look at the house.

How old is the roof?

How is the HVAC?

What condition is the dock in?

Does the septic system need work?

What about the pool, retaining walls, windows, plumbing, or other major items?

Large repairs can change the numbers quickly.

And you'll likely deal with those repairs whether you rent the property or eventually sell it.

If you know a major expense is coming, decide what you want to do with the property before putting a lot more money into it.

When Selling May Make More Sense

Selling may be worth considering when:

You can't rent the property the way you planned.
The rental numbers only work if nothing goes wrong.
You rarely use the home anymore.
Major repairs are coming.
You don't want to manage a rental.
You would rather use the equity somewhere else.

Sometimes a vacation home simply did what you bought it to do.

You enjoyed it. Your family made memories there. And now your needs have changed.

That's okay.

When Keeping It May Make More Sense

Keeping the property may still make sense when:

You can legally rent it.
The rental numbers work after all expenses are counted.
You still use and enjoy the home.
You have a plan for management and maintenance.
You're comfortable keeping your equity tied up in the property.

A Lake Travis home that helps pay for itself while still giving your family a place to enjoy the lake can be a great asset.

Just make sure you're choosing to keep it because it still works for you, not simply because you already own it.

Frequently Asked Questions

Can I rent my Lakeway home on Airbnb?

Possibly, but you'll need to follow Lakeway's short-term rental rules and permitting requirements.

Don't assume the property qualifies just because other homes nearby are being rented.

Check directly with the city before counting on short-term rental income.

Do I have to collect hotel occupancy tax on a Lake Travis short-term rental?

Short-term rentals in Texas can be subject to state hotel occupancy tax, along with additional local taxes depending on where the property is located.

Some booking platforms may collect certain taxes for you, but don't assume every tax is being handled automatically.

Verify what applies to your property.

Will I owe capital gains tax when I sell my Lake Travis vacation home?

You may.

Vacation homes and second homes are generally treated differently from your primary residence for tax purposes.

And if you've used the property as a rental, depreciation and other tax rules may also apply.

Have your CPA review the numbers before you list.

Not Sure Whether to Sell or Keep It?

Every Lake Travis property is a little different.

Location matters. Rental rules matter. The condition of the home matters. And most importantly, what you want from the property matters.

If you're trying to decide whether to sell your Lake Travis vacation home or keep it as a rental, I can help you look at the real estate side of the decision.

We can talk about what the home may sell for, what you're competing against, and what you should consider before turning it into a rental.

Then you can make the decision with better information.

Amanda Zito, REALTOR®

Real Broker, LLC
TX TREC #840088 | CA DRE #01740063

SoldByZito.com | 949-484-9486