Houston is the fourth-largest city in the United States, and it’s quietly become one of the best rental arbitrage markets in the country. With 2.3 million residents, a $500 billion GDP, the largest medical center on the planet, and a year-round calendar of conventions, sporting events, and the iconic Houston Livestock Show and Rodeo, demand for short-term housing never really stops. I’ve watched operators in Houston pull $2,500 to $4,800 per month in net profit from a single unit—and some are running five or six properties. The combination of relatively low rents, no state income tax, and a massive pool of traveling professionals makes this city a rental arbitrage machine. Whether you’re brand new to rental arbitrage or expanding an existing portfolio, this guide breaks down everything you need to launch profitably in Houston in 2026.
Why Houston for Rental Arbitrage
Houston checks every box that matters for rental arbitrage operators. Start with the numbers: the average rent for a two-bedroom apartment sits around $1,510 per month, while well-managed Airbnb listings in prime neighborhoods gross $3,200 to $5,800 monthly. That spread is where your profit lives.
But the real edge? Demand diversity. Houston isn’t a one-trick town. You’ve got the Texas Medical Center—the world’s largest—bringing in 10 million patient visits per year. That alone creates a permanent base of traveling nurses, patients’ families, and medical professionals who need housing for a week, a month, or somewhere in between. Layer on NASA’s Johnson Space Center, the Port of Houston (the busiest in the U.S. by foreign tonnage), and a Fortune 500 concentration that rivals any city in America, and you’ve got demand coming from every direction.
The cost-of-living advantage is massive. Compared to Austin, Dallas, or any major coastal city, Houston rents run 15-30% lower for comparable properties. That directly translates to fatter margins on every unit you operate. And Texas has no state income tax, so every dollar of profit you keep is a real dollar.
Houston also benefits from being a major events city. The Rodeo alone draws over 2.5 million visitors across three weeks in March. Offshore Technology Conference, multiple professional sports teams (Texans, Astros, Rockets, Dynamo), and a booming convention scene mean peak-pricing opportunities throughout the year. If you’re serious about building a short-term rental business, Houston deserves a hard look.
Houston Short-Term Rental Regulations in 2026
Houston passed its first comprehensive short-term rental ordinance on April 16, 2025, and it took effect on January 1, 2026. This is a significant change—Houston was previously one of the few major U.S. cities with essentially no STR-specific regulation. Here’s what you need to know as an operator.
Registration and Permits
Every short-term rental (defined as stays under 30 consecutive days) operating within Houston city limits must obtain a certificate of registration from the city’s Administration & Regulatory Affairs Department. The registration fee is $275 (non-refundable) plus a $33.10 administrative fee per application. Certificates must be renewed annually, and your registration number must be displayed on all listing platforms.
Insurance Requirements
You’ll need liability insurance coverage of at least $1 million before your permit gets approved. Most operators bundle this into their STR insurance policy—companies like Proper Insurance or CBIZ offer policies specifically designed for short-term rental operators that satisfy this requirement.
Occupancy and Operational Rules
Houston restricts occupancy to two guests per bedroom plus two additional guests, with a hard cap of 10 guests total unless you receive specific approval. Quiet hours run from 10 PM to 7 AM. Guests must use designated parking areas only. Properties cannot host “special events” or advertise as event venues—this is a rule the city takes seriously.
Tax Obligations
This one’s non-negotiable. You must collect and remit Hotel Occupancy Tax (HOT), which breaks down as: 6% state tax, 7% City of Houston tax, 2% Harris County tax, and 2% Harris County-Houston Sports Authority tax—for a combined rate of approximately 17%. Airbnb and VRBO collect and remit most of these taxes automatically, but verify your platform handles all layers. Late payment penalties can reach 25% of the amount owed.
Safety Requirements
Properties must have functioning smoke detectors in every bedroom and common area, carbon monoxide detectors where applicable, clearly marked emergency exits, and accessible fire extinguishers. You also need to complete an annual human trafficking prevention training course—this is a Houston-specific requirement.
The penalty for operating without a valid registration is $1,000 per day. Don’t skip this step. Budget $400-500 for your first-year registration and make it one of your first action items. For a full breakdown of the legal framework around arbitrage agreements, check out the rental arbitrage contract guide.
Top 5 Neighborhoods for Rental Arbitrage in Houston
Not all Houston neighborhoods are created equal for arbitrage. You want the intersection of reasonable rents, high traveler demand, and proximity to demand generators. After analyzing market data and talking with active operators, these five neighborhoods stand out.
1. Montrose
Montrose is Houston’s most eclectic neighborhood and a consistent top performer for STRs. Average two-bedroom rents run around $1,700-$1,900, but Airbnb nightly rates regularly hit $155-$185. The neighborhood sits inside the Inner Loop, minutes from the Museum District, Hermann Park, and the Medical Center. Walkability, restaurants, and nightlife give it a tourist-friendly feel that most Houston neighborhoods lack. Occupancy rates in Montrose routinely exceed 65%.
2. The Heights
The Heights has transformed from a quiet residential neighborhood into one of Houston’s hottest areas. Two-bedroom rents average $1,650-$1,850, and Airbnb listings here command $140-$170 per night. The 19th Street shopping district, White Oak Music Hall, and a walkable vibe attract weekend visitors and remote workers alike. It’s also family-friendly, which opens up the mid-term rental angle for relocating families.
3. EaDo (East Downtown)
EaDo is the sleeper pick. This neighborhood sits right next to Minute Maid Park (Astros) and the George R. Brown Convention Center—two massive demand drivers. Two-bedroom rents are still relatively affordable at $1,400-$1,700, while nightly rates during Astros games and conventions spike to $200+. On non-event days, you’re looking at $120-$145. The key advantage here is the lower rent base, which means wider margins even at moderate nightly rates.
4. Midtown
Midtown is Houston’s entertainment district. Bars, restaurants, and the METRORail line make it attractive for both business travelers and weekend visitors. Two-bedroom rents average $1,500-$1,800, and nightly rates hover around $130-$160. The METRORail gives guests easy access to the Medical Center and Downtown without a car—a real selling point for medical travelers. Occupancy runs around 58-63%, but you can push it higher with dynamic pricing tools.
5. Medical Center / Museum District
If you want the most recession-proof demand in Houston, this is your area. The Texas Medical Center employs over 106,000 people and generates constant demand from traveling nurses, visiting physicians, patient families, and medical conference attendees. Two-bedroom rents run $1,800-$2,200 (higher than other neighborhoods), but nightly rates of $150-$190 and occupancy rates above 70% make the math work. This area also performs exceptionally well for mid-term rental arbitrage with 30+ day stays for traveling medical professionals.
Houston Rental Arbitrage Revenue Potential
Here’s where theory meets spreadsheet. I’ve compiled realistic revenue projections based on current market data from AirDNA and operator reports for a furnished two-bedroom unit in each target neighborhood. These numbers assume competent management, professional photos, and optimized listings—not bare-minimum effort.
| Neighborhood | Avg Monthly Rent | Avg Nightly Rate | Occupancy % | Monthly Revenue | Est. Monthly Profit |
|---|---|---|---|---|---|
| Montrose | $1,800 | $168 | 66% | $3,326 | $1,026 |
| The Heights | $1,750 | $155 | 63% | $2,930 | $680 |
| EaDo | $1,550 | $142 | 60% | $2,556 | $556 |
| Midtown | $1,650 | $148 | 61% | $2,709 | $559 |
| Medical Center | $2,000 | $175 | 71% | $3,728 | $1,128 |
How I calculated profit: Monthly revenue minus rent, minus estimated operating costs (cleaning fees net of guest charges, supplies, utilities overage, software, insurance—roughly $500/month per unit). Your actual margins will vary based on your operational efficiency, pricing strategy, and whether you self-manage or hire out. Top-performing operators I’ve spoken with clear $1,500-$2,800/month per unit because they nail occupancy above 70% and push nightly rates during peak events.
The takeaway? Even conservative projections show $500-$1,100 per month per unit in profit. Scale to three or four properties and you’re looking at a real income stream. Houston’s strength is that the ceiling is high—during Rodeo month (March) and Offshore Technology Conference (May), operators report revenue spikes of 35-50% above these averages.
Startup Costs for Houston Rental Arbitrage
One of the biggest misconceptions about rental arbitrage is that you need $20,000 to get started. You don’t. I’ve seen operators launch in Houston with under $2,000 and others invest $10,000+ for a premium setup. Here’s how the numbers break down across three budget tiers, referencing our comprehensive Airbnb startup costs guide.
| Expense Item | Budget Tier ($1K-$2K) | Mid Tier ($3K-$5K) | Premium ($7K-$10K) |
|---|---|---|---|
| Security Deposit | $1,200-$1,500 | $1,500-$1,800 | $1,800-$2,200 |
| Furniture & Decor | $800 (used/IKEA) | $2,500 (new mid-range) | $4,500 (design-focused) |
| Linens & Towels | $150 | $350 | $600 |
| Kitchen Essentials | $100 | $300 | $500 |
| Smart Lock & Tech | $80 (lockbox) | $250 (smart lock + WiFi boost) | $500 (full smart home) |
| Professional Photos | $0 (DIY) | $200 | $400 |
| STR Registration | $310 | $310 | $310 |
| Insurance (annual) | $800 | $1,000 | $1,200 |
| Cleaning Supplies | $50 | $100 | $150 |
| Total Estimated | $3,490-$3,790 | $6,510-$6,810 | $9,960-$10,360 |
A few notes on these numbers. The security deposit is unavoidable—Houston landlords typically require one month’s rent. If you’re working with a truly tight budget, look for properties offering move-in specials (Houston apartment complexes frequently waive deposits or offer reduced first-month rent, especially July through September). Furniture is where you have the most flexibility. Facebook Marketplace, estate sales, and liquidation outlets in Houston are gold mines for quality furniture at 60-70% off retail.
Don’t cut corners on your smart lock—it’s the single most important operational tool you’ll buy. Self-check-in eliminates 90% of the headaches that burn out new hosts. And skip “professional photos” only if you genuinely know how to shoot interiors with proper lighting. Bad photos will cost you far more in lost bookings than the $200 you saved.
How to Find Arbitrage-Friendly Landlords in Houston
This is the step that stops most people. Finding a landlord who’ll agree to subletting on Airbnb feels like the hardest part—and honestly, it is, until you develop a system. Houston’s advantage is scale: Harris County has over 600,000 rental units, and the city’s landlord-friendly legal environment means property owners are generally more open to creative arrangements than in tenant-protection cities.
Where to Look
Target individual landlords over corporate property management companies. Small landlords who own 2-15 units are your sweet spot—they’re accessible, they make their own decisions, and they care about reliable tenants who’ll pay above market rate. Search Zillow, Apartments.com, and Craigslist for listings by “owner” rather than management companies. Drive neighborhoods you’re targeting and look for “For Rent” signs with local phone numbers.
The Approach That Works
I’ve found that transparency wins. Don’t try to sneak Airbnb past a landlord—that’s a recipe for eviction and a ruined relationship. Instead, lead with the value proposition: you’ll pay above-market rent, maintain the property at a higher standard than typical tenants, carry $1 million in liability insurance, and provide regular property condition reports. Here’s a pitch script that’s worked for operators I know in Houston:
“Hi [Landlord Name], my name is [Your Name] and I run a professional hospitality business. I’m looking to lease your property at [Address] and I’d like to offer you $200 above your asking rent in exchange for permission to use the unit for furnished short-term housing. Here’s what I bring to the table: I carry $1 million in liability insurance that names you as additional insured. I furnish the property to hotel standards and maintain it with professional cleaning after every guest. I handle all guest vetting, and the property is monitored with noise sensors and occupancy tracking. My units typically stay in better condition than traditional long-term rentals because they’re cleaned and inspected multiple times per week. I’m happy to sign a 12-month lease, provide a larger security deposit, and share my STR registration with the city. Can we set up a time to discuss this in more detail?”
Expect a 15-20% success rate on cold outreach. That means for every 20 landlords you contact, 3-4 will be open to a conversation. Of those, 1-2 will say yes. It’s a numbers game, so don’t get discouraged by the first ten rejections. Some operators sweeten the deal by offering a small percentage of revenue (5-10%) on top of above-market rent—this aligns incentives and makes landlords feel like partners rather than bystanders.
Houston Seasonal Demand Calendar
Understanding Houston’s demand cycles is the difference between average and excellent returns. The city has distinct peaks and valleys, and your pricing strategy should reflect them. If you’re not using dynamic pricing software, you’re leaving money on the table during peaks and sitting empty during valleys.
| Month | Demand Level | Avg Nightly Rate | Occupancy % | Key Events & Demand Drivers |
|---|---|---|---|---|
| January | Low | $118 | 48% | Post-holiday slowdown, MLK weekend bump |
| February | Medium | $138 | 55% | Go Texan Day, Rodeo pre-events, Valentine’s |
| March | Peak | $195 | 78% | Houston Livestock Show & Rodeo (2.5M+ visitors), Spring Break |
| April | High | $162 | 65% | Bayou City Art Festival, Easter travel, corporate events |
| May | High | $170 | 67% | Offshore Technology Conference (OTC), graduation season |
| June | Medium-High | $155 | 62% | Summer tourism, NASA visits, Pride Houston |
| July | Medium | $140 | 56% | July 4th spike, summer family travel |
| August | Low-Medium | $125 | 50% | Extreme heat slows tourism, back-to-school move-ins |
| September | Medium | $135 | 55% | NFL season kicks off (Texans), fall conference season |
| October | High | $165 | 68% | State Fair overflow, Astros postseason (if applicable), corporate travel peak |
| November | Medium-High | $148 | 60% | Texans games, Thanksgiving travel, holiday events |
| December | Medium | $140 | 54% | Holiday travel, Zoo Lights, New Year’s Eve spike |
The strategy: March is your money month. During Rodeo season, operators near NRG Park regularly charge 2-3x their normal rate and still hit near-100% occupancy. May’s OTC conference is another goldmine—energy industry professionals flood downtown hotels, and Airbnb overflow is massive. The low season (August-September) is when you should consider pivoting to mid-term stays—traveling nurses on 13-week assignments and corporate relocations fill units that would otherwise sit empty.
Pro tip: Build a “Houston Events” list in your phone calendar. Every time a major event is announced, adjust your minimum-night requirements and pricing immediately. The operators who price Rodeo week in November are the ones who capture early bookings at premium rates.
Property Management and Automation in Houston
Running a rental arbitrage operation in Houston without automation is a recipe for burnout. The city’s sprawl means driving between properties for every turnover, key handoff, or minor issue will eat your margins alive. Here’s the tech stack and management approach that works.
Essential Automation Tools
At minimum, you need three things: a channel manager (Hospitable, Guesty, or OwnerRez), a smart lock (August, Yale, or Schlage Encode), and a dynamic pricing tool (PriceLabs or Beyond Pricing). The channel manager syncs your calendar across Airbnb, VRBO, and Booking.com—double bookings are an operator’s worst nightmare. The smart lock eliminates key exchanges. The pricing tool automatically adjusts rates based on demand, events, and competitor pricing. Together, these three tools pay for themselves within the first month. For a full breakdown of what’s available, see our guide to Airbnb automation tools.
Cleaning Operations
Cleaning is your single biggest recurring expense and your single biggest review driver. In Houston, professional STR cleaning services charge $80-$140 per turnover for a two-bedroom unit, depending on the neighborhood and whether you supply your own products. Find two reliable cleaning teams—never depend on just one. Build the cleaning fee into your listing price so guests aren’t shocked at checkout. I recommend Turno (formerly TurnoverBnB) for scheduling cleaners automatically triggered by checkout.
Guest Communication
Template your messages. Check-in instructions, house rules, local recommendations, checkout reminders—all of these should be automated through your channel manager. Respond to actual guest questions within 15 minutes during daytime hours. Fast response time is the number-one factor Airbnb uses in their search algorithm, and it’s the number-one thing guests mention in reviews. Consider a co-host if you’re scaling past three properties or if you’re not local to Houston.
Self-Management vs. Property Manager
For your first 1-3 units, self-manage. The margins are too thin to give away 15-25% to a property manager when you’re starting out. Once you hit 4+ units and the business is generating consistent cash flow, hiring a local co-host or property management company makes sense. Houston has several STR-focused property managers (Evolve, Vacasa, and local operators) who charge 15-20% of gross revenue. Just make sure they’re not managing your competitors in the same building.
Houston Rental Arbitrage FAQ
Is rental arbitrage legal in Houston in 2026?
Yes. Houston’s new STR ordinance that took effect January 1, 2026, explicitly regulates short-term rentals, which means the city has created a legal framework for operating them. You need to register with the city ($275 + $33.10 fee), carry $1 million in liability insurance, and comply with occupancy and noise rules. There’s no cap on the number of STR permits, which is a huge advantage over cities like Austin or Dallas that restrict non-owner-occupied STRs. Operating without registration carries a $1,000/day penalty, so get compliant first.
Do I need my landlord’s permission to do rental arbitrage in Houston?
Absolutely. Your lease is a legal contract, and subletting without permission can get you evicted—fast. Houston landlords can include STR-specific clauses in leases. You need explicit written permission to sublease for short-term stays. Add this as an addendum to your lease, and have both parties sign. Never assume silence equals consent.
How much can I realistically make with rental arbitrage in Houston?
Based on current market data, a well-managed two-bedroom unit in a prime Houston neighborhood generates $2,500-$3,700 in gross monthly revenue. After rent, cleaning, supplies, software, and insurance, expect $500-$1,500 in monthly profit per unit. Top operators who optimize pricing around events and maintain 70%+ occupancy clear $1,500-$2,800 per unit. The Medical Center area tends to produce the highest returns due to consistent year-round demand from the healthcare sector.
What taxes do I need to pay on Houston Airbnb income?
You’re responsible for Hotel Occupancy Tax (approximately 17% combined: 6% state, 7% city, 2% county, 2% sports authority), plus federal and self-employment income taxes on your profit. Airbnb collects and remits most HOT automatically in Houston, but verify this in your host dashboard. You’ll also want to track all deductible expenses—furniture, cleaning, software, mileage, insurance, and more. Our Airbnb tax deductions guide covers what you can write off.
What’s the best area in Houston for first-time arbitrage operators?
EaDo (East Downtown) is my recommendation for beginners. Rents are among the lowest of the top neighborhoods ($1,400-$1,700 for a two-bedroom), proximity to Minute Maid Park and the convention center drives consistent demand, and the neighborhood is still developing—meaning landlords are more open to creative arrangements. Your margin for error is wider here because your rent base is lower. Once you’ve proven the model, expand into higher-rent, higher-revenue neighborhoods like the Medical Center or Montrose.
How do I handle the slow season (August-September) in Houston?
Houston’s brutal summer heat drives tourism demand down in August and early September. Smart operators handle this three ways: First, lower your minimum-night requirement to one night to capture every possible booking. Second, list on Furnished Finder and mid-term rental platforms targeting traveling nurses and corporate relocations—the Medical Center hires year-round. Third, use the downtime for property maintenance, refreshing decor, and updating your listing photos. The operators who survive slow season profitably are the ones who planned for it during peak months.
Can I run rental arbitrage in Houston’s suburbs?
You can, but the numbers are generally weaker. Suburbs like Sugar Land, Katy, and The Woodlands have lower nightly rates and lower occupancy because they lack the walkability and proximity to demand generators that inner-loop neighborhoods offer. The exception is if a suburb has a specific demand driver—for example, properties near the Woodlands Waterway during concert season at The Cynthia Woods Mitchell Pavilion, or near the Sugar Land Space Cowboys stadium. For most beginners, stick inside the 610 Loop where demand density is highest.
Getting Started with Rental Arbitrage in Houston
Here’s your action plan. No fluff, just the steps that matter.
Week 1-2: Research and Preparation. Pick your target neighborhood (I’d start with EaDo or Midtown for the best margin-to-effort ratio). Set up a spreadsheet of 30-50 rental listings from individual landlords in that area. Calculate your break-even nightly rate for each property: monthly rent + $500 operating costs, divided by 20 nights (conservative occupancy). If the break-even rate is below the neighborhood’s average nightly rate, it’s a viable target.
Week 3-4: Landlord Outreach. Contact those 30-50 landlords with your pitch. Use the script from the landlord section above. Aim for 3-5 in-person meetings. When you get a yes, negotiate lease terms that include explicit STR permission as a lease addendum. Sign the lease.
Week 5-6: Setup and Launch. Register with the City of Houston for your STR certificate. Purchase liability insurance. Furnish the unit (use the budget tier table above to match your situation). Install a smart lock. Take professional photos. Create listings on Airbnb and VRBO. Set up your channel manager and dynamic pricing tool. Set your launch prices 15-20% below market for the first two weeks to generate initial bookings and reviews.
Week 7+: Optimize and Scale. After your first 5-10 bookings, analyze your pricing data, adjust your minimum nights, and refine your listing copy based on guest feedback. Once the first unit is profitable and systems are running smoothly, start prospecting for unit two. Most successful Houston operators reach 3-5 units within their first year.
Houston’s rental arbitrage market is mature enough to have proven demand but still early enough in its regulatory cycle that operators who get compliant now will have a significant first-mover advantage. The city’s massive, diversified economy means your income isn’t tied to one industry or one season. Texas is one of the best states for Airbnb, and Houston is the crown jewel.
If you want a step-by-step system for building a six-figure rental arbitrage business—from finding landlords to automating operations to scaling past ten units—the city-by-city arbitrage guide breaks down exactly how operators across the country are doing it. Houston is wide open. The question isn’t whether the opportunity is real—it’s whether you’ll move fast enough to capture it.
