The Investor’s Guide to SXSW Rental Properties

The Investor's Guide to SXSW Rental Properties

Like Christmas decorations hitting store shelves and shopping malls the day after Halloween, the build-up for Austin’s annual South by Southwest Festival seems to start earlier every year.

Whether it’s billboards on I-35, the endless number of parties you’re told to RSVP to, or the slow drip of confirmed artists performing, the signs of the looming festival are everywhere. Austinites prepare themselves every year for the hundreds of thousands of migrants hitting our downtown area. And while locals all have their feelings about the 10-day festival, one group of people who cherish this time of year are property owners looking to make some serious cash with short-term home rentals.

It’s no secret that the economic impact of SXSW on the city is significant. In fact, reports from last year’s festival indicate it brought in close to $348.6 billion to the city in 2017, making it the single most profitable event for the hospitality industry every year.

But for property owners with single rooms or entire homes, condos, and apartments to rent, the 10-day windfall from festival attendees is easily the most profitable week and a half of the year. While SXSW brings tens of thousands of people to Austin that attend the festival with a wristband or badge, it brings even more who are coming to experience the fantastic local food and craft beer scene, as well as catch a few free day shows or private events. That means more people in Austin who need places to stay, and the demand doesn’t seem to be slowing down anytime soon.

The most significant reason for this beneficial return on investment is the disproportionate number of attendees to hotel rooms. With hundreds of thousands of festival-goers coming to Austin and roughly 30,000 hotel rooms—only 7,000 in the downtown area—the opportunity for property owners to make some serious cash renting out their property is hard to pass up. So exactly how much are property owners making? The average nightly rental rate of a short-term rental, according to sites like HomeAway and Airbnb, can triple during the week of SXSW, with some apartments renting for $1,000 a night and larger homes for closer to $2,000 a night.

President of the Austin Rental Alliance, Joel Rasmussen, says he increases his rental price for properties he owns to around double the average rate. However, he claims that amount is minimal compared to what other people in town charge, especially the downtown area where property owners have the best chance at making a profit. “It gets crazier every year...and some people are desperate so they’ll pay it,” Rasmussen said.

But part of maximizing your chances at a profit during the week of SXSW, Austin City Limits Music Festival, or any other favorite festival weekend of the year, comes down to location. With most activities happening in or near downtown, that’s where the highest rental rates are, but with the festival getting bigger every year, many events and concerts have begun to disperse out of downtown into the surrounding areas, where short-term rental prices can still be much higher than usual. Let’s look at some of the most popular areas of town during SXSW that would make valuable property investments.

Downtown

The majority of events, concerts, and nightlife are happening in the downtown area. It’s a favorite lodging location for festival attendees because of the cut down on the stressors of driving, parking, and renting a car. Downtown lofts and apartments also give renters incredible views of the Austin skyline and easy access to public transportation. Downtown property places renters in the heart of the festival, with easy access to shows and parties on Austin’s historic 6th street. There are music venues like The Mohawk, Barracuda, Sidewinder, and Empire Control Room in the Red River music district, where a large number of shows occur. There is also easy access to Auditorium Shores on Lady Bird Lake where a free outdoor concert happens every year. It is also a short walk to the Convention Center, as well as many great restaurants and bars for SXSW Tech and Interactive attendees.

South Congress

One of the most quintessential Austin neighborhoods for that quirky, Keep Austin Weird vibe is South Congress (SoCo). Those looking to invest can find cute and vibrant bungalows and older homes with a unique style. And while its a little over a mile from the downtown area, there is a multitude of official and unofficial concerts and other activities. It's easy to catch daily performances at Hotel San Jose, as well as shows at one of Austin’s most important and historic music venues, The Continental Club. South Congress also has a wide selection of local eateries, arts and crafts, and shopping destinations that festival attendees are drawn to by the thousands.

East Austin

For permanent residents and tourists alike, East Austin has become a favorite destination, not only during SXSW but throughout the year. From great music venues to local breweries and watering holes, and some of the best and most notable local restaurants, this one-time hipster haven has seen an influx of new apartment complexes and homes, which makes it a great location to invest in real estate. Close to SXSW showcase venues like Hotel Vegas and Scoot Inn, the east side is also the perfect area to spend a sunny day bar hopping and people watching for festival goers that don’t have a badge or wristband. With great coffee shops, brunch locations, and the legendary Franklin BBQ in the area, you can guarantee it will be a popular neighborhood year round.

At Domain Realty, we know the Austin neighborhoods you should be investing in because Austin is our home. We have spent our lives here and can quickly identify the best areas in town to invest in real estate. If you choose to rent your property out during SXSW, or the multitude of other Austin festivals and are in need of a property manager, we can seamlessly connect you with our partners at Domain Property Management to assist you with your needs. Contact Domain Realty today at (512) 872-4211 to speak with a real estate professional.

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