Overview: Are Short-Term Rentals Allowed in Stephenville, TX?

Yes, short-term rentals are explicitly allowed in Stephenville, Texas. The city officially recognized and defined short-term rentals in its municipal code through Ordinance No. 2020-O-__, which amended Chapter 36, Article II of the City Code of Ordinances. The ordinance became effective January 1, 2021, and specifically includes short-term rentals within the definition of "Hotel" for hotel occupancy tax purposes.

Stephenville maintains a low regulation environment for short-term rentals compared to many Texas cities, with no additional licensing requirements beyond tax compliance. This creates a relatively straightforward path for investors to operate STRs in the market.

How to Start a Short-Term Rental Business in Stephenville

Market Opportunity Assessment

Stephenville offers a compelling STR investment opportunity driven by:

Tarleton State University Influence

• The city is home to Tarleton State University, creating consistent demand from students, visiting families, and university-related events
• Occupancy peaks align with the academic calendar: semester start/end, graduations, homecoming weekends
• University events provide predictable booking cycles

Tourism and Cultural Attractions

• Stephenville is known as the "Cowboy Capital of the World," attracting rodeo enthusiasts and Western culture tourists
• Local rodeo events, particularly the annual Cowboy Capital of the World PRCA Rodeo, draw regional visitors
• Historic downtown district and cultural attractions provide additional tourism appeal

Property Performance Metrics (2025 Market Data)

• Average Daily Rate (ADR): $222
• Average Annual Revenue: $26,593 per listing
• Current Active Listings: 90 properties
• Occupancy Rate: 39.2%
• Revenue Growth Year-over-Year: 4.2%

Market Positioning Strategy

Optimal Property Types

• Houses represent 64.4% of the market, indicating strong demand for entire-home rentals
• 3-bedroom properties dominate (31.1%), serving families and small groups
• Properties accommodating 8+ guests represent 26.7% of listings, serving larger groups

Target Guest Demographics

• 99% domestic travelers, primarily from Texas (San Antonio and Fort Worth as top origins)
• 50% of guests belong to Post-2000s generation (Gen Z/Alpha)
• Peak booking periods: October (78-day lead time), May (peak revenue month)

Required Documents, Permits, Licenses, and Guidelines

State Requirements

Texas Hotel Occupancy Tax (HOT)

• Rate: 6% of gross rental receipts
• Threshold: Applies to all reservations of 29 nights or fewer
• Reporting: Monthly filing required with Texas Comptroller
• Scope: Includes base rental rate plus all cleaning fees and additional charges
• Due Date: 20th day of the month following collection

Local Requirements

Stephenville Compliance

• No additional city-level permits or licenses required beyond state tax compliance
• No local hotel occupancy tax imposed by the city
• No specific zoning restrictions for STR operations identified

Documentation Requirements

• Register with Texas Comptroller's office for HOT collection
• Maintain records of all rental transactions
• Collect and remit 6% state HOT monthly
• Coordinate with tax professionals for compliance setup

Recommended Business Structure

Professional Management Considerations

• Consider engaging local property management companies for operational efficiency
• Ensure compliance with state tax requirements regardless of management structure
• Maintain separate business records for tax compliance

Specific Regulations: City, County, and State Level

City of Stephenville Regulations

Municipal Code Amendments (Ordinance No. 2020-O-__)

• Definition: Short-term rentals are defined as "consideration for occupancy of all or part of a residential structure/residential property, whether or not permanently occupied by others"
• Tax Classification: STRs are subject to the same hotel occupancy tax framework as traditional hotels
• Effective Date: January 1, 2021
• Compliance: Required to comply with hotel occupancy tax collection and remittance

No Additional City Requirements

• No separate STR registration process
• No local licensing requirements
• No zoning restrictions specifically for short-term rentals
• No property inspection requirements beyond standard residential codes

County Level (Erath County)

Limited County Oversight

• No specific county-level STR regulations identified
• Standard county business licensing may apply for operating any business
• Property taxes apply under standard residential/commercial classifications

State Level Regulations (Texas)

Texas Hotel Occupancy Tax Requirements

• Mandatory collection for stays under 30 days
• 6% tax rate on gross receipts
• Monthly filing requirement with state comptroller
• Potential penalties for non-compliance

General Business Requirements

• Standard Texas business registration if operating as a business entity
• Insurance requirements as standard for rental property operations
• Compliance with all applicable state landlord-tenant laws for short-term stays

Contact Information for Local Authority

City of Stephenville

Municipal Government

• City Manager: Allen L. Barnes (per ordinance review)
• City Secretary: Staci L. King
• City Attorney: Randy Thomas
• Mayor: Doug Svien

Note: Contact information for specific tax or business licensing departments was not provided in the source materials. Investors should contact the city directly for current department contacts.

State Tax Authority

Texas Comptroller - Hotel Occupancy Tax

• Website: comptroller.texas.gov/taxes/hotel/
• Phone: Contact through main comptroller office
• Filing: Online portal available for monthly tax remittance

Recommended Initial Contacts

City Hall (Stephenville)

• Purpose: Confirm no additional local requirements or recent ordinance changes
• Approach: Request to speak with planning/zoning or tax department regarding STR operations

Erath County

• Purpose: Verify no county-level business licensing requirements
• Approach: Contact county clerk or tax assessor-collector office

Links to Source Pages

Official Documents

• Stephenville Ordinance No. 2020-O-__: mccmeetingspublic.blob.core.usgovcloudapi.net/stphnvlltx-meet-2ea9aa8bfa264f87ad0ddc2fe92feb6f/ITEM-Attachment-001-e4e580c13fb44ac9894be1fc9f1559d3.pdf

Market Analysis and Industry Information

• AirROI Market Report: www.airroi.com/report/world/united-states/texas/stephenville
• Texas Hotel & Lodging Association STR Update: texaslodging.com/short-term-rental-str-update-2018/

Property Management Services (For Reference)

• Surge Property Management: www.gowithsurge.com/airbnb-management/stephenville-texas
• Checkmate Rentals: www.checkmaterentals.com/airbnb-management/stephenville-texas

Investment Considerations and Recommendations

Risk Assessment

• Regulatory Risk: Low in Stephenville due to minimal specific regulations
• Market Risk: Moderate due to university-dependent demand cycles
• Tax Compliance: Primary operational requirement for legal operation

Revenue Optimization Strategies

• Peak Season Pricing: Capitalize on university events and rodeo weekends
• Dynamic Pricing: Adjust rates based on demand cycles (peak: May, low: January)
• Minimum Stay Flexibility: 45.6% of market uses 1-night minimum, but consider longer stays during peak periods

Due Diligence Checklist

• [ ] Confirm current state and local tax rates
• [ ] Verify no HOA restrictions on STR operations
• [ ] Review property insurance requirements for commercial rental use
• [ ] Establish tax collection and remittance procedures
• [ ] Consider professional property management for operational efficiency

Stephenville presents a favorable environment for short-term rental investment with its combination of institutional demand drivers, tourist attractions, and minimal regulatory burden, making it an attractive market for investors seeking to enter the Texas STR landscape.