Converting Your San Antonio Home to a Rental: What Changes the Day You Sign the Lease

Turning your San Antonio house into a rental is not just "find a tenant and collect rent." The moment the property stops being owner-occupied, your insurance policy, your homestead exemption at BCAD, your mortgage's occupancy clause, and your legal duties under Chapter 92 of the Texas Property Code all change. Handle those items before the tenant signs, not after.

This is written for owners keeping one house — a PCS move out of JBSA-Randolph, a step-up to a bigger place in Stone Oak, an inherited property in Southtown — not for investors building a portfolio. The traps are different.

Your homeowner's policy stops covering you

A standard HO-3 policy assumes you live in the house. Once a tenant moves in, most carriers will either non-renew or deny a claim if they learn the property is rented and the policy wasn't converted. You need a DP-3 (dwelling fire) landlord policy, plus a landlord liability endorsement — typically $300K–$1M. Tell your carrier the change is coming; do not wait for renewal.

Separately, require the tenant to carry renter's insurance with you named as an additional interested party. It is cheap for them ($10–$20/month in most SA ZIPs) and it puts their belongings and their liability on their policy, not yours. Put the requirement in the lease with a specific minimum liability figure.

You lose the homestead exemption — and the 10% cap

Under Tax Code § 11.13, the homestead exemption only applies to your principal residence. Once the house is a rental, you are required to notify the Bexar Appraisal District that it no longer qualifies. Two things happen:

• The exemption (school district $100K plus any local exemptions) comes off, so the taxable value jumps.
• The 10% annual appraisal cap under Tax Code § 23.23 also goes away. A rental has no cap, meaning BCAD can move the appraised value to full market value in one cycle.

Run the numbers before you commit. On a $350K house in NEISD boundaries, losing the exemption plus the cap can add $1,500–$3,000/year to the tax bill depending on how far the capped value sat below market. If you plan to move back within two years, some owners keep the homestead on their new primary residence and accept the loss here — but you cannot claim homestead on two properties.

When the notice of appraised value arrives around April, you can still protest under Tax Code § 41.41 as the owner. File through BCAD's online portal by the deadline on the notice (typically May 15 or 30 days after the notice, whichever is later).

Your mortgage has an occupancy clause — read it

Most owner-occupied loans (conventional, FHA, VA) require you to occupy the property as a primary residence for 12 months after closing. If you closed 14 months ago and are now renting it out, you are fine. If you closed four months ago, renting it out is technically a violation and can be treated as occupancy fraud. Servicers rarely audit, but the risk is real if you refinance or if the loan is called.

Call your servicer, tell them the property is becoming a rental, and ask them to update the mailing address and confirm there is no issue. VA loans have specific rules around PCS orders — if you are a servicemember being reassigned, occupancy relief is built into the program. Get that in writing from the VA regional loan center.

Utilities and account handoff

San Antonio splits utilities in a way that trips up out-of-town buyers who became accidental landlords:

• CPS Energy handles electric and gas. Not water.
• SAWS handles water and sewer. Not electric.
• Trash is typically City of San Antonio Solid Waste inside city limits, or a private hauler in Schertz, Cibolo, Converse, or unincorporated Bexar County.

Decide before listing whether the tenant puts utilities in their name (standard for single-family) or you keep them and bill back (rare, and usually a mistake for SFR). If tenant-paid, the lease should specify which accounts they must open and by what date. SAWS in particular will lien the property for unpaid water bills, so if the tenant defaults and moves out, you own the balance. Some landlords keep the SAWS account in their name and bill it through as additional rent to avoid the lien risk — talk to a Texas real estate attorney about how to structure that clause.

Your legal duties under Chapter 92 begin immediately

Once you are a landlord, the Texas Property Code imposes duties that do not exist for owner-occupants:

• § 92.052 — duty to repair conditions that materially affect health and safety, once the tenant gives written notice and is current on rent.
• § 92.153 — smoke alarms in every bedroom and on every level, tested and working at move-in.
• § 92.0561 — the tenant's right to repair-and-deduct if you fail to act on a proper notice.
• § 92.103 — security deposit must be returned within 30 days of surrender, with an itemized list of deductions if any are made. § 92.109 allows the tenant to sue for three times the wrongfully withheld amount plus $100 and attorney's fees.
• § 92.108 — you cannot retaliate (raise rent, terminate, refuse to renew) against a tenant who exercises a statutory right within the prior six months.
• § 92.331 — no lockouts except under narrow statutory conditions with proper notice.

Use a current TAA (Texas Apartment Association) residential lease or a lease drafted by a Texas attorney. A generic online template will miss the required statutory disclosures.

Pricing: comp the block, not the ZIP

Rent inside 78209 (Alamo Heights) varies by hundreds of dollars per month depending on whether the house feeds Alamo Heights ISD or SAISD — and buyers/renters know the boundary line. Same logic in 78258 (parts NEISD, parts NISD) and 78154 in Schertz (SCUCISD vs Judson).

Pull three data points before setting the number:

• Active SFR rentals within a half mile at similar bed/bath count — SABOR MLS if your agent will run it, or public listings on HomeFinder and the usual portals.
• Recently leased comps within 90 days at the same square footage band.
• Days on market for the actives. If comparable homes are sitting 45+ days, the list price is too high; drop 3–5% and re-test.

Overpricing by $150/month to "see what happens" typically costs a full month of vacancy, which is worth 12 months of that $150. The math never works.

What most people get wrong

• Skipping the DP-3 conversion. They keep the HO-3, a tenant fire claim gets denied, and the loss is uninsured.
• Forgetting to remove homestead at BCAD. The exemption sits on the property, BCAD catches it later, and the back taxes plus penalties land in one bill.
• Using a handshake lease or a template from a non-Texas site. No § 92.056 language, no proper late fee cap under § 92.019, no lead paint disclosure for pre-1978 homes. All of it is enforceable against you, not the tenant.
• Collecting last month's rent and calling it a deposit. In Texas, if you label it a security deposit, it is one, and § 92.103 rules apply. If you label it prepaid rent, it is income in the year received. Pick one deliberately.
• Not adjusting withholding or estimated taxes. Rental income is taxable, but depreciation and expenses offset it. A CPA who does Schedule E returns will save you more than the fee — especially in year one, when you set the depreciation basis for the next 27.5 years.
• Assuming a military tenant is automatically a risk. JBSA tenants are often the most reliable renters in the market; the SCRA (§ 3955) termination right on PCS orders is a feature, not a bug. Screen the same way you would anyone else.

Before you list

Walk the house with a punch list: HVAC serviced, smoke alarms and CO detectors installed and tested, GFCIs working in kitchen and baths, no active leaks, all keys and garage remotes accounted for, and photos taken of every room and every wall before the tenant takes possession. Those photos are your evidence for the § 92.104 deposit deduction letter if it comes to that.

When you are ready, list the property free at /list-your-home, browse the market to see what you are competing against at /rentals, or connect with a local leasing agent at /agents if the paperwork side is what is keeping you from pulling the trigger.