Legal & Compliance Tips for Real Estate Investors in Texas

Protecting Your Investment Through Compliance

Real estate investing in Dallas-Fort Worth can be highly profitable, but success requires more than just finding good deals. Understanding and complying with legal requirements protects your investment, reduces liability, and ensures long-term profitability.

This guide covers essential legal and compliance considerations for DFW real estate investors.

Understanding Texas Landlord-Tenant Law

Key Legal Framework

Texas Property Code governs landlord-tenant relationships throughout the state.

Core Principles:

• Written lease agreements strongly recommended
• Security deposit limits (typically no more than 2 months' rent)
• Required disclosures must be made
• Proper eviction procedures must be followed
• Habitability standards must be maintained

Security Deposit Rules

Texas law strictly regulates security deposit handling:

Requirements:

• Must be returned within 30 days of move-out
• Deductions must be itemized in writing
• Normal wear and tear cannot be charged
• Interest not required (unless specified in lease)
• Deposit must be held in separate account

Consequences of Violations:

• Liability for $100 plus three times the deposit amount
• Tenant's attorney fees
• Loss of ability to collect actual damages

Lease Agreement Essentials

A comprehensive lease agreement should include:

• Names of all tenants and landlord
• Property address and description
• Rental amount and due date
• Security deposit amount
• Lease term (start and end dates)
• Late fee policy
• Maintenance responsibilities
• Pet policies
• Subletting restrictions
• Early termination conditions

Fair Housing Compliance

Federal and State Requirements

Fair Housing laws prohibit discrimination based on protected classes.

Protected Classes:

• Race
• Color
• National origin
• Religion
• Sex (including sexual harassment)
• Familial status (families with children)
• Disability

What This Means for Investors:

• Screen all applicants using same criteria
• Document all tenant selection decisions
• Never advertise preferences for protected classes
• Provide reasonable accommodations for disabilities
• Treat all tenants equally

Marketing Your Rental

Compliant Language:

• "Available now"
• "2-bedroom, 1-bath"
• "Near schools and shopping"

Prohibited Language:

• References to family status
• Religious references
• Discriminatory preferences
• Exclusions based on protected classes

Required Disclosures in Texas

Mandatory Disclosures

Texas law requires specific disclosures to tenants:

Lead-Based Paint Disclosure:

• Required for properties built before 1978
• Must provide EPA pamphlet
• Disclose known lead hazards
• Allow 10-day inspection period

Property Condition Disclosure:

• Prior flooding or water damage
• Previous foundation problems
• Past insurance claims
• HOA information
• Registered sex offenders in area (upon request)

Landlord Information:

• Owner's name and address
• Property manager information
• Emergency contact details
• Where to send legal notices

Timing of Disclosures

Most disclosures must be provided:

• Before lease signing
• In writing
• With tenant acknowledgment
• Retained in your records

Eviction Procedures

Legal Process Requirements

Texas eviction procedures must be followed precisely.

Step-by-Step Process:

1. Notice to Vacate:

   • Must be in writing
   • Minimum 3-day notice (rent nonpayment)
   • Specify reason for eviction
   • Deliver properly (posting, mailing, or hand delivery)

2. File Eviction Suit:

   • File with Justice of the Peace court
   • Pay filing fees
   • Serve tenant with citation
   • Wait for court date

3. Court Hearing:

   • Present evidence
   • Obtain judgment if successful
   • Receive writ of possession

4. Constable Eviction:

   • Wait 24 hours after writ issued
   • Constable removes tenant
   • Never self-evict or change locks

Common Eviction Mistakes

Avoid These Errors:

• Self-help evictions (illegal in Texas)
• Utility shut-offs
• Changing locks without court order
• Removing tenant's belongings
• Harassment or intimidation

Property Maintenance Standards

Habitability Requirements

Landlords must maintain habitable conditions:

Minimum Standards:

• Functioning heating and air conditioning
• Adequate plumbing and hot water
• Working electrical systems
• Structural integrity
• Pest-free environment
• Secure locks on doors
• Weather-tight windows and roof

Repair Obligations

Landlord Responsibilities:

• Major repairs and replacements
• Structural issues
• Plumbing and electrical systems
• HVAC maintenance
• Exterior maintenance

Tenant Responsibilities:

• Minor repairs under certain lease terms
• Damage caused by tenant
• Reporting problems promptly
• Maintaining cleanliness

Response Timeframes

While Texas doesn't mandate specific repair timeframes, reasonable responses are expected:

• Emergency issues: 24 hours
• Essential services: 48-72 hours
• Non-emergency issues: 7-14 days

Insurance Requirements

Adequate Coverage

Proper insurance protects your investment:

Essential Policies:

1. Landlord Insurance:

   • Property damage coverage
   • Liability protection
   • Loss of rental income
   • Legal expense coverage

2. Umbrella Policy:

   • Additional liability coverage
   • Protects personal assets
   • Recommended for multiple properties

3. Flood Insurance:

   • Required in flood zones
   • Recommended for all DFW properties
   • Separate from standard coverage

Tenant Insurance Requirements

While Texas doesn't require tenant insurance, landlords can:

• Require renters insurance in lease
• Specify minimum coverage amounts
• Request proof of coverage
• Include landlord as additional insured

Entity Structure Considerations

Protecting Personal Assets

Many investors use legal entities for liability protection:

Common Structures:

1. LLC (Limited Liability Company):

   • Personal asset protection
   • Pass-through taxation
   • Flexible management
   • Recommended for most investors

2. Corporation:

   • Strong liability protection
   • More complex administration
   • Potential double taxation
   • Suitable for large portfolios

3. Sole Proprietorship:

   • Simplest structure
   • No liability protection
   • Not recommended for rentals

Entity Formation Steps

1. File formation documents with Texas Secretary of State
2. Obtain EIN from IRS
3. Create operating agreement
4. Open business bank account
5. Obtain necessary insurance
6. Transfer properties to entity

Tax Compliance

Federal Tax Requirements

Investor Obligations:

• Report rental income on Schedule E
• Track deductible expenses
• Calculate depreciation properly
• File quarterly estimated taxes
• Issue 1099s to contractors ($600+)

Deductible Expenses:

• Mortgage interest
• Property taxes
• Insurance premiums
• Repairs and maintenance
• Property management fees
• Advertising
• Professional fees
• Utilities (if landlord-paid)

Texas State Taxes

Texas-Specific Considerations:

• No state income tax on rental income
• Property taxes are deductible
• Franchise tax may apply to entities
• Local hotel occupancy tax (short-term rentals)

Short-Term Rental Regulations

Growing Compliance Requirements

DFW cities increasingly regulate short-term rentals:

Common Requirements:

• Registration with city
• Zoning compliance verification
• Occupancy limits
• Parking requirements
• Noise restrictions
• Safety standards (smoke detectors, etc.)
• Hotel occupancy tax collection

City-Specific Rules:

• Dallas: Registration required, owner-occupied preference
• Fort Worth: Permit required in certain areas
• Plano: Limited to certain zoning districts
• Frisco: Registration and inspections required

HOA Compliance

When Your Property is in an HOA

Many DFW investment properties are in HOAs:

Investor Responsibilities:

• Review CC&Rs for rental restrictions
• Comply with architectural guidelines
• Pay HOA dues on time
• Obtain tenant information for HOA
• Ensure tenants follow HOA rules
• Attend hearings if violations occur

Rental Restrictions

Some HOAs limit or prohibit rentals:

• Minimum lease terms (often 6-12 months)
• Caps on rental units in community
• Approval processes for tenants
• Registration requirements
• Fines for non-compliance

Working with EnterActDFW

Compliance Support

At EnterActDFW, we help investors navigate legal requirements:

Our Services:

• Review of leases and disclosures
• Tenant screening procedures
• Referrals to qualified attorneys
• HOA navigation assistance
• Entity formation guidance
• Market compliance updates

Staying Informed

Laws and regulations change frequently. Stay compliant by:

• Consulting with real estate attorney
• Joining local real estate investment groups
• Attending landlord education courses
• Subscribing to compliance updates

Get real-time compliance and market updates via text. Text INVEST to (832)-346-9569 for important regulatory changes, tax deadlines, and investment opportunities in DFW. Message and data rates may apply. Reply STOP to opt out.

The Bottom Line

Legal compliance isn't optional—it's essential for long-term investment success. Understanding and following Texas real estate law protects your investment, reduces liability, and maximizes profitability.

Ready to invest in DFW real estate with expert guidance? Contact EnterActDFW today for a consultation on finding and managing compliant investment properties.

---

This article provides general information and does not constitute legal advice. Consult with a qualified attorney for advice specific to your situation. Laws and regulations are subject to change. Information current as of November 2025.