Austin, TX, Real Estate... What's the deal?

Question

Hi all,

I am moving to Austin, Tx, next month and I want to get involved in my first property deal! I know this is general, but does anyone have any tips specifically for someone with the below criteria? Any help would be greatly appreciated as I want to learn as much as I possibly can about this new city (good neighborhoods, success stories, networking opps - lenders, agents, prop managers, etc.):

1. Rental property

2. budget: $150k-$200k

3. Interested in #1 cash-flow potential (replace my income) and #2 appreciation (great investment)

As a secondary question, how do you all think COVID will affect the Austin RE market if at all? Will we start seeing deals sometime soon, and why?

Danny Webber · Answer

Welcome!

150-200k will not get you much as a traditional rental in the area. I would consider either stepping out some in distance or looking for BRRR properties using private money to get started.

Jordan Moorhead · Answer

@Ajeet Baath I would think Bastrop and Taylor would be at the top of my list there

Ajeet Baath · Answer

Any suggestions of good satellite cities that are growing and would be worth looking into?

Jordan Moorhead · Answer

@Ajeet Baath I also suggest househacking or looking outside the city could be a good bet. There's lots of areas within 1 hour of Austin that could work for that budget but not in Austin.

Jeremy Vandermause · Answer

Hey @Ajeet Baath!

First, welcome to Austin! The real estate market here is very hot to say the least. Multiple offers on almost every decent house you can find. Average home price is in the high 300s, low 400s. Covid has barely affected the market in terms of price. Inventory has been low because sellers are holding off until it gets a little easier for people to actually go to open houses and tour homes. If you're looking for a rental property in that price range, your best bets are the surrounding towns outside of Austin (not far, maybe 30 min).

As far as neighborhoods and getting in touch with agents, lenders, property managers, etc - I will send you a message! Too much info to type out here.

Jeremy Vandermause | Shaffer Properties

Account Closed · Answer

Look in the southeastern part of the country for what you are looking for in sub $100K homes, lower property taxes, insurance, higher cash flow, and some appreciation.

The property taxes combined on my 5 rent houses I have out of state, almost equal what I pay on my residential house here in the Austin area.

North of Austin in the burbs is no better like Cedar Park, Leander, Georgetown, and Liberty Hill. It's booming out here, subdivisions going up left and right, luxury apartments by the thousands. If appreciation was your main goal, then yes this is the area, but you will need more funds.

We bought our house 3 bed, 2 bath, 2 car garage, 1,700 sq. ft. built in 1993 here in Leander on the back half of 2008 for $144,900 and today it is worth over $245,000.

Good luck to you

Andres Bustamante · Answer

@Ajeet Baath

1.) It can vary depending on the Loan Officers, you might be looking at a minimum 0.75% higher.

2.) Not necessarily, obviously depends on how much you put down. For example on mine I have a 3.5% and put 10% Down so I'm only paying $41 PMI. It all depends on the DP, if you put around 3% then it'll be higher for sure. Also if you put 20% as an Investment you're still looking at higher interest rates, so even with the PMI you might be paying less overall because of the lower interest rates. PMI varies depending on the amount you put down since the Lenders are hedging against a potential default.

3.) Yes, as long as you live in the property for a year right after closing, that's how it's considered a primary residence.

Joe Scaparra · Answer

@Ajeet Baath, if you house hack you will qualify for the same interest as a personal home.  I recommend a duplex.  Live on one side, rent out the other and your 20-30k is plenty for the down payment.  Your biggest obstacle might be qualifying for the higher priced property than you were originally planning on buying.  However, if you can qualify, you might find the duplex strategy costing you less than your rental on a monthly basis.  If you're really motivated, renting out a room on your side of the duplex just might make your living cost nil.  Cheers.

Ajeet Baath · Answer

@Andres Bustamante A few questions your response:

1. How much of a difference in interest rates are we talking, generally?

2. With house hacking, I put very little down but that would make my payments astronomical, right? And then I would have to worry about PMI? With that being the case, is there still a significant benefit?

3. After I move out of the house hack and rent out the unit I once lived in, would I get to keep the "low interest rates" you mentioned?

Thanks in advance

Andres Bustamante · Answer

Ajeet, I'd definitely look into House Hacking. As an Investment property you're looking at putting a minimum 20% Down and you'll have higher interest rates. With House Hacking, as a first time home buyer you can put as low as 3% and take advantage of the low interest rates.

As for the price point you're looking at, in the City of Austin the Median Price point is $429k. Austin Metro is around $326k, I'd say your best bet is Manor or Bastrop.

Austin, TX, Real Estate... What's the deal?

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