Do you wish you HADN'T bought rental property in Austin?

4 Replies

Hi everyone --

I'm a newbie (very green) and am starting Buy and Hold deal discussions with a someone who has two very profitable rental homes in Austin on one lot.  If I do the deal, one escape route I'm strongly considering is splitting the land into two lots, allowing me to sell off each home individually.

1. Has anyone else in Austin done this (I know the answer is yes!)?  How hard was it to work with the city of Austin to make these changes?

2. Looking to do owner financing to purchase this, and I don't have a ton to put down.  I know I'll want the deed (obviously) before splitting the homes up.  How do you guys feel about balloon payments?  I've never been a fan, so I'm wondering how someone else might structure the deal so that the deed ends up in my hand as quickly as possible.

Thank you in advance!


1. Yes. It is difficult. Alternatively you can just create a condo regime.

2. Balloon is fine as long as you buy at a price you can sell quickly if needed. 

Right now the city of Austin is trying their best to make division of lots very difficult as it has gotten out of control on the Eastside. Condo regime is a great alternative.

If you do a balloon, have your numbers tight because that's a dangerous way to finance if you aren't careful.

@Karen Morgan

Congrats on the project!

I've done subdivisions with the city. 

The short answer is, subdivisions with the City of Austin are never simple. 

The longer answer is:

  • There are 8 departments that work together to sign off and approve the subdivision plan.
  • The subdivision will have to comply with the very cumbersome land development code that Austin has. 
  • You will need engineers to do drainage studies.
  • It will cost you at least $25,000 for the subdivision
  • You will have additional costs during development because you will likely lose your water tap and your wastewater connection on at least one of the lots (I'm assuming that the existing connections will no longer fall within the guidelines of the land development code)..
  • The city will tell you that this takes 6 months. I would plan on 18.

The easier solution, as others have mentioned, is to sell off each individual house under a condo regime. Creating this does not involve the city at all, it's done by a lawyer. 

This requires you to 

  • get a survey
  • have the lawyer divide the property into common elements, limited common elements.
  • create an HOA. There may be no fees inside the HOA, but you will probably need/want one to control decision making on the common elements
  • file the legal paperwork with the state
  • This will take your lawyer about 2 weeks
  • Cost on this will be probably be around $4000, maybe a little less by the time you've paid the lawyer and the survey company.
  • Your sales price on the houses will likely not be any less for doing this. Assuming they are 2 separate houses, you can still list them in the MLS as houses instead of condos. Shared wall condos take a small hit on pricing per unit.

Hope that helps!


@Will R.

@Account Closed

Thanks to each for the tips!  I went down to the City last Friday to ask them about subdivision versus condo regime - it was time well spent (note:  get there 30 minutes early on a Friday morning and you're in & out quickly. I was able to speak with Residential AND Commercial folks and be out by 8:15 am!).  It seems the property is perfect for condo regime, and won't even qualify (due to lot size) for subdivision.  That said, I'll get with my lawyer asap and hope I can get the offer to go through so I can make the condo regime happen!  Lynn - there are no shared walls so hopefully they'd end up selling for full value.

Oh yes...I'm working on an offer that does NOT include a balloon payment.  I don't want to get myself stuck succombing to paying a balloon off.