Out of State rentals: Austin, TX

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Out of State rentals: Austin, TX

Jon McCarron
Real Estate Agent · Salem, MA · Member since 2014 · 114 posts · 78 votes

Hello All,

Recently, 2 old college roommates of mine moved to Austin, Texas. I told them that I can't wait to make a visit down there (I am currently in Massachusetts) to see them, and check out the city. But giving it some thought, I figure, why not check out some real estate while I am there. I have not done out of state deals before, so I am not sure how I would get started with it. I think I am going to plan and visit those guys in March 2015, so like 5 months away. 

My strategy would be buy and hold rental/s that produce positive cash-flow. Single or multifamily homes.

I am currently listening to any BP pod-casts related to out of state investing, and reading any blogs and forums about the subject as well. And I figure I would send this out to get even more perspective.

My questions are as follows:

1) What are some good places to start research about the city? Websites, blogs, newspapers?

2) How/ when would I consider building contacts/team for Austin? Suggested property management companies or real estate agents or agencies.

3) Any suggestions on areas to avoid, or any areas to definitely check out?

Thank you for any and all advice! 

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Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
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Hi Jon,

I live in LA and have always bought out-of-state. You will always hear people on one side or the other about it, but certainly know that plenty of people do it just fine. I wouldn't do it any other way personally. Not everyone will agree, but who cares, my investing has nothing to do with their opinions. :)

To answer your questions...the best thing is to network, especially on BP. Just start asking around for anyone working in or around that area. That's the best starting point. My word of caution though, is make sure you understand how to calculate cash flow correctly because you want to be sure you will get positive cash flow out of a property. The reason I say that is Austin isn't too slick on price-to-rent ratios that produce positive cash flow. Houston, Dallas, and some of San Antonio are good, but Austin isn't usually known for it. Not to say you can't find anything there, but it will be much harder.

Best of luck! You'll have fun with it.

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  • Jim Sestito
    Investor · Cambridge, MA · Member since 2013 · 264 posts · 104 votes
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    Hello @Jon McCarron 

      I can't speak for Austin TX specifically but I would take advantage of that fact that you have 4 feet on the ground down there.

     Pick their (your friends) brains as much as you can.  Where do they like to hang?  What areas are they most comfortable in?  Where are the areas that they would avoid?  Where are the renters renting - how much are they getting.

     Look on the trulias and zillows and when you see an interesting property have them do a drive by.  Most likely they will be excited to be apart of your investing journey.

    Good Luck

    Jim 

    1Reply
  • Dan BurstainBusiness Member
    Real Estate Agent · Austin, TX · Member since 2014 · 361 posts · 331 votes
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    Hi @Jon McCarron ,

    I would be happy to answer any questions you have.  I have lived in Austin on two different occasions for over 10 years now and run a real estate investment company out here as well as hold my own income property here.  I am a Realtor so I can email you properties that might fit your criteria and help you manage them or find property management.  Happy to help.

    Dan Burstain, JB Goodwin Realtor  

    cell: 512-588-3260

    [email protected]512-588-3260
    Dan Burstain, Investment Realtor51 Review
    WebsiteView Page
    0Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
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    What would compel you to consider such a risky prospect?

    0Reply
  • Dawn AnastasiPro Member
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
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    @Jon McCarron  do your friends have any real estate investing experience?

    Podcast Guest on Show #29
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  • Frankie Woods
    Investor · Arlington, VA · Member since 2012 · 1k+ posts · 491 votes
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    @Jim Sestito is right on the money.  If you can get your friends interested in this real estate game, that would be your best bet.  You can use them to leverage the local REAIs.  I am attempting a similar strategy in ATL, and it seems to have legs.

    1Reply
  • Jon McCarron
    OP
    Real Estate Agent · Salem, MA · Member since 2014 · 114 posts · 78 votes
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    @Account Closed  If I were to buy the property right now, knowing nothing about the area, sure that would be a risky prospect. However, I am planning on a trip five months from now. In that time, I feel I can do a lot of research on the area. Use BP to possibly connect (2 people already offered their help). From gaining more knowledge and having people that want to help, I feel a lot of the risk is taken out.

    1Reply
  • Jon McCarron
    OP
    Real Estate Agent · Salem, MA · Member since 2014 · 114 posts · 78 votes
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    @Dawn Anastasi Neither of them do personally. One of my friend's dad owns rental properties in Maine.

    @Jim Sestito That's good advice. I started texting them yesterday to get their info on where they live, what they pay for rent, type of rental (house, complex, etc) Gotten some good info just from them, so far.

    0Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
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    Originally posted by @Jon McCarron:

    @Account Closed  If I were to buy the property right now, knowing nothing about the area, sure that would be a risky prospect. However, I am planning on a trip five months from now. In that time, I feel I can do a lot of research on the area. Use BP to possibly connect (2 people already offered their help). From gaining more knowledge and having people that want to help, I feel a lot of the risks is taken out.

     That dosen't answer the question.  Distance increases risk AND expenses.  You are choosing distance because.....?  You seem to know nothing about that market so your "plan" would seem foolish to most.

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  • Jon McCarron
    OP
    Real Estate Agent · Salem, MA · Member since 2014 · 114 posts · 78 votes
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    @Account Closed Thank you for your reply. I understand increased expenses (management, travel costs, etc.)Please let me know if I am missing any other "out of state" costs. Could you explain how more risk is involved? This is why I am posing this question to this community to get all angles and aspects of out of state investing. I am okay with looking foolish here in the beginning stages on this site (no money involved yet, and great insight from those who have done this before). Please, let me know what I should be thinking about "risk" wise. As I had stated previously, I plan on taking the next 5 months to do research and make connections with professionals in the area. Please let me know how you might approach.

    Thank you for any input.

    0Reply
  • Dawn AnastasiPro Member
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
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    Originally posted by @Jon McCarron:

    @Account Closed Thank you for your reply. I understand increased expenses (management, travel costs, etc.)Please let me know if I am missing any other "out of state" costs. Could you explain how more risk is involved? This is why I am posing this question to this community to get all angles and aspects of out of state investing. I am okay with looking foolish here in the beginning stages on this site (no money involved yet, and great insight from those who have done this before). Please, let me know what I should be thinking about "risk" wise. As I had stated previously, I plan on taking the next 5 months to do research and make connections with professionals in the area. Please let me know how you might approach.

    Thank you for any input.

     Sometimes people will ask the hard questions on this site, but it's better to learn it all now versus being thousands of dollars out of pocket and having headaches!

    Investing out of state is considered "riskier" because you're not there locally to watch over your property.  Therefore, you have to hire someone else to watch over your property.  If the person or company you hire fails you, or bails on you, then you're suddenly put in a very bad place.

    If, however, you can invest out of state, and trust your "team" -- meaning, your realtor, your property management person/company and they do right by you, then investing out of state can be a dream come true.

    And yes there are more costs with a PM than by self-managing because you have to pay someone to do the work. Rarely if ever do people work for free.  :)

    Podcast Guest on Show #29
    1Reply
  • Jon McCarron
    OP
    Real Estate Agent · Salem, MA · Member since 2014 · 114 posts · 78 votes
    11y

    @Dawn Anastasi Thank you for your response. I agree with your points of trusting the team you are assembling. I am definitely planning on contacting and vetting many real estate professionals in that area, and really get a feel for how they conduct their business.

    Thanks again for responding, have a nice weekend!

    0Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    11y
    Originally posted by @Jon McCarron:

    @Account Closed Thank you for your reply. I understand increased expenses (management, travel costs, etc.)Please let me know if I am missing any other "out of state" costs. Could you explain how more risk is involved? This is why I am posing this question to this community to get all angles and aspects of out of state investing. I am okay with looking foolish here in the beginning stages on this site (no money involved yet, and great insight from those who have done this before). Please, let me know what I should be thinking about "risk" wise. As I had stated previously, I plan on taking the next 5 months to do research and make connections with professionals in the area. Please let me know how you might approach.

    Thank you for any input.

    Jon, you still have not answered my question of WHY you want to invest in Austin LOOOOONG distance.  I invest in Hawaii, CA and Nevada.  Hawaii and Ca because I lived there and the rent growth and appreciation is incredible!  I've retired to Hawaii so that is whare I wanted most of my properties.  When I left Hawaii I hired a property management company.  I fired them after 6 months because they seemed to think they could take advantage of me because I was OFF island.  That taught me to NEVER invest in property location that I would not get on a plane and be there the next day.  Even if you know the area and start with good local mgt. things change.  Even when I managed from a distance I made sure the tenants knew when I was in town and not know when I wasn't. 

    So other that deducting your hat and boot expense WHY do you want to invest thousands of miles away from where you live?

    1Reply
  • Lynn Burson
    Real Estate Investor · Houston, TX · Member since 2014 · 75 posts · 22 votes
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    Austin is a very hot market being the state capitol, large university, tech/industry,... The fact that it is growing fast means a lot of demand & minimal supply.  I am not sure that I'd be looking at starting my RE career from a distance in a complex market like Austin.

    Just thoughts from my POV but no harm in looking?

    1Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y

    Hi Jon,

    I live in LA and have always bought out-of-state. You will always hear people on one side or the other about it, but certainly know that plenty of people do it just fine. I wouldn't do it any other way personally. Not everyone will agree, but who cares, my investing has nothing to do with their opinions. :)

    To answer your questions...the best thing is to network, especially on BP. Just start asking around for anyone working in or around that area. That's the best starting point. My word of caution though, is make sure you understand how to calculate cash flow correctly because you want to be sure you will get positive cash flow out of a property. The reason I say that is Austin isn't too slick on price-to-rent ratios that produce positive cash flow. Houston, Dallas, and some of San Antonio are good, but Austin isn't usually known for it. Not to say you can't find anything there, but it will be much harder.

    Best of luck! You'll have fun with it.

    2Reply
  • Dan BurstainBusiness Member
    Real Estate Agent · Austin, TX · Member since 2014 · 361 posts · 331 votes
    11y

    This is just a generic comment I will make as an investor/Realtor here in Austin who knows a lot about Texas real estate.  Many of you say that Austin is hard to get good cash flow and some parts of Austin I would agree.  However, Austin is growing/spreading big time and the forecasts do not show it slowing down.  Want to make money in real estate - follow the jobs.  Apple, Visa, Amazon, Samsung, and the list goes on, are all expanding their high tech (aka high paying) operations into the Austin area and more companies are coming daily.  110 people are moving to Austin every single day.  The outskirt areas of Leander, Cedar Park, Round Rock, Pflugerville, San Marcos, Georgetown and others (all within 30 min of downtown Austin) have great opportunities for investment with nice cash flow.  But yes, unless you are a VRBO champion, nothing in downtown Austin is a great cash flow investment.  The same could be said for many areas of Houston and San Antonio.  Happy to provide opportunities for anyone interested in Austin.

    [email protected]512-588-3260
    Dan Burstain, Investment Realtor51 Review
    WebsiteView Page
    1Reply
  • Daniel Kaminske
    Residential Real Estate Agent · Austin, TX · Member since 2013 · 11 posts · 4 votes
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    Scott Sutherland of RealtyStake has gotten me exceptional cash flow properties in the Austin Area and he only requires $99/mo. for property management. There are still great opportunities north in Pflugerville/Round Rock or south in Buda/Kyle! 

    Jon, I'd give Scott a call. He has been more than helpful with me!

    Best,
    Dan

    1Reply
  • Marian Smith
    Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes
    11y

    Texas property taxes surprise a lot of out of state investors.  Texas has no income tax, so property taxes are high.  There are MUDs.  There are mandatory HOAs.  We use the AC 8 months of the year.  But we don't get hurricanes or earthquakes, just tornados and hail.  There is also a lot of land in the outskirts and house builders could ramp up at any time, so the current rental rates in the outlying areas may moderate in the future.  

    I was on the plane next to a guy with a real estate book and I asked where he was investing.  He had just bought a house in Hutto, NE of Austin, and was very pleased with the price....which was about 40-50k more than the large slew of Hutto foreclosures sold for in 2010-12.  He said it was obviously a desirable rental area because there were a lot of rental homes in the neighborhood.  He has cash flow at the moment...and maybe it will hold for a good while.  Prices are holding and inventory cant keep up with sales.

    1Reply
  • David Shapiro
    Real Estate Broker · Austin, TX · Member since 2014 · 75 posts · 18 votes
    11y

    @Jon McCarron   I'm in Austin and I agree with @Ali Boone  that rent-to-purchase ratios are not good in the core. It's definitely a hot market and that has driven prices up and cap rates lower. Yes, you can go to the outskirts and probably get some better cash flow (I prefer to keep all of my properties within 20 minutes of downtown for convenience, curious to hear Ali's take on why she prefers out-of-state). I've refined my criteria for purchasing rental properties over the years, and I have high standards. I live here and decided 2 years ago to pursue other avenues rather than buy and hold because the time commitment wasn't worth the return. Any good deal on the market will go to multiple offers. There are many others looking for off-market deals, including me (any wholesalers feel free to reach out to me :) 
    I'm curious, have you looked for cash flow properties within driving distance of you?
    I own an out-of-state rental and it's been great, but it would be even better if it were within 20 minutes of where I live :)

    0Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    11y

    The investing in or out of area is a question of cash flow usually. Bobs points make sense in that the risk factor goes up long distance. Investing is about managing those risks. Why would you increase those risk? The easy answer is cash flow. According to a lot of experienced investors that is not a good enough answer. Bobs experiences are common. You will find the majority of out of state buyers have the least amount of experience. 

    You definitely got to be careful chasing cash flow. Some parts are equal to investing in Radio Shack. Thanks, Matt

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  • Marian Smith
    Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes
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    Gaines or Dotzur said property buyers need to be aware that foreign buyers are pushing up prices in some areas.  He specifically  mentioned Chinese buyers in areas their children are attending college.  

    but population projections for the area indicate the Austin MSA is a no brainer...obviously only at the right price/location.

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  • Sean T.
    Rental Property Investor · MA · Member since 2014 · 420 posts · 213 votes
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    I lived one town over from Jon and can say without doubt Cashflow is not easy in MA. I just picked up a a SFH that requires significant improvements for $300K. I will be putting $50K in and "if" I was to rent I would maybe see 1800-2000K a month, maybe.

    I have to play to distant vs risk game as well.  

    Just saying....

    0Reply
  • Richelle T.
    Rental Property Investor · Columbus, OH · Member since 2014 · 340 posts · 111 votes
    11y

    I agree with the previous posters. I feel comfortable investing in Austin because I lived there. Choosing an out of state investment in a city (seemingly) at random is a good way to loose money. I do think the suggestions to move to the further out suburbs for investing are good ones. There is a tech boom in the north part of the city that is attracting a lot of young tech professionals. Take the time to learn the city and the market before you invest. Just because you have buddies in the city does not mean they are savvy enough to recommend where you should invest your money. I would proceed with caution.

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  • Account Closed
    Residential Real Estate Broker · Austin, TX · Member since 2014 · 146 posts · 21 votes
    11y

    People invest in and out of their home areas and are successful in both.  Just do your homework.  This site has loads of great information.

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  • Mike E.
    Investor · Austin, TX · Member since 2014 · 1 post · 0 votes
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    www.austinhomesearch.com is the site that presents pretty much everything listed by the Austin Board of Realtors. I use it a lot

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  • Guy Gimenez
    Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes
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    @Marian Smith

    Just remember that a lot of projections made in 2006 turned out to be terribly wrong and many investors (mostly from the east and west coasts where they were buying based only on a agent's judgment of what constitutes a good investment) lost it all. The Austin market is very hot right now but changes occur quickly and with little warning.  

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