Austin is Uninvestable

[Steven Greenwalt]

Alright — the title might sound dramatic, but it’s genuinely where my head is at with the Austin market. That said, I’m open to being proven wrong.

I’ve been diving into STRs, BRRRRs, and LTRs across Austin and the greater metro. No matter the strategy or purchase price, the numbers just don’t seem to work. Most deals I’ve run either bleed cash monthly or break even at best.

Rates are still high, sure — but more than anything, the property taxes here feel like the real killer. It’s hard to make anything pencil out with how aggressive they’ve become. Has the tax burden effectively made Austin uninvestable?

I’m not against going out of market, but like a lot of folks getting started, I’m focusing close to home for now.

So I’m asking:

• Is anyone making deals work in Austin right now?

• If so, how?

• Are there specific submarkets or property types that still cash flow?

Would really appreciate insight from people actually operating in this space. What’s working — or not — for you?

[Joe Scaparra]

Listen up and take heed, square pegs do not go into a round circle....period!  Be an investor not a SPECULATOR!  Buying today even with 20% down in the Austin MSA DOES NOT WORK if you require POSITIVE CASH FLOW (unicorns are still possible but not likely).  

@Steven Greenwalt    Now, here is what could work.  If you are currently renting and you are paying $1500 to $2500 rent, then buying a DUPLEX can get you ownership with less negative than you are paying for rent.  However, IMHO we are just in the beginnings of a significant downturn in residential real estate.......buyer beware.  Real estate prices have stagnated but so have rents.  I have been a buyer in the Austin market beginning 2005.  I own/manage 10 units (5 duplexes) and this YEAR is the first time I have lowered rents.  What used to take 1-3 days to fill a vacancy is now taking 2-3 MONTHS.  

What used to be net 150 new arrivals daily is now ZERO. Austin population at the moment is only growing by new births not new arrivals. Additionally, the Austin MSA has overbuilt apartments. Competition for tenants is at an all time high. Some apartments are offering 6 weeks free with $50 deposit with good credit. If you have never done STR, there is a learning curve and vacancy rates are higher than LTR.

IF you are hell bent on investing, look 2 hours away to Bryan-College Station.  You can still find value there. I have another 12 units there and that market is still very viable for investors.  Good luck and cheers!