I'm a brand newbie in Austin Texas trying to figure out if there are SFH buy and hold opportunities within a 2 hour or so drive of me. I know Austin is probably out; looking just south in Kyle/Buda I am worried about market oversaturation; suspect there might be opportunities down towards San Antonio. I work more than full time right now, maybe 55 to 60 hours a week, and am looking to ease out of corporate life and into investing to cover at least half of my retirement within 7 years or so.
1. what's a good simple formula for ROI on a buy and hold?
2. where would any of you with more experience be looking, if anywhere, with that criteria?
3. is there any point in looking outside of my 2 hour drive range? Is that stupid if I'd prefer no property manager for first SFH rental? (In other words am I better off looking further out and getting a property manager?)
Thanks in advance for any help and advice!
Kellie Mecham. As an Agent / Broker with 25+ years experience in the Austin Market (now in College Station).
If you live on Southside of Austin - look at Buda / Kyle or potentially Bastrop.
If you live on Northside of Austin look at Cedar Park / Leander / Liberty Hill / Round Rock.
Also consider Georgetown, Hutto, Taylor. Any of the Bedroom communities people might realistically live in more economically and still commute to their job in Austin.
Kellie, welcome to the REI game. I'm investing on the North side--mostly Round Rock. There are buy-and-hold opportunities you just have to look for them.
I know there are different opinions about the proximity of your properties. I for one like to be able to almost walk to mine. I have one in Florida that I'm going to be selling soon, which will put all of mine (5 units) within about a 10 mile radius.
I'm trying to negotiate one in Leander that would be infinite ROI since I wouldn't have anything in it--we will see if I can land that one.
@Jeremy VanDelinder if you don’t mind my asking, where is your Florida property?
Milton--outside Pensacola. It's Florida, but only if you count the panhandle as Florida. (-:
I lived in Pensacola for 5 years. Loved it. Lower Alabama, as we used to say.
@Kellie Mecham - you need to define your search criteria, investment goals and exit strategy and aslo be clear on property evaluation.
For example, here is what we currently have as search criteria (must have):
- Purchase price should be between $60,000-$150,000
- Neighborhood should be a solid B-/C+ (Working Class)
- I want minimum 200+ monthly cash flow or 100/door after ALL expenses
- Rent 1% or more of ARV
- 10-12%+ CoC ROI
- Schools above 6 rating
- Tenants pays all utilities
Ideally (or more flexible criteria):
- I will buy with cash and want to refinance with 25-30% down after rehab
- Built after 1985.
- When possible, I want to purchase multifamily units (2-4, max 8)
- I want to spend less than $3,000 on inspections and closing costs
- I want to spend less than $10,000 in initial repairs and rehab
Values we use in our calculations:
- 5.5% interest rate, 30 years
- 10% vacancy
- 6% repairs and maintenance
- 6% capital expenditures
- 10% management fees
- 2% annual income growth
- 2% annual appreciation growth
- 2% annual expenses growth
- 6% sales expenses
Property management will eat 10% of your net. You need to factor it in your calculations regardless, for various reasons, even if you plan on self-manage. My advice - if it doesn't cash flow with PM included, look for other opportunities.
That being said, with 10% PM and the high RE taxes here in TX, you'll have a hard time finding good rentals (at least on the criteria above).
Thanks for posting! I grew up here in Austin and now work as an investment consultant and wholesaler helping investors find their next project. Personally, I wouldn't limit your your buy and hold options to a specific area but rather look for a project that fits your numbers! It is critical to have a clear game plan on what you would like your all-in cost to be as well as what you would like for your returns. From there it makes it much easier to find your ideal project!
I wouldn't exclude Austin and the surrounding areas simply simply because the further away from home your project is, the more work it will be. If you're having to take multiple trips a week that are 3-4 hours round trip on top of your 55-60 hours of work, REI will become more of a chore than a project you enjoy. Also, I think you would be surprised at what you can find at a reasonable price for buy and hold in the greater Austin Area!
Please don't hesitate to reach out with any questions or if I can be a resource to you!
Just jumping in on this thread as a fellow newbie in town!
Hi @Kellie Mecham . I tend to agree with both @Jim Cummings and @Costin I. There are opportunities in and around Austin...but you need to be ready, able and willing to (1) spend time finding them, (2) have your criteria defined so that you can recognize them when you see them, and (3) be able to react quickly to them.
Also, you do have to pay very close attention to the tax rates and areas of town that are appreciating at crazy rates....this is a great thing if you are selling, but can be a deal breaker if you are buying, and/or you want to buy & hold. I personally think the areas south...Kyle, Buda, San Marcos are very desirable areas because they are within commuting distance to both Austin (ok, it's painful, but still doable) AND San Antonio. Most homes are still reasonably priced and there is a good rental market for buy and holds in those areas. I also like north areas (Leander, Cedar Park, Pflugerville, Georgetown, some areas of Round Rock), but it is harder and harder to find deals here. My concern with Hutto is that many areas in Hutto have tax rates that are really high, even for the Austin area. And I am not yet sure how good the rental market is in Liberty Hill.
I personally would not drive more than 45-60 minutes. A heck of a lot of gas and time can be eaten up in that time.
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