Long post so please bear with me... I have two questions: (1) I live in South Austin and have been shaking the trees for about six months trying to find a deal to buy. I am interested in SF, duplex and up to 8-plex. I have been looking as far South as San Antonio and as far North as Waco and ~ 20 miles East and West of I-35, but nothing seems to be a reasonable investment at this time. Key factors being the average time on market (very limited), asking price, rents for my given search area, etc. I understand that the 1% rule doesn't apply in these markets as the rents have not caught up to home prices and I am fine using IRR. Is anyone finding deals within the past 6-months that are available? By available I mean do they make sense to purchase, rent, and receive a reasonable return without pinning hopes on the real estate market continuing to soar in Central Texas?
(2) Is anyone interested in potentially partnering on a JV to purchase some land within the year and build duplexes? I am specifically looking in the Buda area as there is a real shortage of homes there. I understand building costs are exorbitant at this time and I would be fine purchasing the land and holding it until some costs ease. Specifically lumber.
Thanks for reading and please let me know if you have any input or interest.
Hi @Michael Watson ,
You are spot on with the 1% rule, it does not apply in the Austin market as rental rates tend to lag behind property price, especially when we are seeing 20%+ appreciation for the city of Austin. In truth, this rule/guideline has fallen off for many regions in the US. The largest population group in the US is now entering their statistical home buying period, which is likely contributing to the low levels of housing inventory at the national level.
To answer your first question, yes deals still exist. Running numbers for investors/clients that have purchased in the Austin MSA as well as two rental properties I personally picked up in the last 30 days in Austin and Round Rock illustrate that it is possible. It is a challenge, but establish your criteria and stay diligent. We all hear about the $200k+ over asking price offers (which does happen for Austin, Cedar Park, etc) but statistically offers go for 108% of list price as of March 2021 data for the Austin-RR MSA. You will lose some, but this is a numbers game and in the end statistics almost inevitably gravitate towards their respective data points.
Would also love to connect as you are a contractor, always looking to expand that network!
Hi @Michael Watson -
I'm here in Austin as well, with similar goals, encountering the same challenges with ever-increasing land & construction costs. A partner & I are in the process of rehabbing a single-family rental while building a new ADU in the back for sale. Our target sale price on the ADU should return 80%+ of our basis, which makes the rental return attractive, and we plan to 1031 the ADU proceeds toward another one. Feel free to reach out if you'd like to chat.