Looking for long term investment properties in Austin
Austin, TX · Member since 2023 · 2 posts · 1 vote
As a newbie passive real-estate investor currently living in Austin, TX. I am looking to buy a fairly new constructed investment property in and around Austin metro area. While evaluating potential investment properties these past few weeks, I have realized that the average rent in Austin is comparatively lower and due to high interest rates and property tax, the outcome is mostly negative cash flow. Although my long term goal is appreciation in the value of the property, I am looking for an investment that either breaks even or has a positive cash flow in the short term. Here are some of the options I have been brainstorming
1. Is it better to buy a primary house with 5% down and stay for 2 years after which I can rent out (hoping rents increase by then) if not I can sell it and be and be exempt from taxes on capital gains.
2. BEAF(Break even appreciation focused) properties
3. Look into other markets( San Antonio/ Houston/Dallas)
Any suggestions are greatly appreciated!
I would suggest buying 5% down owner occupy for a few reasons. One, you will get a lower interest rate than an investment loan. Two, your property taxes will be lower but you will have to file a homestead exemption. Three, your insurance will also likely be less. Fourth, just as you pointed out, you can sell with no taxes. You could also lease it out for 2-3 years and as long as you have lived there for 2 years then your taxes will be zero when you sell unless we have a house appreciation pop that is off the charts that surpasses the max benefits (unlikely to happen). Fifth, the tax advantages in the years that it serves as a rental are beneficial.
Given that you will have 5% into it then the ROI could be astronomical, if rents go up nicely and also the prices go up nicely too. One of the best investments, in terms of ROI, has been when I bought a duplex with zero money down as a Veteran. Infinite returns.
You are probably NOT going to make money in 2 or 3 years buying near turnkey properties anywhere. I would think if you moved into the property and then rented it out after a few years THEN you might break even in another few years after that. Higher interest rates and much higher valuations that cause higher property taxes are going to put downward pressure on prices for a while.
I would suggest buying 5% down owner occupy for a few reasons. One, you will get a lower interest rate than an investment loan. Two, your property taxes will be lower but you will have to file a homestead exemption. Three, your insurance will also likely be less. Fourth, just as you pointed out, you can sell with no taxes. You could also lease it out for 2-3 years and as long as you have lived there for 2 years then your taxes will be zero when you sell unless we have a house appreciation pop that is off the charts that surpasses the max benefits (unlikely to happen). Fifth, the tax advantages in the years that it serves as a rental are beneficial.
Given that you will have 5% into it then the ROI could be astronomical, if rents go up nicely and also the prices go up nicely too. One of the best investments, in terms of ROI, has been when I bought a duplex with zero money down as a Veteran. Infinite returns.
Hey @Shwetha Pindikuri I understand that cash flow seems impossible in Austin but there are pockets outside of the city that work as a long term rental. Also mid terms rentals are really booming here. Moreover you could always get into an up and coming market like Shertz TX. Appreciation will be key here in the next 2-5 years for sure. As far as funding I have a few great investor lenders I send all my buyers to get deals done that make sense. Let me know if I can help in anyway get your next home and that next check in your mailbox from it of course 😊
As a newbie passive real-estate investor currently living in Austin, TX. I am looking to buy a fairly new constructed investment property in and around Austin metro area. While evaluating potential investment properties these past few weeks, I have realized that the average rent in Austin is comparatively lower and due to high interest rates and property tax, the outcome is mostly negative cash flow. Although my long term goal is appreciation in the value of the property, I am looking for an investment that either breaks even or has a positive cash flow in the short term. Here are some of the options I have been brainstorming
1. Is it better to buy a primary house with 5% down and stay for 2 years after which I can rent out (hoping rents increase by then) if not I can sell it and be and be exempt from taxes on capital gains.
2. BEAF(Break even appreciation focused) properties
3. Look into other markets( San Antonio/ Houston/Dallas)
Any suggestions are greatly appreciated!
If you are looking in the suburbs there are ways you can break even on cash flow with new construction.
As a newbie passive real-estate investor currently living in Austin, TX. I am looking to buy a fairly new constructed investment property in and around Austin metro area. While evaluating potential investment properties these past few weeks, I have realized that the average rent in Austin is comparatively lower and due to high interest rates and property tax, the outcome is mostly negative cash flow. Although my long term goal is appreciation in the value of the property, I am looking for an investment that either breaks even or has a positive cash flow in the short term. Here are some of the options I have been brainstorming
1. Is it better to buy a primary house with 5% down and stay for 2 years after which I can rent out (hoping rents increase by then) if not I can sell it and be and be exempt from taxes on capital gains.
2. BEAF(Break even appreciation focused) properties
3. Look into other markets( San Antonio/ Houston/Dallas)
Any suggestions are greatly appreciated!
Hello! Realtor and long term investor here in Austin. There are ways to make cash flow right now. It's tight, but it makes the deals very simple to read. I've purchased two homes in the last 6 months that are cash flow positive. I also did purchase one where I'm slightly negative (apprx. $75/mo), but I'm happy about that one as well.
@Shwetha Pindikuri Hello Newbie wannabe passive INVESTOR.
Got your attention. Ok if you want to be an INVESTOR, you need to start THINKING how an investor thinks. Since I don't know much about you and since you have not utilized your profile that might've given me some insight to you, your goals, and experience, I am going to have to make some assumptions.
1. Obvious your new to investing
2. Goal is Cash Flow over Appreciation (if not I can easily explain why it should)
3. Limited $$$ to start.
4. Single or married with one child or less.
5. Currently renting now.
Realize you live in Texas, not California. In California most investors HAVE TO INVEST for APPRECIATION. They don't have the option to invest for Cash Flow, like you do in TEXAS. Now, Austin is now becoming California, but if you live here and are renting then you have better options as an owner occupant, than as a pure investor in Austin.
If my Assumptions are fairly accurate, then listen up, if not disregard.
Buying a new built house in Austin on limited funds, hoping to sell it in two years so that you can make a tax-free profit, is NOT A GOOD STRATEGY!
Most people who KNOW me already know what I am about to tell you. But since you don't know me here we go.
Consider buying your first INVESTMENT property.......A DUPLEX. It can serve two purposes, provide a roof over your head and still provide some income to OFFSET your LARGE MORTGAGE payment, since you are considering putting 5% down. Becoming an investor involves developing your buying strategy/skills AND learning how to manage your investment (property management).
Living in a duplex will help you learn how to do both, buying and managing. Buying a duplex will give you more options several years down the road. Should you need to move, you simply rent out your side and with the hope of any rental appreciation you have a good chance that you might be breaking even or slight profit. However, buying a house and having to leave in a couple years will either force you to sale or take on negative cash flow because a SFH will not cash flow positive by putting 5%. With a duplex, you can do STR, MTR, or long term rental on the unit you don't occupy and those options might give you a substantial boost in CASH FLOW.
Yeah living in that duplex might not be as nice as that newly constructed SFH but the VERY small sacrifice now will pay HUGE dividend down the road. Investors are usually willing to let lifestyle living take a back seat while they begin their investment journey so that in the not to distant future they can be living the life style they desire with less stress.
If you want some more of my hard hitting advice, hit me up with a DM and we can do coffee.
BTW, I'm neither a real estate agent, nor lender, just an O'ld Fart who loves discussing real estate. Cheers!