I am looking at some new construction properties in the Austin/Pflugerville/Round Rock area to house hack. I have mostly looked at DR Horton, and a little bit at KB Home. I am wondering:

1. What kind of appreciation can I get on a new construction (e.g. if I hold for 5-10 years)

2. How is the build quality? I've heard mixed thoughts on this, some companies apparently cut corners so the concept of little maintenance costs is not always the case. 

-Are there any builders you WOULD recommend?

3. Do any of them not allow renting out extra rooms(aka house hacking)?

Lennar is a bit rubbish, but other than that, most are decent enough.

Hard to answer what appreciation will look like in a decade: With Covid driving Californians and others from Silicon Valley to the silicon hills, you never know... Austin could be the 2030 San Francisco! There are several folks on this forum who can give you insights... @Neil Narayan is my personal hero  given his depth of knowledge about both Austin and real estate, I’d love to hear his take on this! 

Renting a room shouldn't be an issue. Renting the house out may be because some HOAs do not allow STR or cap a percentage of it to be leased. Just ask each sales person as you shop around. While some builders build crappy product, at the end of the day the numbers over the years is what you need to be focused on the most. Obviously after about 7-10 years you're going to begin to look into things like the roof, fence, etc. I've always treated all my investments as a 5-7 year hold, rinse and repeat. Make sure you have an exit strategy.

Lennar is decent in my opinion. And I know the builder industry....25 years experience, I was married to it once. Don’t listen to someone not in Texas.  

@Vik J. 's kind word spurred me to respond :)

1. What kind of appreciation can I get on a new construction (e.g. if I hold for 5-10 years)

NN> the avg for the last 10 years is 6.72%, my expectation for the next 10 yrs is that we will beat that. For new construction the trick is to get in at phase 1 for a multiphase dev and by the time they get to the late phase the same plan will be $20-30K more pushing the prices for the community up 

2. How is the build quality? I've heard mixed thoughts on this, some companies apparently cut corners so the concept of little maintenance costs is not always the case.

NN> In my experience you can't say one builder is better than another since all the big ones hire subcontractors and the quality depends on who they get. KB in RR will have diff quality than KB in say pflugerville.  

-Are there any builders you WOULD recommend?

NN> See above

3. Do any of them not allow renting out extra rooms(aka house hacking)?

NN> I don't know of any builder that can restrict house hacking 

Originally posted by @Nina Hayden :

Don’t listen to someone not in Texas.  

im speaking from experience, I had 3 deals on new constructions in Austin fall through, so no need to adopt that dismissive attitude. Even if you don’t agree with other poster’s opinions, have the basic courtesy to respect them. 

Originally posted by @Neil Narayan :

@Vik J. 's kind word spurred me to respond :)

1. What kind of appreciation can I get on a new construction (e.g. if I hold for 5-10 years)

NN> the avg for the last 10 years is 6.72%, my expectation for the next 10 yrs is that we will beat that. For new construction the trick is to get in at phase 1 for a multiphase dev and by the time they get to the late phase the same plan will be $20-30K more pushing the prices for the community up

Thanks Neil! Is the 6.72% appreciation for All homes in general, or for new construction?

Is there a significant difference in appreciation for new construction vs old homes (assuming I make no improvement to the home in either scenario) ?

Business is business. Listen to someone with 3 deals experience or someone that has dealt  with thousands of deals since 1998?  Just like my realtor, contractors, and management, I don’t hire anyone that’s not experienced in the market long enough to know how to handle them in the downturn or during a recession.  

all homes. there is no data that i know of to that level. location is the most important thing. you can get a old house in a good location close to the city and it will appreciate better than a new construction in the outskirts of town.

What RTV can you expect or even hope to get on a newer construction?  It seems like nothing is coming close to 1% or even 0.8% near Austin

@Kevin Chan it's not just Austin but any city that has almost high appreciation cannot have 0.8 or 1% RTV. Rents always lag home values. Austin appreciation has been 19% from Nov to Nov. A $2000 rental cannot jump in rent by $400 in 1 yr as no one will renew. 

Originally posted by @Neil Narayan :

all homes. there is no data that i know of to that level. location is the most important thing. you can get a old house in a good location close to the city and it will appreciate better than a new construction in the outskirts of town.

 

Could you define close to the city vs outskirts? Would you consider Pflugerville and Round Rock to be the outskirts?

I would consider outskirts as further out as RR and PF prices have appreciated a lot already in the last few years

@Vik J. Austin will never be San Francisco. The horrendous weather and lack of ocean will keep it far behind. I don’t doubt that it could/has become a tech hub, but a worldwide destination, never.

@Andrew Bissada

For the same price point I would choose Lennar over DR.Horton or K.B. Lennar and Pulte are of comparable quality, though Pulte is building more higher end (only cost wise) homes with the same build quality.

Location wise. I personally prefer couple of pockets:

1. Pflugerville near Tech ridge

2. Leander near the Station.

If you can find new houses or houses built within past 5 years under your budget you can consider them. Very high chance of appreciation and decent rental yields.

Just my personal opinions.

And another thing that you need to be aware of is that KB doesn't allow investors in lot of communities especially during the early phases. They allow it towards end of completion of the. Community when the prices have appreciated more than 10%.

So check with them first hand about investment property.

@Kevin Chan

.8% on a new construction would be a great deal now if you can find it. 2 yrs back it was possible. You will be lucky landing 0.7% right now on a new built to be honest.

Originally posted by @Steve R. :

@Kevin Chan

.8% on a new construction would be a great deal now if you can find it. 2 yrs back it was possible. You will be lucky landing 0.7% right now on a new built to be honest.

Thanks for the insight everybody.  I'd be pretty excited to find 0.8% on anything at the moment!

@Kevin Chan

Ha ha ya true. Market is getting real crazy out there. Bidding wars pushing the prices up like crazy

Originally posted by @Steve R. :

And another thing that you need to be aware of is that KB doesn't allow investors in lot of communities especially during the early phases. They allow it towards end of completion of the. Community when the prices have appreciated more than 10%.

So check with them first hand about investment property.

 This is not relevant to someone who is going to rent out rooms in his residence.