We're testing out some new live market data at BiggerPockets, and our first post uses Austin as an example. If you have a minute I'd really appreciate if you could take a look at this post and tell us what you think.
What market data is important to you?
Is this a tool you would use frequently?
What is good about it? What is it missing?
Please share your thoughts!
If I could suggest a few more KPIs:
- Pending vs Active
@Dave Meyer I love that you chose to start with Austin! We're booming and it's easy to make the case
@Dave Meyer This is awesome! The tableau visuals are great at breaking down the data. I like that you used data from the suburbs as well since many investors are getting priced out of buying in the city limits.
I would like to see some more population trends, if you have that data available. Maybe something like median salary, number of new residents, job growth by sector. It would be nice if there was a link to the tableau dataset to allow users to come up with their own graphs and do their own research. I have experience using tableau and would like to mess around with the data.
@Dave Meyer very well put together post, thank you for sharing. I enjoyed the wider lens perspective of including past years' data and not just the preceding year.
I would have added the 30+ day rentals to the list of ways to make cash flow early after acquisition. That model is seeing tremendous success in the Austin MSA currently and it circumvents STR restrictions.
I second @Daniel K. , as an investor considering a market I would like to see KPIs on vacancy numbers. You referenced low vacancy but being able to plug in hard numbers to a calculator would be a tremendous (and precise) boon when using the BP calculator.
@Dave Meyer every month. I post monthly housing stats update on BiggerPockets for the Austin MSA but your report is putting my input to shame. Where will you keep these market insights for future exploration?
I like the article overall! I lived in Austin for several years and analyzed a bunch of properties there, but ended up deciding to invest out of state for cash flow when the pandemic hit and put things up in the air. As I analyzed the area, I used a few metrics that you might want to consider.
1. I analyzed the projected geographic growth of the city. For Austin in particular, the city is growing in every directions, but more south than anything else and will probably end up creating a metroplex with San Antonio like we have with Dallas & Forth Worth. You probably went with the Austin-Round Rock metropolitan statistical area to choose which zip codes to display, but as you build out this and future city models I think it would be worth considering surrounding zip codes as well. For Austin in particular, it's worth including Dripping Springs to the west of town, Bastrop to the East, and as far south as New Braunfels. New Braunfels is expecially enticing since it sits between Austin and San Antonio. If you live in that town you can commute to either city, which means you can work in either one. As a landlord, this more than doubles you number of renters. Plus, the cost of housing along what we call the "I-35 corridor" between Austin and San Antonio
2. You mentioned that if a landlord gets creative and rents by the room then properties can cash flow. This is not what I found to be the case. After taxes, insurance, vacancies, annual repairs, and putting aside additional cash for long-term capital expenditures like a roof or a hot water heater, you're left with breakeven. So, Austin is a market where you are betting on appreciation.
3. You should probably have a section on risk for these cities. I know it's fun to talk about the positives of investing. We love it, that why we do it. But these type of statistical analyses are just as helpful in identifying areas to avoid, or at least reconsider. Sure, Austin might appreciate another 66% in another 5 years in which case you are fine wherever you buy. However, you should also mention that in Austin it's pretty much a necessity to pay $40-$100k in cash when you buy, even for a primary residence with a 5% down payment. Banks won't loan the full amount to cover the sales price, so buyers need to be prepared to come up with the difference. Is this the best use of your money? If you have to come up with 5x the amount of cash for an investment with little or no cash flow, you better be assured that the market will continue to appreciate at 5x the average. Otherwise, you're better off buying a place with a city with steady growth where you can put in as little cash as possible. That is, if you are comfortable with debt.
4. Another risk you could visualize is macro trends. For Austin, remote work is a big risk factor. A lot of tech companies my friends and I worked for were comfortable with some hybrid work before the pandemic, and that's only accelerated. If the future is going in to work once or twice a week, or even once or twice a month, then the Austin real estate market is in a pickle. People can live in the suburbs of San Antonio, Dallas, Houston, or any other town within the Texas triangle and bite the bullet for their long commutes (which would still be shorter than a lot of commutes in the Northeast). Shoot, if it's only once or twice a month, they could fly in from another city anywhere else in the country, get an airbnb for a few days, and then fly back home. I had a boss that used to do this and it really wasn't too hard for them to manage.
5. You mentioned short term rentals in Austin. If this is an ongoing format you might want to include the costs of short term rental licenses and average cleaning fees in the cities you analyze. I had a neighbor who rented out her place on airbnb in Austin and it was too much of a hassle for her to keep up with the fees and cleaning. She switched to long-term rentals and then eventually sold to invest in an area with more cash flow.
I don't want to go on too long in my response so if you have any questions just let me know and I'd be happy to give more input.
Thanks and good job!
@Dave Meyer Good work. I think that you need to cite your sources to give credibility to the data/info, though. What are the impediments to supply? Any barriers to entry? Permit data would be golden. House hold formation would be great too! You mention a lot of demand drivers but nothing about supply. You could also do a deeper dive. My two cents.
Great feedback @Aaron Gordy thank you! We use our own database, and have constraints on what we can divulge, but we can definitely provide some more transparency -- great call out.
We don't current have a lot of supply-side data, which is also an excellent point. We'd have to license more data to get that, but it's certainly possible in the future.
@Dave Meyer I think the data and your insight is helpful, though as @Aaron Gordy mentioned I would give links to the underlying source (i.e. FRED, etc.), so people can really dig into the numbers. I also did not expect it to be slanted with opinion and advertising, as in '...yes, you should consider investing in Austin...here's a broker to call!' I think that weakens your credibility of posting data and your well-thought out analysis of it. I understand BP survives on ad revenue, but a link somewhere on the page to your broker submission form seems like it would be sufficient without detracting in the way those two paragraphs do.
I think the one omission that would really help people is what is your analysis on the outlook on future performance? It is great that there's 24% YoY appreciation in Austin for the last two years, but what is the driver of that? Is it speculators from California driving the price up? Is it genuine job growth? If so, what is the median income of these buyers? If they struggled to afford a $300k house a year ago, and the median wage hasn't increased, could that indicate it is close to plateauing now at $400k? But even without that, I do think it is a good and well thought out analysis!
@Dave Meyer I think this is a good high-level look at a market and provides some context around prices and rents. I would love to see more info about population growth, job demand, property taxes, and other market economic factors like average wages, top 10 employers, etc. I also agree with @Jason Hirko that it doesn't have to SELL a market to the readers, but should rather provide some context if people are considering the market. Thanks for pulling this info together.
I would like to see what cities closest to Austin or on the outskirts of Austin people are moving to. I'm new to this real estate game, and have been told about Austin - but central Austin (near all the tech) is out of reach for first time investors like myself. I'm curious about where people are migrating to and what kind of jobs they're doing.
Another thing I am curious about are tenant vs. landlord laws. I currently live in Maryland, which is way too tenant-friendly. As Austin becomes more "blue," there's a potential for more tenant-friendly laws that may make it difficult for landlords to ensure that their property is taken care of.
I like that.
Current inventory, absorption rate,average list to sale ratio price.
Trends, Market direction, Good deals.
Yes I would use it frequently.
Do San Antonio! haha. It looks great! A lot of good information mapped out. I think any suggestion I have has been suggested already.
We've always really enjoyed your market updates over the years, and it always seems to be improving. This is an extremely valuable tool! How much do you charge? ; )
Keep up the excellent work!
How to correlate price appreciation vs real pricing. adjusting for inflation in numbers (x 2017 is y 2021), interest rates then vs now and how that impacts pricing (purchasing x home for $300k based on interest rates in june of 2017 is similar to purchasing y home for $526k today), all of the impacts of pricing and some soft calculations of 2 points in time. can be of same property over time or like kind properties, etc.
Been invested in Austin for 8 years. A great run with incredible appreciation. But sky-high property taxes kill any shot at decent cash returns. I am happy I got in when I did but wouldn't buy now.... I have sold some of my SFHs there because I started negative cash-flowing. But made good money on the sales!
How much are multi family properties in the Austin area? 8-16 units?
@Michael Williams most 8-16 unit properties will be listed between $1M-$2.5M depending on location. The closer into the city, many are being zoned for tear-down/remodeling projects because the land is more valuable than the building. If you need connections to a commercial broker, I'd be happy to connect you.