New investor looking for some guidance in SFR

Austin, Texas
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New investor looking for some guidance in SFR

Raghuram Janakiraman
Member since 2021 · 2 posts · 2 votes

Hi, 

I am an out of state investor looking for my first rental investment in Austin. I am looking to buy a SFR in the range 350 - 400K within the suburbs of Hutto, Manor, Pflugerville. Would like to understand how is the rental market in these areas.

1. Would renters prefer single story vs two story homes ? Also, how is the re-sale value for single vs two story homes ?

2. I am currently looking at 3bed/2bath homes at around 1400 - 1700 sqft range. Any suggestions on the size/spec that would be more preferable for renters ?

3. Any other general Do's/Don'ts for rental investment properties which can help in making it favorable for renters. 

4. Any common pitfalls to avoid/factors due to which houses might not get rented soon in these areas ?

I am buying this property only for investment purposes, though there would be a small negative cashflow currently, I am aiming at appreciation with buy & hold.

With the current competition in Austin market, I am looking at buying a new construction home, since it has become very hard to close on a re-sale home due to every house getting 10+ offers and all houses going atleast 10% over list price.

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Vik J.
Redmond, WA · Member since 2017 · 134 posts · 65 votes
4y

1. All other things equal, I’d go for single storey 

2. You hit the sweet spot actually. That said, even a 2100 sq ft would be ok but then the house and corresponding PITI will be bigger and home may negative CF even more

3. Too many to list, depends on where you buy and what kind of upgrades you choose (or the home comes with). Example - in my last 2 purchases, I chose tile and/or wooden for all except bedrooms (which were carpeted). Make sure home has all working appliances and fridge. Allow pets! 

4. I hate to spell out the obvious but competitive rent, even it means you negative CF if finding a tenant asap is your goal. the rental market is great in Austin at the mo but is also equally cut throat as well.

I’m sure you know this already but a lot of builders aren’t selling to investors. That said, there a few - just make sure your realtor is on it.

Good luck on your search and let us know if you need anything. This is a great forum. specifically, neil Narayan, this forum’s legend has been very helpful. 

 

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  • Vik J.
    Redmond, WA · Member since 2017 · 134 posts · 65 votes
    4y

    1. All other things equal, I’d go for single storey 

    2. You hit the sweet spot actually. That said, even a 2100 sq ft would be ok but then the house and corresponding PITI will be bigger and home may negative CF even more

    3. Too many to list, depends on where you buy and what kind of upgrades you choose (or the home comes with). Example - in my last 2 purchases, I chose tile and/or wooden for all except bedrooms (which were carpeted). Make sure home has all working appliances and fridge. Allow pets! 

    4. I hate to spell out the obvious but competitive rent, even it means you negative CF if finding a tenant asap is your goal. the rental market is great in Austin at the mo but is also equally cut throat as well.

    I’m sure you know this already but a lot of builders aren’t selling to investors. That said, there a few - just make sure your realtor is on it.

    Good luck on your search and let us know if you need anything. This is a great forum. specifically, neil Narayan, this forum’s legend has been very helpful. 

     

    4Reply
  • Taylor DaschBusiness Member
    Real Estate Agent · Temple, TX · Member since 2022 · 1k+ posts · 700 votes
    4y

    Great advice from Vik, I'll also add that the new construction homes in my market are just as competitive as the resale homes as they are taking multiple offers.  Depending on your goals, it does add a bit of risk to buy with negative cash flow, although investors are pretty much in agreement that inflation will keep causing prices to rise, you never know and if there were to be a dip in the market, you would need more reserves to be able to ride it out if your rent isnt even paying the mortgage.  If you buy a property that needs work you will at least have a back up plan of selling it and not losing anything if it were to drop. I do believe there are still properties that cash flow well in and around Austin so always be on the lookout!

    [email protected]254-718-4249
    Taylor Dasch | EG Realty560 Reviews
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  • Robert Eyers
    Property Manager · Austin, TX · Member since 2019 · 60 posts · 53 votes
    4y

    Some good feedback from the others here. Couple things to add.

    "all things being equal, a single story is better" I agree with that, but usually having 2 USUALLY means you get more square footage. Some tenants prefer not having stairs, others prefer more sq ft. I don't think it really matters much.

    Most new builds aren't accepting investor clients. I am aware of at least one community in Elgin that still is, but they are releasing homes fairly slowly... about 6 per week. Message me if you would be interested as I may have some pointers in how to be sure that one of them goes to you.

    Biggest thing I have to remind people in our market is to let go of the dream of cash flow! A $400k home will rent between $2k and $2.5k... basically break even with the mortgage. You lose cash flow, but you still get...

    - Paydown of the mortgage

    - Guaranteed appreciation (almost... barring catastrophy)

    - Increased rent next year while the mortgage remains the same

    - Tax benefits through depreciation claim

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