Need feedback on a specific community in Austin : Rental unit

15 Replies

I'd like to invest in a rental property in Austin. 

I have an agent in Austin, who has narrowed down our search to the following communities. The criteria for selection was : <400K, close to the city, a property that's easy to sell, will appreciate and rental income (in that priority order). I don't really care about the size of the house or a big yard.

The first option is Amber -- Here's the developer's website Builder's website: http://www.calatlanti chomes.com/find-your-new-home/ 2-austin/8115-amber-oaks.html

The 2nd option is Parmer Crossing -- https://www.pulte.com/homes/t exas/the-austin-area/austin/pa rmer-crossing-209615

They are both close to Dell, Cisco and other IT companies.

I'd love to get advise.

Thanks,

What specific questions do you have?

Hey Peter, 

The area you're looking at is very good, lots of development and prices have been rising quickly (well, that's true for almost all of Austin). I'd say you could go with either one based on the location. It's near highways so that's a plus here in Austin (big critique is that the highway infrastructure is poor... not enough highways, difficult to get from point A to B if you're not close to one of the big roads I35, 45, 183, 130, 290, 360.)

@Rod Hanks specifically - is this a great location? Great community? Will it be super easy to rent and sell? I want to be close to the city so I assume commuting to downtown is 15 mins? Any feedback on the builder or quality of construction?

I think it is going to be hard to have these properties cash flow positive.  I know you say cash flow is low on your priority but why buy a property if you are going to be out of pocket every month.  That isn't a model you can scale very well.  What if there is a down turn in the market, then you will be upside down on the home and losing cash each month.  Why not buy in another location where you can get appreciation and cash flow?

@David Ferrette I am expecting 2200$/month in rent so it should be cash flow positive with 350K buy price and 25% down. what am I missing?

Which other neighborhoods do you recommend looking at? I absolutely don't want to be too far from the city.

@Peter Shaw have you factored in property tax? it is high. I am looking at properties in similar area too. 

Hi @Peter Shaw , I think your heart is in the right place, but I have a feeling you have more research to do if you're going to find cash-flowing rentals in Austin. If you haven't already, I'd also recommend reviewing the 50% rule.

Buying cash-flowing single-family rentals in Austin isn't impossible, but I would be surprised if new construction, in an up market, in Austin, paid off with immediate cash flow. There's nothing wrong with your general locations, but to pay the new-construction premium you'd need high rents. Rents just aren't keeping up with sales prices in Austin, particularly for new construction.

Also, I personally prefer to run my numbers assuming 100% financing.

Originally posted by @Peter Shaw :

@David Ferrette I am expecting 2200$/month in rent so it should be cash flow positive with 350K buy price and 25% down. what am I missing?

Which other neighborhoods do you recommend looking at? I absolutely don't want to be too far from the city.

 Have you had a chance to use the rental calculator here on bigger pockets.  Based on the info you provided, when you add in vacancy, maintenance, insurance and taxes I show on my own calculator that  you are out over $400 a month.  

What is bad about being away from downtown?  The further you get away, the better cash flow you get.  You can still buy in great neighborhoods that will have similar appreciation.  

I was born in DFW area, then lived in San Antonio for 2 years and now in Austin for the last 17 years. Austin real estate has skyrocketed and I expect it to rise steadily. But they just voted in the highest tax allowable and all the freeways are toll roads and property is 3 times the prices of other cities. I believe if you invest in San Antonio or Houston you can still get a better deal and those areas will rise too. Especially the rent ratios are perfect for the Brrrr system in all the major cities. As far as Austin goes, you can rent anything you own FAST anywhere in this .city...just expect to pay a lot for it. I represent a hard money lender but would be glad to help you with any address inspection if you aren't local. Try San Marcus, Kyle, Del Valle, Garfield or Bastrop which are suburbs. 78704, 78702, 78745 are all hot areas in Austin  but 78753 is okay too. Call me if questions on locations. Parmer is good north central location. I would pick that one of the two. connect with me if you would like. The closer to downtown, the higher the rent..some 1 bedroom condos rent for 2600 or more downtown. Med price $389k Where San Antonio is about 180k and Houston about $180k too. Rents are around $1100 there, which is still very good. Bottomline, it is hard to lose in any of these cities if you shop right! Good Luck. 

Oh, and Peter, ask your realtor about east of IH35 between Riverside Dr and Buda/Kyle. Those areas are going through the roof if you can find a good deal. Or look at the Travis County Tax Office under properties then foreclosures and check out those too. There is really no bad areas anymore. Or many great deals either. But people can't afford the taxes and are forced to sell. Or bank foreclosures due to rising property taxes. Google Travis OPR and look at foreclosure list. Hope that helps.

I would look for something closer to downtown or by the lake. People rent those more.

Personally I wouldn’t buy a new home as you’re not buying into equity day one. There are still deals around Austin but it takes a lot of patience and you have to be quick when the deal does arise.

@Peter Shaw , I would be careful of overestimating your rental projections in these two neighborhoods.  Just doing a quick search on homes that have rented in the last year in/near those two neighorhoods, that projection looks to be anywhere from $200-$500/month high, which could really effect your cash flow.

That is  where we Hard Money Lenders come in handy! Like Matthew said, if you find a deal, you better jump on it and quick. Hard Money is known for being quick and closes same as cash. Most all of them are about the same time frame, but banks are way too slow! you could probably close and darn near finish repairs by the time a traditional loan closes! Best to have a pre-approval from a lender while you shop, too! 

yeah, East Riverside Dr would be a good bet in Austin

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