Austin Real Estate market Price Point ????

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Austin Real Estate market Price Point ????

Tom Nguyen
Rental Property Investor · Austin Tx · Member since 2012 · 89 posts · 26 votes

Hi, I am in Minnesota and looking to move down to Austin TX. 

I have few questions on Real estate market here. How is pricing ? is it seller market or buyer market ?

I own many duplex in MN and they are cash flow good. Example Duplex cost $230k will generate $2650-$2800 a month in rent. Will I get those number in Austin ? 

Looking to learn more about the market so feel free to response or message me. 

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David IvyPro Member
Real Estate Broker · Austin, TX · Member since 2016 · 352 posts · 699 votes
7y

@Tom Nguyen

As @Andrew Allen and others have said, the Austin area market is a high growth, low cash flow market. If you're familiar with stocks, think about the difference between a growth stock (e.g., Tesla) and a dividend stock (e.g., Ford). People investing in Tesla are hoping to participate in the rapid growth of a relatively young, innovative company. They don't expect or want a dividend. People who invest in Ford know that the company's days of rapid, explosive growth are behind it. They are, instead, looking for (they hope) a lower volatility, predictable investment in a company that will reliably generate cash. Ford is able to offer a 6.96% yield to investors, and the market requires it to do so in order to attract investment. The market doesn't require that of Tesla.

There is around 2 months of housing inventory in Austin and very strong demand for housing. A balanced market is ~6 months of inventory. We are in a seller's market in all price bands up to around $700k. There is an extreme seller's market for anything below $300k. The median single-family home in Austin sells for $375k. However, the median rent is $1,878/mo. The median duplex unit rent in Austin is $1,350/mo., but the median duplex sells for $348k.

You can expect cap rates in the 5% range on commercial multifamily in the Austin area. Of course, things differ from deal to deal, but that's what I've seen.

Here's a chart of the median single-family sales price in Austin starting in 2005 broken down by year:

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  • Andrew Allen
    Investor · Austin, TX · Member since 2017 · 91 posts · 106 votes
    7y

    No you will not.

    4Reply
  • Nina Hayden
    Rental Property Investor · Dallas, Austin · Member since 2018 · 246 posts · 213 votes
    7y

    No, Austin is hard to get that cash flow, especially If you have to borrow money, you will not cash flow. and Austin is still more of sellers market, but you may interpret that differently depending what you’re getting into. 

    0Reply
  • Ryan KellyBusiness Member
    Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes
    7y

    Hi Tom, welcome to Austin! You will not find the same numbers in Austin as you do in Minnesota. I assume you have heard of the 1% rule = one month's rent is one percent of the sales price. I tell my investor clients often that Austin is more of a .5% to .6% rule, so not the same returns. You can find a few "deals" with patience and creativity, but expect a more expensive market to live and invest. The upside is we have strong appreciation due to the high demand for housing and job flow coming to the area...like you!! Reach out anytime if you would like more specific info on the market or Austin-area communities.

    [email protected]512-674-5478
    Ryan Kelly Group - Keller Williams5112 Reviews
    WebsiteView Page
    4Reply
  • Tim SwierczekPro Member
    Lender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    @Tom Nguyen I recommend you also reach out to @Jordan Moorhead he lives in MN and invests in Austin so you can get a unique perspective from Jordan.

    0Reply
  • Tom Nguyen
    OP
    Rental Property Investor · Austin Tx · Member since 2012 · 89 posts · 26 votes
    7y

    Thanks for all the reply . That help me with some basic information to determine where I should move.

    Are you guy also in apartment market ?what is cap rate that are currently trade for ? Like we are about 5-6 cap rate in MSP metro.

     My strategy for the move is buy one single family in good area and 1031 my portfolio to 16-40 unit apartment building . 

    0Reply
  • Kary AycockPro Member
    Lender · Austin, TX · Member since 2014 · 24 posts · 14 votes
    7y

    I agree with all of the above. You'll find it very hard, I daresay impossible, to buy a cash-flowing property in Austin without scoring something way below market. I was just noticing a property in 78704 that sold for $550k and they're renting it for $3,500. Yes, I'm serious. This is a different world from MN! However, appreciation has been stellar and several areas are going up 15% or more a year. 

    1Reply
  • Tom Nguyen
    OP
    Rental Property Investor · Austin Tx · Member since 2012 · 89 posts · 26 votes
    7y

    @Kary Aycock Wow. That is really low and just like @Ryan Kelly said, it almost .5 % rule. I thought 1% rule in MN was a little risky, now I need to rethink. hahaha

    Look like I may need to look  somewhere else that is warm and still make sense to invest. I focus on cash flow and any appreciation is bonus.  Cash flow provide me ability to move when I want. 

    Does any one have chart provide Austin SFG market in the last 20 year ? I would like to learn about the market cycle to try to gauge where we at in cycle. If we at peak, It may make sense for me to rent couple year until market cool down then buy at that time.

    @Jordan: I think I see you few time at different real estate event. Since you invest in both market MN and Austin. Can you give me your opinion ?

    0Reply
  • John Woodrich
    Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Tom Nguyen:
    My strategy for the move is buy one single family in good area and 1031 my portfolio to 16-40 unit apartment building . 

    This will be tough to correctly setup in any market.  Would require you selling your first property, identifying a property you want within 45 days, then selling the rest of them and closing on the new one within 6 months...  Won't be easy...  If this is your plan I would start talking to qualified intermediaries soon.  

    0Reply
  • David IvyPro Member
    Real Estate Broker · Austin, TX · Member since 2016 · 352 posts · 699 votes
    7y

    @Tom Nguyen

    As @Andrew Allen and others have said, the Austin area market is a high growth, low cash flow market. If you're familiar with stocks, think about the difference between a growth stock (e.g., Tesla) and a dividend stock (e.g., Ford). People investing in Tesla are hoping to participate in the rapid growth of a relatively young, innovative company. They don't expect or want a dividend. People who invest in Ford know that the company's days of rapid, explosive growth are behind it. They are, instead, looking for (they hope) a lower volatility, predictable investment in a company that will reliably generate cash. Ford is able to offer a 6.96% yield to investors, and the market requires it to do so in order to attract investment. The market doesn't require that of Tesla.

    There is around 2 months of housing inventory in Austin and very strong demand for housing. A balanced market is ~6 months of inventory. We are in a seller's market in all price bands up to around $700k. There is an extreme seller's market for anything below $300k. The median single-family home in Austin sells for $375k. However, the median rent is $1,878/mo. The median duplex unit rent in Austin is $1,350/mo., but the median duplex sells for $348k.

    You can expect cap rates in the 5% range on commercial multifamily in the Austin area. Of course, things differ from deal to deal, but that's what I've seen.

    Here's a chart of the median single-family sales price in Austin starting in 2005 broken down by year:

    7Reply
  • Dan BurstainBusiness Member
    Real Estate Agent · Austin, TX · Member since 2014 · 360 posts · 331 votes
    7y

    slightly older but gives you an idea. Austin is usually last in and first out of any recession because of our huge government and university job base. . Yes, cash flow may be lower but ROI is as good as it gets.

    [email protected]512-588-3260
    Dan Burstain, Investment Realtor51 Review
    WebsiteView Page
    1Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    7y

    @Tom Nguyen you're going to have trouble getting the same returns in Austin. I bought a duplex with @David Ivy (great realtor) for $260k, put $70k into it and will get somewhere above $3000 gross per month. Cashflow is possible but it's easier to find in other markets within driving distance of Austin. If you want to grab coffee let me know.

    [email protected]512-888-9122
    The Moorhead Team5140 Reviews
    WebsiteView Page
    1Reply
  • Ernest Fernandez
    Real Estate Agent · San Antonio, TX · Member since 2017 · 122 posts · 37 votes
    7y

    Hi @Tom Nguyen, I'm an agent / investor in San Antonio, shoot me a DM so we can talk about what you're looking for.  I can help get you something here.

    1Reply
  • Gaurav Bhasin
    Rental Property Investor · New York City, NY · Member since 2018 · 38 posts · 7 votes
    7y

    @Dan Burstain what did you use to get the chart data? I would like to get the same info for areas surrounding Austin for lower entry point. Georgetown, Temple, etc.

    1Reply
  • Dan BurstainBusiness Member
    Real Estate Agent · Austin, TX · Member since 2014 · 360 posts · 331 votes
    7y

    @Gaurav Bhasin That one was from a marketing piece from Austin Title I had awhile back. Here is an MLS generated graph for Georgetown. Not enough data points just for Temple to really see a trend. You can combine Temple though with other cities.

    [email protected]512-588-3260
    Dan Burstain, Investment Realtor51 Review
    WebsiteView Page
    2Reply
  • Tom Nguyen
    OP
    Rental Property Investor · Austin Tx · Member since 2012 · 89 posts · 26 votes
    7y

    Thanks @David Ivy for detail explanation. It help me understand a lot about this market. do you think the market will have some kind of correction in the next two year ? In the chart, it look like price gone up a lot but I don't think wages have gone up that much so affordable is in question now.

    Also I found these area are good for family: Round rock, lake travis but in north.

     is there any good area for family but in south of Austin? I was thinking of live in south Austin but invest in Sain Antonio since it still cash flow there.

    1Reply
  • Alex G.
    Investor · Austin, TX · Member since 2014 · 184 posts · 229 votes
    7y

    @Tom Nguyen  One of the big considerations for cash flow in Austin is property tax that runs in the 2.2%-2.7% of the assessed value, depending on where you are in the metro. While your tax grows linear with the increases of assessed value, the rents don't. Therefore the higher you climb up in price per unit, the bigger bite property taxes will take out of your cash flow.

    Both south Austin and north suburbs like Leander, Round Rock and Cedar Park have houses in the low 200s that will have the lowest tax bite. Some of the East Austin suburbs like Del Valley, Manor have inventory of younger properties in the mid- to upper 100s that will also save you big on taxes. The outskirts have experienced good uptick in values in recent few years, but haven't quite been growing at the rate of central Austin. 

    The demand from buyers for mutli-family units in Austin have been rampant, so current prices on 2-4 units are hard to justify with rents and cashflow. 

    Out of curiosity, I looked up at my HUD from selling a 4plex in east Austin in 11/2013 on Sweeney Cir. It was in a rough shape and I sold it 'as is' for $185,000. It may have been worth $220,000-230,000 at the time with a bit of clean up and at full occupancy. I just saw an adjacent building with the same floor plan sold in MLS for $515,000.

    Who cares about cashflow in this kind of market! Of course, we'll see a slow down at some point with mortgage rate increases. But Austin seem to be doing extremely well economically, so I think the long trend up will continue. 

    4Reply
  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    7y

    Austin, TX  will cost you 2-2.25X that of 230K to start. Rent is way higher there because of high tech presence.  It was and is and will be seller market with multiple offers. You want near high tech center getting top rent and bet on appreciation not cash flow.

    2Reply
  • Aaron Gordy
    Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes
    7y

    Yes, Austin is super hot. The latest unemployment stats show that Austin metro area is at 2.69% with a 3.41% increase in overall employment. That is crazy. Everywhere one looks in the city there is construction. I am not sure the number of high rises going up but its a bunch. And in older neighborhoods, one sees older houses being demolished and 2 houses being constructed on it. And then Apple and Oracle makes their big announcements: nuts! Its not uncommon to go into restaurants in the city and one sees help wanted signs. 

    Its going to be super hard to cash flow when there is such demand for space around the city. I see ghetto fourplexes selling for close to $500k with rents of $3550 and I know that whoever buys it will have trouble with the tenants. The only way to get cash flow in the city is one has to be super creative and buy right. I put an offer on a turnkey duplex a few days ago in the suburb and it was quickly a multiple offer situation. So be expecting multiple offers on most anything that is priced right and turnkey. 

    3Reply
  • Tom Nguyen
    OP
    Rental Property Investor · Austin Tx · Member since 2012 · 89 posts · 26 votes
    7y

    Thanks for all the information.

    After searching and reading past few day, I really have to rethink my strategies. It seem very hard and pretty much different animal that I am dealing here in MN.  I don't think rental will make sense in Austin. I think Fix and Flip make better sense because of appreciation.

     any fix and flipper here in Austin ? What do you guy think ? I also do fix and flip here in Minnesota and very confident will full gut rehab so I can certainly do it again in Austin.

    2Reply
  • Rebecca Lujan
    TX · Member since 2018 · 17 posts · 10 votes
    7y

    It's very encouraging and helpful for me, as a new investor, to see how willing everyone is to share valuable information with others. Although I am new to investing, I used to be a real estate agent in California. There are many of the same processes starting out and I am grateful for my past experience. I too, thank you for all the input. Clearly, knowing the market, is essential.

    0Reply
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