Looking to invest in SFH in North Austin

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Looking to invest in SFH in North Austin

Tulika Tyagi
Member since 2021 · 1 post · 0 votes

Hi everyone,

I'm from the San Francisco bay area and just starting out in the real estate investment world. I am looking to invest in a single family home in North Austin (Round rock, Leander, Hutto, Pflugerville area) primarily because of the close proximity to tech. It'll be for rental purposes and my main goal is appreciation ( hopefully with 300-500 monthly cash flow).  

Would really appreciate some expert advice 

-Is it possible to buy a 1500-2000 sqft single family home in $380-400K. I do see homes listed within my range on Redfin/Zillow, but not sure how is the bidding war ? I am looking at constructions after 1990. Are these considered "older" when renting ?

-Is it easy to find high quality tenants homes in these areas?. The forums I read talk about lack of home inventory in Austin, thus people willing to rent but there seem to quite a bit of homes listed for sale on online marketplace like Redfin 

-Also what is the prediction for these areas ? Is further appreciation going to be slow ?

-Can I also get some suggestions/references for real estate agents who can help me find a house? (would be ideal if they also deal with property management ) 

Thanks in advance !!

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    Dan Hunter
    Rental Property Investor · Austin, TX · Member since 2020 · 43 posts · 41 votes
    5y

    I would agree with everything @Costin I. and @Jordan Moorhead said. Your best case scenario is putting 40-50% down on a property to get the desired cash flow or putting 25% down and pay an additional $500-1000 out of pocket over PITI for a property manager, repairs and vacancy. No one can predict future appreciation, but I can tell you aside from 2020-2021, Austin has averaged about 6% appreciation over the past 20 years. I am sure you could find a closer market with better or similar returns (Sacramento, Fresno, Bakersfield?). If it's closer to your home, you might be able to self manage to allow cash flow. If you're mainly looking for appreciation, historically the bay area has some of the best appreciation in the nation and could be easier and more cost effective for you to do locally.

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    • Costin I.
      Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes
      5y

      @Tulika Tyagi, my 2¢:

      1. Yes, it is definitely possible to buy 1990+ built, 1500-2000 sqft single family home, in $380-400K in the areas mentioned. The market is hot and bidding wars are frequent - you can probably count on 20+% over asking and very "lax" contracts (cash offers, no contingencies, no repairs, free long lease back, etc.)

      2. Finding quality tenants it's an art and a relative term (to the house quality, amenities, location, property manager).

      3. Prediction and appreciation in these areas - let's consult my crystal ball - "possible, likely depending on..." oh, it got cloudy, can't read a clear response. Interesting enough though, my crystal ball comes with a disclaimer at the bottom of it: "Past performance no guarantee of future result. All investments carry some degree of risk and all can lose value, if market conditions sour."

      And with that in mind, you are missing the more important question: should you do it, should you buy a house in said conditions, in said area (given that you are hoping for a 300-500 monthly cash flow - are you ready to put 30-40% DP to achieve that kind of cash flow, fully realizing that your ROI will be under 2% for that DP?)?

      And, also important, WHY? What is your goal? Short term speculation on hopeful appreciation? Parking available cash into an asset, away from likely inflationary trends? Long-term passive income? FOMO?

      PS. You are not going to find a REA tell you "don't buy" LOL. Same like asking an insurance agent if you need insurance.

      2Reply
    • Jordan MoorheadBusiness Member
      Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
      5y

      @Tulika Tyagi with property management of 8-10% you'll definitely be in the red. A likely scenario is you'll pay $3-400,000 for a home and rent it out for $1800-2100, pay a property manager 8-10%, pay fees to rent it each time and then pay for maintenance. If you have money to burn and can pay $500-1000 a month for this property and you goals are only appreciation then it may be a good idea. Another idea is to find something with cashflow not in Austin or invest in syndications.

      @Costin I. we don't all have commission breath! 

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    • Dan Hunter
      Rental Property Investor · Austin, TX · Member since 2020 · 43 posts · 41 votes
      5y

      I would agree with everything @Costin I. and @Jordan Moorhead said. Your best case scenario is putting 40-50% down on a property to get the desired cash flow or putting 25% down and pay an additional $500-1000 out of pocket over PITI for a property manager, repairs and vacancy. No one can predict future appreciation, but I can tell you aside from 2020-2021, Austin has averaged about 6% appreciation over the past 20 years. I am sure you could find a closer market with better or similar returns (Sacramento, Fresno, Bakersfield?). If it's closer to your home, you might be able to self manage to allow cash flow. If you're mainly looking for appreciation, historically the bay area has some of the best appreciation in the nation and could be easier and more cost effective for you to do locally.

      4Reply
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