Activity in Austin, TX?

[Joseph Henry]

New investor here, have never owned real estate before. I live in Austin, TX. Has anyone invested here in the past four months? I've been looking for deals for over a month now and cannot find anything. I did not think Austin would be a fantastic investor's market in 2023 and primarily chose it because I live here and know the area well (i.e., to learn). However, multifamilies are regularly selling for 150-200x more than the highest monthly rents in the neighborhood, even multifamilies in absolutely horrendous condition. I visited a duplex that literally had rats living in one side, and the seller wanted almost $500K (in a neighborhood that seldomly rents more than $2500 for a similarly sized unit). Single-families aren't looking much better; I imagine I could still find an affordable property that appreciates well over the next 10 years, but I'd like to build up my portfolio faster than one property per decade. 

I've concluded that Austin in 2023 is not the time and place to get into real estate investing. I plan on moving to middle TN in a year or so, which looks more promising. But I would love to be proven wrong and have an investment property under my belt before I head back. Has anyone found any deals here (or in the surrounding areas) recently?

[Tatum Littleton]

Hi Joseph, I understand where you are coming from and your concerns! My wife and I also live in Austin and are currently looking for investments in and around Austin as well. We do have a property in Bryan, TX (about an hour and 45 minutes east) and are also looking there to build our portfolio. I believe Bryan/College Station is also a great, viable location to begin investing worth looking into, with low vacancy and different ways to invest such as LTR or STR it offers a good amount of creativity!

I know Austin and Bryan/College Station quite well and think both (with the right strategy) would be great portfolio builders! There are plenty of ways to make a property work for what you are looking to do.

[Zach Edelman]

I would hit up Jordan Moorehead and his team. There an investor focused agency here and it seems like they've been able to find some good deals. Good people too. 

[Aaron Gordy]

@Joseph Henry The days of just randomly picking out a property on the mls and picking a winner are in the past. There are deals to be had but one has to be creative and very selective. An investment deal isn't necessarily a duplex or a house either. There are other types of product to choose from that might make more sense if the yields from day 1 isn't interesting to you.  

[Joe Scaparra]

Yes you can still find deals but it is WORK!  I found a duplex gem 2 months ago in the Austin MSA. Listed for 277k, sold for 270k. 2 Bedrooms 1 Bath 1 Car Garage each side.  Market rents $1500 each side and was turnkey, no REQUIRED maintenance needed.  We are painting the outside and touching up some wood rot siding at a cost of 6k.  Summary 270k.  Occupied side  lease in Jan at $1050 the other side was empty (before we closed).  We advertised empty side before closing, had new tenant move in at $1500 day one!  The other side that was rented is in better shape than the one just rented at $1500.  

Lastly, if you're impatient and need something TODAY, look at Bryan/College Station still good buys there.  Cheers!

[Joseph Henry]

@Joe Scaparra What was your down payment if you don't mind me asking? Or was it an all-cash deal?

[Joe Scaparra]

20% Down as it was not owner occupied.

[Scott Mac]

Quote from @Joseph Henry:

New investor here, have never owned real estate before. ... ... I visited a duplex that literally had rats living in one side...

Were they collecting pet rent?

Seriously though, if there are rats in one unit, they are probably going to be in the other unit eventually.

They like to eat cereal and will gnaw a holes in the cereal boxes.

Sometimes the renters bring them inside with their move in belongings, from their old place, or they leave a door propped open during move in and an outdoor rat scampers in.

They also will use the roof gutters like Habitrails.

If you buy the place, you will have to get them out, they carry diseases like typhoid.

You cannot allow them in your rentals.

Good Luck!

[Joseph Henry]

Quote from @Aaron Gordy:

@Joseph Henry The days of just randomly picking out a property on the mls and picking a winner are in the past. There are deals to be had but one has to be creative and very selective. An investment deal isn't necessarily a duplex or a house either. There are other types of product to choose from that might make more sense if the yields from day 1 isn't interesting to you. 

Can you give some examples of creative deals or other products I might choose from? I don't necessarily need to see yields day 1, but I also can't hold onto a property that is actively losing money for years in hopes of winning on the resale.

[Aaron Gordy]

There are a variety of deals out there but I am not going to give out my honey holes.  I love to fish. If I tell everyone where all the fish are at then pretty soon those fish aren't there anymore...  The only thing that I would stay away from like the plague is office deals. Retail is great. Multifamily is good in some areas. Sfh and condo's are a little tougher to cash flow. I ran the numbers on a 1x1 condo near the domain and it was a terrible deal. No thanks. 

[Lucia Rushton]

@Joseph Henry @Bryan Noth do you want to chime in ? You and I had a great conversation about Austin yesterday

[Bryan Noth]

Indeed @Lucia Rushton and thanks for the mention! @Joseph Henry

There are still deals all over Austin, though some areas do tend to have better ratios when running numbers. If you are finding nothing fits your criteria and metrics I would first check to make sure your estimates are on par for the area and possibly push the search outwards a bit.  As you get beyond the immediate adjacent suburbs the cash flow numbers tend to improve.  Unfortunately, while there are deals to be found, there are certainly unrealistic options as well which sounds like you may have come across one of those.   

[Robin Simon]

Even with prices coming down recently, its definitely not the right market for cash flow, but if you believe in the city and continued appreciation, then the deals can still make sense

[V.G Jason]

If you're investing in Austin thinking you'll make a quick buck, you're looking at the wrong area.

[Zack Oberlies]

We are seeing buildings cash flow just outside of "Austin proper" that will also appreciate at a higher rate as the city expands (primarily north). Round Rock, Hutto, Leander. And probably could spend the same amount of money as an Austin SFR and find a 2-4 flat in those areas, which opens the door to house hacking as well.