First Time Buyer in Austin/Round Rock

Buying & Selling Real Estate
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First Time Buyer in Austin/Round Rock

Pat Brown
Real Estate Investor · Round Rock, TX · Member since 2016 · 19 posts · 8 votes

Houses here are going in 2 to 3 days so I have to make a decision fast
Looking at a 207k house that would only yield a $150 a month positive cash
flow. But houses are appreciating fast here at a rate of 10 or more a year.
Should I jump in a possibly have a negative cash flow?

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Jennifer BeadlesPro Member
Rental Property Investor · Phoenix, AZ · Member since 2016 · 424 posts · 261 votes
10y

@Pat Brown don't do it. If you are in a negative cash flow situation and the market takes a turn it would be a very bad situation. Consider looking at multi family properties in your area, and if you still cannot find properties that provide sufficient cash flow then look elsewhere. 

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  • Jennifer BeadlesPro Member
    Rental Property Investor · Phoenix, AZ · Member since 2016 · 424 posts · 261 votes
    10y

    @Pat Brown don't do it. If you are in a negative cash flow situation and the market takes a turn it would be a very bad situation. Consider looking at multi family properties in your area, and if you still cannot find properties that provide sufficient cash flow then look elsewhere. 

    3Reply
  • Pat Brown
    OP
    Real Estate Investor · Round Rock, TX · Member since 2016 · 19 posts · 8 votes
    10y

    Thanks for the reply. Frustrating process here in Round Rock Tx. Houses have all jumped about 15% last year. I don't see it stopping but then with those prices rents have not jumped accordingly.
    There in lies the problem.

    0Reply
  • David Ferrette
    Developer · Austin, TX · Member since 2014 · 266 posts · 110 votes
    10y

    @Pat Brown Yes, if you are just buying a rent ready home off the MLS in Round Rock, it may be a bit difficult to find a good deal that cash flows really well. That goes for both single family and multi-family in that area. You are going to need to find one that is distressed and that maybe not many other people would buy. That way you purchase at a discount, fix it up and then rent it out.

    1Reply
  • Lars S.
    Los Angeles, CA · Member since 2015 · 10 posts · 3 votes
    10y
    Originally posted by @Pat Brown:

    Should I jump in a possibly have a negative cash flow?

    Round Rock and Austin seem extremely competitive which is why I have been trying to learn about other cities. Have you taken a look at other cities like Kileen or Katy? Those two cities seem to be discussed more and more here on the forums and I would be interested to see what you think of those areas. Perhaps those areas might provide better opportunities than Round Rock. 

    0Reply
  • Joseph Baldini
    Austin, TX · Member since 2016 · 30 posts · 14 votes
    10y

    Austin is tough when it comes to a buy and hold strategy right now. The real meat and potatoes if you're trying to generate income would be to buy and resell. But, then again, that isn't really cash flow. I agree with the previous posts. One of the suburbs will have the right properties at the right price point and have the renters to fill them leaving you much better off

    0Reply
  • Darwin Crawford
    Rental Property Investor · Scottsdale, AZ · Member since 2016 · 296 posts · 243 votes
    10y

    Re: Kileen - have found this area tough to value.  Lots of space, lots of new builds, and not a ton of good comps.  Fort Hood is there, but military life being what it is, those tenants can be ordered elsewhere in the blink of an eye.  

    Anyone doing any investing in Kileen?  

    0Reply
  • Jason Hirko
    Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes
    10y

    @Pat Brown Yes there's risk in the market going down as others have mentioned, but a disciplined investor takes the risk into account to determine if the potential return is investable. If your risk tolerance is there, go for it. 

    0Reply
  • Brian Adams
    Residential Real Estate Agent · Dallas, TX · Member since 2013 · 232 posts · 173 votes
    10y

    @Darwin Crawford and @Lars S. - 

    There certainly are investors active in Killeen.  Mostly buy and hold types.  I know a guy who flies in from CA every month just for the Bell county foreclosure auction.  

    I wrote an article about some of the MLS flips I've observed here as a real estate agent.

    http://www.hoodhomesblog.com/investing/blog/who-sa...

    Again, those are just deals that came off the MLS.

    My experience working with investors in our area is that they have a hard time overcoming the initial frustrations of selling in our market - unlike the rest of Texas it seems, we are a buyers market where you can expect 6 weeks to close, pay the buyer's closing costs, title, survey and a generous option period. The VA loan makes up over 50% of transactions here.

    Because many in the Army choose not to buy, Killeen is a lopsidely large renter market - another reason it works well for buy and hold. I and others have talked elsewhere in BP about the concern about it being a single employer economy while, while mostly true, shouldn't foreclose the market to your consideration for many reasons.

    Finally, Killeen is not a small town - it is the largest town between Austin and Dallas, and that is not including the Harker Heights and Copperas Cove markets with another 50k population - there are opportunities here, especially at these price points compared to competing markets.

    0Reply
  • Dan BurstainBusiness Member
    Real Estate Agent · Austin, TX · Member since 2014 · 360 posts · 331 votes
    10y

    I am sure you can make money investing in Killeen and if you can get a long term tenant you are golden there but it is an investment that should be looked at as mainly cashflow grab even with high vacancy factor. I still believe Austin and the surrounding areas like Round Rock, Cedar Park and others are the best places to maximize ROI.

    [email protected]512-588-3260
    Dan Burstain, Investment Realtor51 Review
    WebsiteView Page
    0Reply
  • Brian Adams
    Residential Real Estate Agent · Dallas, TX · Member since 2013 · 232 posts · 173 votes
    10y

    I agree @Dan Burstain - I would plan on exactly 0% appreciation in the Killeen market. Though that is my post-2008 philosophy for any market, not that I'm a big time investor or anything.

    0Reply
  • Account Closed
    Killeen, TX · Member since 2015 · 85 posts · 60 votes
    10y

    I'm a real estate agent and an investor.  The Killeen area is a perfect place to employ a buy-and-hold strategy.  We have a steady supply of foreclosures both active foreclosures and new foreclosures coming to market, a large pool of renters and a virtually recession-proof economy fueled by government money.  I have seven little cash registers (rentals) all around the city and they go off every month.  My plan is to get a whole lot more.  

    If cash flow is your objective certain zip codes perform better than others. If appreciation is your objective certain zip codes perform better than others. Next consider your asset class...SFH vs Multis....our market is complex and no book or seminar will prep you for it. If you figure it out, you'll do exceptionally well here if your assets are wisely selected. I'd argue ROI is micro-scale phenomenon dependent on what an individual paid for a individual property. It's difficult to apply it to a full city or area imho.

    1Reply
  • Linda Osborn
    Real Estate Agent · Austin, TX · Member since 2016 · 111 posts · 64 votes
    10y

    I also am a real estate agent and an investor. Rents are always going to be 6 to 18 months behind the market...because rent rates can only be adjusted at lease renewal. I agree that is is hard to latch onto a house in the Austin / Round Rock market right now. However, I do think there are still deals if you are patient and willing to wait for the right property. Also, @David Ferrette is correct;  you can do better if you don't need it live-in ready (be willing to take a property in less than perfect condition) and/or are willing to wait until things slow down a bit in the fall / winter months. I have a client who just bought a property in Georgetown that she got for almost $20K under market (and without multiple offers)...because this property desperately needed new paint and flooring. 

    1Reply
  • Charlie Chung
    Burlingame, CA · Member since 2016 · 29 posts · 22 votes
    10y

    Hi Pat,

    Contrary to most advice, I wouldn't be against a zero cash flow investment in Austin/RR. It depends, of course, if immediate cash flow is your goal. If you believe the market will appreciate & rents will likely increase, and you can wait a few years, it could be a good investment. Also, even with no cash flow, the principal portion of the mortgage is being paid down, at a rate of ~$200-300 (increasing your equity) every month.

    From a purely financial standpoint, it makes sense to compare investments and go for the best returns, whether it is in Killeen or elsewhere, but I can understand the benefits of wanting to have a local rental that you strongly believe will increase in value--you can drive by it, manage it easily, etc. I am somewhat in the same boat.

    -Charlie

    1Reply
  • Sal Zafar
    Investor - buy and hold. · Cedar Park, TEXAS (TX) · Member since 2015 · 95 posts · 7 votes
    10y

    Round rock is getting out of hand. Properties which never been sold because of it's condition are selling it with full or may be higher than asking price. Outside investors are killing it here. What they are not understanding that rents are not really matching with the sale price. Even whole sellers are putting artificial inflated numbers incorrect COMPS from next two streets increasing the value of the property-- I personally notice that, since i have MLS access. Sad thing is, outside investor are not understanding all that. They see under $200k sell price and just jumped on it.

    0Reply
  • Account Closed
    Killeen, TX · Member since 2015 · 85 posts · 60 votes
    10y

    @Charlie Chung That's great advice!  I hope some of the beginning investors heed it.  It's not always about cash flow.  It's about getting the asset for free using other peoples money...and that all depends on valuation...how much one pays for the property when they initially buy it.

    0Reply
  • Mark Allen
    Real Estate Investor/Broker · Irving, TX · Member since 2015 · 520 posts · 263 votes
    10y
    Save your money and buy at next market correction!
    0Reply
  • Russell Spillers
    Flipper / Investor · Austin, TX · Member since 2015 · 4 posts · 2 votes
    10y

    Pat,  

    You've gotten a great response from some really knowledgeable folks.  I am a full time real estate investor in Central Texas. I am mainly engaged in flips and acquiring properties for my own buy and hold portfolio, but the level of marketing I am doing enables me to also wholesale deals that I am unable to take down immediately.  

    If your interested in a conversation plesas give me a call.  

    0Reply
  • Pat Brown
    OP
    Real Estate Investor · Round Rock, TX · Member since 2016 · 19 posts · 8 votes
    10y
    Originally posted by @Lars S.:
    Originally posted by @Pat Brown:

    Should I jump in a possibly have a negative cash flow?

    Round Rock and Austin seem extremely competitive which is why I have been trying to learn about other cities. Have you taken a look at other cities like Kileen or Katy? Those two cities seem to be discussed more and more here on the forums and I would be interested to see what you think of those areas. Perhaps those areas might provide better opportunities than Round Rock. 

     So I have checked into Kileen which is a military town so heavy transition. Pretty close to Round Rock but I want a little closer to home. Katy is outside of Houston so even further out, so maybe down the road. Thanks for the reply

    0Reply
  • Pat Brown
    OP
    Real Estate Investor · Round Rock, TX · Member since 2016 · 19 posts · 8 votes
    10y
    Originally posted by @Russell Spillers:

    Pat,  

    You've gotten a great response from some really knowledgeable folks.  I am a full time real estate investor in Central Texas. I am mainly engaged in flips and acquiring properties for my own buy and hold portfolio, but the level of marketing I am doing enables me to also wholesale deals that I am unable to take down immediately.  

    If your interested in a conversation plesas give me a call.  

     Thanks Russell at this point not heading that direction but could be in the near future. Thanks for the post.

    0Reply
  • Pat Brown
    OP
    Real Estate Investor · Round Rock, TX · Member since 2016 · 19 posts · 8 votes
    10y
    Originally posted by @Sal Zafar:

    Round rock is getting out of hand. Properties which never been sold because of it's condition are selling it with full or may be higher than asking price. Outside investors are killing it here. What they are not understanding that rents are not really matching with the sale price. Even whole sellers are putting artificial inflated numbers incorrect COMPS from next two streets increasing the value of the property-- I personally notice that, since i have MLS access. Sad thing is, outside investor are not understanding all that. They see under $200k sell price and just jumped on it.

     I have to agree with you Sal. It's insane. I do have a patient agent who feeds us lots of good leads but I'm beginning to think I need to sit for a while.  Thanks for the reply

    0Reply
  • Pat Brown
    OP
    Real Estate Investor · Round Rock, TX · Member since 2016 · 19 posts · 8 votes
    10y
    Originally posted by @David Ferrette:

    @Pat Brown Yes, if you are just buying a rent ready home off the MLS in Round Rock, it may be a bit difficult to find a good deal that cash flows really well. That goes for both single family and multi-family in that area. You are going to need to find one that is distressed and that maybe not many other people would buy. That way you purchase at a discount, fix it up and then rent it out.

     I think I'm looking hardest at the strategy you describe here. Good advice. Thanks

    1Reply
  • David Ferrette
    Developer · Austin, TX · Member since 2014 · 266 posts · 110 votes
    10y

    @Pat Brown The two rentals I found and purchased were in Round Rock and Georgetown. They were both pocket listing that my agent had a connection to. They never hit the MLS and we got them at a deal since the both needed a little work. Not screaming deals but they are cash flowing with built in equity. I had to start somewhere but I now look for homes that are even more distressed and need more rehab. I close on one this week in New Braunfels that is our best deal yet.

    0Reply
  • Matthew Carducci
    Investor · Charleston, SC · Member since 2016 · 87 posts · 14 votes
    10y

    @David Ferrette  Congratulations, excellent.  I also close on a New Braunfels rental in the next few days, should be an excellent deal.  Nothing as good as a motivated seller...  

    1Reply
  • Gonz Trevino
    San Antonio, TX · Member since 2015 · 125 posts · 102 votes
    10y
    I own a house in round rock Texas where my mortgage payment is 1150 and my rent is 1700. Be patient. There are good deals out there. Don't get trigger happy! This is something that can change the rest of your life for the better if done right. :) Keep up the patience and the hustle!
    0Reply
  • Cory Damon
    Investor · Austin, TX · Member since 2015 · 42 posts · 21 votes
    10y

    @Gonz Trevino I agree with you, stick to you numbers, don't compromise, and be patient.

    But I have to ask, if your mortgage payment is 1150, then your taxes must be somewhere between 550 - 650 a month. OR does the 1150 include PITI? Considering expenses as well, this difference determines whether or not you've got positive or negative cash flow. Anyway, just curious.

    0Reply
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