All Forum Posts by: Bryan Noth

@Nathan W. the ratios are tight in Austin currently, but this tends to be true in growing markets because rents have a lag time compared to sales prices.  Homes prices can go up monthly (sometimes daily it seems) but rents cannot change until lease renewal.  And while Austin did see home values last year appreciate more than 20% it also saw rents increase by more than 10%.  

Thank you @Lucia Rushton!

@Laukik Hoshing I would echo several other comments here in asking, what are your purchasing criteria for a property in Austin?  Location, jobs, price point, etc.  That may help get you responses that apply to your situation more directly.  

As for areas @Dan Burstain said it, almost every direction has some merit.  The rent : purchase price ratio on LTRs does tend to be lower, especially in hot areas.  However, rent growth in the last 2 years has kept the ratio on close enough to pencil out in many situations.  

Buyer approval is simply the buyer becoming qualified to borrow. This is based on factors such as DTI, income, reserves, credit, etc. The part you want to look for @Chi Tang is the waiving of your right to terminate based on appraisal.  

Appraisal is what determines the value of the property and consequently the maximum amount the lender can lend.  Your agent and lender can submit a reconsideration of the appraisal (if the buyer wishes) but there is no guarantee they will change anything.  

It is important to note the appraiser works for the lender, not you. I would check with the lender if they can perform a second appraisal because I am almost certain it will get flagged by underwriting.   

@Chi Tang short answer is refer to the contract, it should spell out your options and recourses.  

If it is a builder's contract then you likely do not have much wiggle room as they tend to be heavily slated in their favor.  If it's the standard TREC 1-4, check the appraisal waiver and 3rd party financing addendum and what was selected. 

What has your agent said?

@Agraj Sobti I believe Austin is a very solid market for investment and I think will continue to grow for a while to come. However, it may not fit your specific REI criteria and that is fine. San Antonio is a great alternative to stay in Texas with a lower entry price but still a growing market.

@Tony R Fox the true fastest way to scale is to leverage.  Leverage your money into loans on income producing assets.  Leverage hard money to buy more units quickly and refi to recoup capital.  Leverage other people's money to acquire even more units faster.  

But when considering your personal strategy, real estate is often much more of a 'get rich slow' game.  @Corby Goade makes an amazing point on appreciation and I wold like to expand on that.

My first duplex in a high cash flow market made $3k net profit a year. That annual ROI was 6%.

My first SFH investment in Austin made $100k in 3 years. That annualized ROI was 20%.

Cash flow is scalable when you have capital at your disposal. If capital is limited, appreciation is tough to beat. I would look at buying a SFH or small multi to owner occupy and just repeat that process every 1-2 years. You should have a very strong portfolio in a respectively short window of time.

@Amanda Smith it depends on your goals and strengths.  Cash flow?  Appreciation? 1 yr or 5 yr strategy?

The greatest pro of a HELOC is access to capital at a relatively low rate. And if saving capital is a challenge then this route becomes a powerful tool to advance your REI journey.

To be on the opposite side of the coin of @Theresa Harris, I have used refinances to great success on rental properties.  This leads to the debate of negative return on equity versus increasing cash flow over time (essentially, untapped equity results in diminished returns over time).  

North Austin is pretty solid right now.  Hard to argue with that area for having strong potential as an investment.  

@Manu D.

While 10% for 10 years would be an amazing ROI, I believe it would be pushing it as @Aaron Gordy said.  But I do think we will be around the 10% mark this year as @Jordan Moorhead mentioned. 

If we saw that 10% x 10 forecast come to fruition it would almost certainly be due to events we cannot predict.  More stimulus packages, international conflicts, new supply shortages, another pandemic, etc.  As it stands currently, home value appreciation at that rate for the area would quickly push many buyers out of the realm of home ownership.  That would result in median home price in the Austin MSA reaching $523,000 in a year and surpassing the $1M mark within 8 years.  

Some factors can be extrapolated out for a longer term prospective, such as the nationwide housing shortage (acutely, Austin is at 12 days of inventory for the MSA on January's housing market report).  I would also add the number of companies considering relocating to Texas to take advantage of the Chapter 313 tax incentives.  I think this actually has the greatest likelihood of pushing growth as those benefits are set to expire in 2022 and companies contemplating a move to Texas would have to expedite their timelines to qualify for those tax benefits.  

@Agraj Sobti Central Texas is certainly booming.  I own properties in both San Antonio and Austin and like them both for different reasons.  San Antonio's entry price point is much lower and the ratios typically pencil out much stronger.  Austin's appreciation growth and economic stability is tough to match. Would be happy to share more if you have specifics you are interested in.  

As for this: "a future Austin in the making" I do not believe so or at least not to the same extent.  Austin has some powerhouse attractors in the Tech industry (Tesla, Google, Meta, Amazon, Oracle, Apple, Samsung, Dell, etc) and San Antonio simply does not have the same number of big name players.  However, the corridor between the two cities is growing at an unprecedented rate and I believe as those two MSAs expand San Antonio will see a spill over effect.  

"Germany-based semiconductor company Infineon Technologies AG is seeking tax incentives from Del Valle Independent School District for a $700 million facility expansion in Austin.

The company, under the subsidiary Spansion LLC, plans to expand its existing wafer fabrication campus in Southeast Austin by nearly 154,000 square feet and create 100 jobs, according to an application for Chapter 313 incentives posted Feb. 15 to the Texas comptroller's website."

Article link here:

https://www.bizjournals.com/au...