All Forum Posts by: Bryan Noth

@Michael Serrato the predictive formulas for the 70% or 80% ARV acquisition models are difficult to accurately apply to the Austin market currently. This is largely due to the rising home prices. The last 30 days of homes sales near the median home price show 3-6% over list price in the Austin MSA. However, this does not account for listings that bump up the original price in response to a flood of over asking offers. This also shows the majority of sales that had accepted contracts 2-5 weeks prior, not what the current bidding/pricing is at. In a market with unprecedented levels of inventory this makes the final ARV number a moving target. Albeit, an upward moving target at this point. Would be glad to share some insight, I have done several flips in the area.

Welcome to the BiggerPockets forums @Steve MacNerland!  

Welcome to BiggerPockets @Daniel Cocks! Glad to have you and I look forward to hearing about your REI successes in the future

Lol @Vik J. that’s a fair point. 

I have several I could highly recommend @Samin Huque for the Austin area

Article link below after appearing on Joe Rogan's podcast

https://www.businessinsider.co…

That is a fair question @Costin I.

I would begin with: all investments are a speculation. Bonds, cashflow, appreciation, stocks all have some degree of risk and are subject to external factors, often outside the investor’s control.

I believe there are several major drivers for the Austin market. One is growth. Both population as well as the job creation. Austin has not realized the full extent of this effect because many of the employers who are relocating to the area have yet to complete their buildings and offices. This would strongly indicate that the current demand has a continued source of fuel.

Combine that with a second notion which I believe is the growing gravitational force of business and the corresponding talent that comes with those businesses. More businesses means more employment options for workers. And more workers equates to more talent available for businesses. This is particularly true in the tech sector.

Last point, and I’ll phrase it this way: What if Austin follows a similar growth trajectory seen with San Francisco, Seattle, etc.? We have seen those respective markets top out when median household price to median household income ratio reaches around 12-14. Austin was in the mid 4s in 2019 and likely climbing near the 6 ratio range. New York, Chicago, Los Angeles all have ratios in the 9-12 range as well. Data points such as this give a potential indicator that Austin could very well have comfortable room to grow.

I believe the points above are for the appreciation model. The cash flow perspective is a tougher argument. I do think rental prices could see a bump this year. Many landlords did not increase rents in 2020 with the uncertainty surrounding the pandemic. Rents also typically lag and adjust on an annual cycle. It may be a few years for rents to acclimate to the rising market prices.

I wholeheartedly support your comment of an exit strategy. Whatever the degree of risk is, it has to be something an investor can sustain. If rents or prices do not increase as quickly as one hoped, can you cover that loss? Could your investment adapt to another model? And ultimately, does this investment market fit your metrics, criteria, and risk tolerance? It may not, and that is just fine. If that is the case then no additional data points or studies will likely give enough merit to offset the risk. But for others it may align perfectly with their strategy.

Welcome to Bigger Pockets @Mary Smith! 

I second @Will Fraser's recommendation of J Scott's The Book on Flipping Houses.  But also search some of the BP podcasts that cover flipping.  There are some great nuggets of wisdom in those as well.   

@Alex Pyatetsky your post says to convince you not to invest in Austin, TX.  So, how about Round Rock or Pflugerville?   Joking aside, I think you will get a significant amount of confirmation bias validation for Austin.  There are many economic indicators and data points to support your generalized thesis of growth for the area.  Not to mention the near weekly update of companies relocating to Austin.  

I think the two greatest deterrents for investing in the area are cash flow ratios and the barrier to entry with the current level of competition and over asking price offers.  

Details have emerged about requested tax abatements from the company and what could be in store for the Austin area.  

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