All Forum Posts by: David Ivy

@Stephen Stokes

Check out this BP post by @Jason Brown. I attended one of the Austin RENC/REIA regular monthly meetings here in Austin several years ago, experienced a shortened version of exactly what Jason described, and never went back.

The April 2018 Central Texas Housing Market Report is out from the Austin Board of REALTORS®. The median price for a single-family home in Austin is now roughly $400,000. That's a 9% jump from April 2017! All signs continue pointing toward an incredibly strong summer season for Austin area real estate. Last month, 2,611 single-family homes sold in the Austin-Round Rock MSA. That is up 4% from last year. However, inventory remains incredibly tight, with only 1.7 months of inventory in Austin and 2.4 months in the greater Austin area (a balanced market is 6.5 months).

Steve Crorey, 2018 president of the Austin Board of REALTORS®, said, "In the Austin-Round Rock MSA, price classes across the board are seeing an increase in demand with a decrease in inventory. While new listings are up year-over-year, homes are selling faster than they can be listed on the market. This has led to a smaller number of active listings and an increasingly competitive market for homebuyers.”

Here are basic stats on single-family home sales for April 2018 for the City of Austin and the greater Austin area:

Affordability remains an issue. The 2017 median annual income for a family of four in Austin-Round Rock MSA was $81,400. That's nowhere near enough to afford the median priced home in Austin. Things look only to get tougher for median income and entry-level home buyers, who are already priced out to the suburbs and beyond. Rising mortgage interests rates will make it even worse.

Mark Sprague, state director of information capital for Independence Title, said that, "The desire to live in the city of Austin continues to drive home sales. Inventory levels for luxury homes priced at $700,000 or higher have decreased year-over-year, and the inventory for homes priced under $500,000 continues to decline in Austin. As a result, we’re seeing locals purchase more homes in the suburbs. However, the real estate landscape continues to be strong compared to most major cities in the country.”

@Joseph Chan

@Jeff Schechter and @Larry Fried are 100% correct. I don't know of any turnkey provider who could make the numbers work in Austin's current market.

The City of Austin recently passed a resolution to "educate homeowners who could get taken advantage of by low offers, with the promise of quick turnarounds."

According to this story from KXAN, "The resolution will provide resources for homeowners, many elderly and low-income families, who the city says investors prey upon to sell their homes, "through high pressure, deceptive, and/or exploitative tactics." The same people who may be struggling to stay in their homes to begin with."

The resolution calls on the city manager to launch an educational campaign including:

• Best practices regarding educational and marketing campaign strategies
• Outreach activities in areas where populations at risk are being targeted
• Potentially include a hotline to refer homeowners to a “Real Estate Agent List” and a list of legal resources
• A campaign work plan that includes a timeline for implementation and identification of both public and private funding options and potential partnerships

The March 2018 Central Texas Housing Market Report is out from the Austin Board of REALTORS®.  All signs point to an incredibly strong summer season for Austin area real estate. Last month, 2,714 single-family homes sold in the five Central Texas counties comprising the Austin-Round Rock MSA. That is more than any previous March on record. However, inventory remains in incredibly tight, with only 1.5 months of inventory in Austin and 2.2 months in the greater Austin area (a balanced market is 6.5 months).

Steve Crorey, 2018 president of the Austin Board of REALTORS®, said, "Historically, it’s common for some homes to be on the market for 50 days or more, even in markets with strong housing demand. Within the city of Austin and other local markets with limited inventory, homes are spending a fraction of time on the market—as little as two weeks in some areas. This is an indicator of just how competitive it’s become to purchase a home in and around Austin."

Here are basic stats on single-family home sales for March 2018 for the City of Austin and the greater Austin area:

In addition to Austin's housing supply and affordability issues, we can now include increasing mortgage interest rates to the significant forces applying downward pressure:

The Fed is anticipating three to four rate hikes in 2018. With every tick upward in interest rates, the buyer pool for real estate shrinks and buying power of those still in the market is eroded. This will eventually have some cooling effect on the housing market. However, in the immediate term, it actually spurs activity by getting people off the fence and accelerating their real estate plans before rates go higher. The Austin housing market is so strong, though, that I expect it to barrel through mostly unfazed in the more "affordable" price bands. There's still a long way to go for Austin to be anywhere near a balanced market. Some mortgage lenders are also beginning to relax lending standards.

Home builders are trying to meet the extreme demand for an "affordable" product in the Austin area. “Demand for homes priced below $250,000 is driving the emergence of new submarkets like Manor and Del Valle, where builders can construct homes at a lower cost,” Vaike O’Grady, Austin regional director for Metrostudy, said. “We’re also seeing creative land plans that provide common area open space to offset smaller lot and home sizes. Attached single-family homes are also coming to the market to meet buyer demand for more affordable housing.”

@Victor Smith

I was able to pull this below. Is this not what you mean by a subdivision plat? You've probably already seen this. So, I'm assuming not. If it is, then send me a PM for a higher resolution image.

@Ian Hamrick

I'm a firm believer that all the real estate investment education you need to get started (and more) can be accessed basically for free online (e.g., BiggerPockets) and through getting serious about consistently and systematically networking with other active investors and real estate professionals in your area one-on-one and through meet-ups. Almost any investor in the Austin area, including me, will happily grab lunch and tell you more-or-less exactly what it is we're doing and how we're doing it. That's a quick way to finding out what's working in your market and find a path that's attractive to you. To put it crudely, you can find someone to "copy." It's even better if you can find a way to provide value to that person.

Getting very specific in fleshing that out your goal, "to build a passive income stream and be able to walk away from working full time," will help cut through the clutter and avoid being overloaded with so much information that's available.

You could reach out to @Patton VanVeckhoven or @William Smith for details. Both are attorneys in Austin specializing in condo conversions. It's not a lottery or quota system. As I understand it, a small condo conversion (e.g., SFH + ADU or attached duplex) is done in Austin via executing the right legal documents and has nothing necessarily to do permitting or the development code. It's just a change in ownership structure and, as far as I'm aware, doesn't require approval from any outside party or stakeholder. That said, the details can still be complicated. So, again, I recommend talking with an attorney in Austin who does many of these conversions about your particular situation or plans.

@Monty Panm

At your budget, my order of preference would be Cedar Park, Pioneer Crossing (Samsung area), and then Round Rock. Very briefly, Cedar Park's maturing real estate market is simply running out of available land to develop. I was talking with Cedar Park's Assistant Director of Development Services a couple months ago about that. She said there's practically no way for the city to expand its territory. So, with high demand and a fixed/limited supply of real estate, I'd expect Cedar Park to do better than the Pioneer Crossing area in appreciation and rent growth when buying a resale home over the near and middle terms. There's plenty of new home development going on out in the Pioneer Crossing area that your investment would compete against for years to come. Leander to the north of Cedar Park is also packed with new builder activity. But Leander is not Cedar Park. If you're interested in new construction, you may consider getting in very early on in a newer community near Samsung to get some of the benefit from the regular price increases moving forward while they continue to build it out over the next year(s).

Of course, all that depends on how the rental numbers look for you in each area.  I never recommend buying something with negative cash flow with the hope that appreciation or future rent increases will make it a good investment down the road.

@Daniel Pierson

I own rental property in Austin. The major pros to owning rental property in Austin mostly relate to the strength of the 21st century economy here. These include good appreciation for the foreseeable future (especially if Amazon HQ2 happens here) and low vacancy rates for attractive properties. Property in Austin is also more affordable compared to other hot areas, including the Bay Area and Seattle. The major cons include high property taxes, difficulty finding positive cash flow (especially when using property management), and slow rent growth due to, among other things, rising supply of multifamily units being developed all around town. Rents have lagged significantly behind property values in Austin over the past several years. If appreciation plays a big role in your investment strategy and/or you're buying all or heavily cash, Austin could be attractive.

If you are good at performing due diligence and can purchase something cash, then you could find a rehab/value-add (BRRR) opportunity. That would require having a team on the ground and the ability to manage the project from afar.

You may have heard this before. However, I've found that Austin's high property taxes make the numbers very difficult for California investors. There's no state income tax in Texas. So, the high property tax can make (somewhat) more sense. It's supposed to more-or-less balance out for most in-state property owners. At least, that's the idea. However, a California investor pays state tax in CA and has to pay the high Texas property tax. So, you get hit from both ends.

I hope this helps!