All Forum Posts by: David Ivy

@Michael Cavitolo

The Real Estate Council of Austin published a piece on the Austin real estate market, with a particular focus on our city's affordability problems. It's from 2015, but almost all of it rings true today. In fact, many of the problems and figures noted are now even worse. I recommend this document to anyone from outside our market looking to invest. You can check it out here.

Aside from making connections with other investors in Austin, you also need a good relationship with a local lender who understands Austin and works with investors.

Check out these and other meetups when you get to Austin:

• http://www.meetup.com/Investor-Underground/
• http://www.meetup.com/REALESTATEinvestormasterminds/
• https://www.meetup.com/texas-real-estate-Investment-Education-Training-Networking/

Also, join the Investor Underground - Austin group on Facebook. It's private, but all you have to do is ask to join.

Feel free to reach out when you get to town! I'm happy to help.

@John Lach

It looks like we might be a good fit. I'm an active investor and investment focused Realtor in Austin. I focus primarily on buy and hold deals and have experience in single and multi-family property. I'll reach out via private message.

@Christopher Ward

I think we might be a nice fit. I'll send you a private message to talk specifics.

There are pros and cons about waiting until the fall and winter. The biggest con is that there will be less inventory from which to pick, since anyone who can wait to sell later will do so. The largest pro, however, is that those sellers that do put their homes on the market usually have a very good reason to do so and, accordingly, are motivated. You'll also be competing against a smaller pool of buyers. Ultimately, all else being equal, I think you're smart to wait until the end of summer. However, note that public schools are back in session starting today. So, the summer market season has already come off it's peak.

Below is a overview of single family homes on the MLS in the $150K - $210K range in the north Austin/ Round Rock/ Pflugerville area:

Duplexes in these areas at the $150K - $210K range will be much harder to come by and will likely require some extensive rehab.

I'll be in touch shortly.

@Jason Hirko Residential real estate investors want to operate in a balanced market or, even better, a buyer's market. I was saying that some colleagues and I are starting to see what we think are some of the first clear indicators that Austin's highly unbalanced seller's market is beginning to show signs of weakness and that a more balanced market is now on the distant horizon.

The current market, while great for speculators and homeowners, is difficult for buy and hold investors seeking properties that will cash flow in the immediate or very near terms. I speak weekly with successful residential buy and hold investors from around Texas and around the country that just can't make their numbers work in Austin. Most deals I'm seeing require a substantial down payment, or an all cash purchase, for the property to cash flow. Even then, cap rates are unimpressive. Outside of the occasional home run deal, forget about finding a property conforming to the 1% rule of thumb. Although, the residential multi-family market is still a good source of cash flow, especially for those willing to purchase underperforming properties and do a bit of rehab to raise rents.

It has also made more difficult work for flippers, who typically make all their money on the buying side of the transaction. Foreclosures and otherwise distressed residential properties are virtually non-existent. Sellers know they can sell their homes and make a profit (or at least break even) and avoid foreclosure. If you do find such a distressed property, you are all but guaranteed to compete with multiple offers, at least one of which is all cash. Here's a photo @Gunnar Teltow posted on a thread here about a year ago:

Gunnar said, "Here's a picture of when I went to look at a property offered by a local wholesaler. Mind, you, these are just the people who wanted to buy it, not ALL of the people who walked the property. The property was assigned to the person who drew the highest card out of a deck of cards." This is good for speculators, wholesalers, and homeowners, but it's bad for Austin investors.

An investor here in my office has been doing teardowns and building single family spec homes in Tarrytown and 78704. He recently told me that his numbers are now incredibly tight, and he's been unable to keep his project flow up, because the teardowns themselves are becoming too expensive. He used to be able to do the whole deal, purchase, teardown, and construction, in the $800s. The finished property was selling for $1.3M - $1.6M. Moreover, he's seeing pressure on the selling side as well now that the luxury market the Austin area has over 13 months of inventory, as I mentioned above. So, people doing the spec. home teardowns face a seller's market when they buy, and a buyer's market when they sell. Those developers in 78704 doing teardowns and spec. condo-regime duplexes are really feeling it.

Of course, there are great investors out there still making it work. But my sense is that the numbers are tighter than they'd like them to be, the deals are fewer and far between, and the time and money needed to uncover those deals is rather high. However, as with any market, home runs can still occur. They do every day in Austin.

I hope this helps give a little more context to my previous post. I'm interested to hear your thoughts. Is anyone seeing anything different?

I think there are some initial signs that the Austin area market is starting to change.

For the second time in 2016, single-family home sales volume declined in Central Texas, down 3.1% year-over-year from July 2015. In the City of Austin, that number is 7.3%. Meanwhile, the median home price in Austin hit $345,000 in July 2016, a 4.6% increase over July last year. So, median price was up, but sales volume was down. Average days on market is also up to 33 days, compared to 29 days in July last year. There is still around two months of inventory, slightly up from this time last year.

My sense, and the sense of those I talk to in the Austin real estate community, is that rising prices are starting to have a cooling effect on sales volume and the market as a whole. Though it has been politicized, the affordability of housing in Austin is also a very real market force that will eventually reign in housing prices in the area.

As prices rise and rise, the pool of potential buyers for those properties shrinks. The median income earning family in Austin has been priced out to the suburbs, fueling the rapid growth of Cedar Park/Leander, Buda/Kyle, and other outlying communities in recent years. Many of these former and would-be Austin residents have been replaced the tremendous influx of new residents, many of them drawn here by careers in the high-tech and creative sectors and comparatively lower cost of living. However, even they have a price at which Austin housing becomes less attractive.

One indicator I like to look at is the difference between the lower and higher end segments of the Austin market. Homes priced between $100,000 and $200,000 are virtually non-existent in the greater Austin area, with inventory at less than one month in July 2016. At the very same time, homes priced above $400,000 had more than four months of inventory. Still not a balanced or buyer's market by any means, but it's worth noting. What's most telling to me, however, is what's happening in Austin luxury market ($1M+), which is now transitioned into a very strong buyer's market at more than 13 months of inventory. Homes at the top of the market, with the smallest pool of buyers, have already gone over the peak. I think this is particularly telling. As homes prices in other market segments continue to rise--and I do think they have some to rise yet--those segments will go over their own peak as well.

Of course, there are many more things to say here. I just wanted to throw out some numbers and thoughts to spark a discussion. However, I do believe that things will get better for Austin investors, buy and hold in particular, in the next couple years. Thoughts?

Hello @Chris Murphy! The BP community is one of the best places for new and experienced investors to network and learn. 

I recommend you and your wife start attending some of the various investor meetups in the Austin area. Here are some great places to start:

• http://www.meetup.com/Investor-Underground/
• http://www.meetup.com/REALESTATEinvestormasterminds/
• https://www.meetup.com/texas-real-estate-Investment-Education-Training-Networking/

Also, request to join the Investor Underground - Austin group on Facebook. It's private, but all you have to do is ask to join.

Overall, the Austin area is still a very hot seller's market. Single family housing inventory has been hovering around 2 months. Affordability of housing is a big problem for median income earners, with most of them being pushed to the suburbs and beyond to find quality affordable housing. Rents have lagged home values, quite significantly in some areas. It's difficult to find single family homes in Austin that generate cash flow, unless you're buying cash or putting down a significant down payment. There are opportunities to find immediate cash flow by buying unrentable or severely underperforming single family properties to rehab and hold. However, many of the buy and hold deals I'm seeing investors do this year look like pure speculation to me, where there the deal is nothing more than a bet on the continued upward trajectory of the Austin market. Whether a property can produce positive cash flow in the immediate or near term is a secondary consideration and not considered a deal-breaker. I don't operate that way and don't recommend it to others.

There's much more I could say. I love talking Austin investing. Feel free to reach out!

@Diron Binns

In what trend(s) in Lamplight Village are you interested? Over the last 12 months, the average SFH in that subdivision sold for $205,625 and leased for $1,541/mo.

Here's the trend chart of the average SFH sale price in Lamplight Village going back to 2006:

What's got you interested in Lamplight Village in particular?

@Ryan Hawkins

That's the very reason my partners and I just exited one of our downtown condos this month. I priced, staged, and marketed it well and had it under contract in two days with multiple offers. The winning buyer was all cash, significantly over asking, and closed in two weeks. We now have some big cash to fund some shorter-term projects. Have you thought about exiting any of your current properties in this market?

I have an investor client who wants to diversify his real estate portfolio by making some hard money loans through a local hard money lender here in Texas. What are some good questions for someone looking to invest with a hard money lender to ask? He fully understands how hard money loans work and how the hard money broker will take a cut for sourcing deals, handling due diligence, originating the loan, and servicing it. So, I'm primarily looking for questions a first-time hard money investor might not think to ask. Thanks!

@Ryan Hawkins

Hello Ryan! I'm also an active investor and investor focused agent in Austin. Have you done any deals in the past 12 months? I'm always interested in hearing how buy and hold investors are still making it work in Austin's current market. My partners and I can still make numbers work as cash buyers. However, we've had to be more creative and proactive in finding properties. Even then, it's often very tight.