All Forum Posts by: John Umphress

@Terry Lao Just about all locales in Texas have high property taxes, regardless of who is in office. Product of no state income tax and the Legislature pushing more of education funding onto property owners. (Public school taxes comprise the lion's share of property taxes.) Add HOA and/or special district fees/taxes and it can really eat into your returns.

I'll offer the advice I received from a very savvy RE attorney, one who has seen both successes and failures:  "Don't try to squeeze the last dollar out of a deal."  Determine what factors would cause the tenants to stay or leave, and determine the costs associated with finding replacement tenants.  Once a property is vacant, you really don't know how long it will stay vacant or what terms you will need to offer to put someone in that space.

Lane,  thanks but I already own a small MF property in San Antonio - bought it a year ago via a 1031 exchange.  Went looking down there again last month and the pickings are slim (and prices higher) which is why I'm looking out-of-state.   You may have missed it my original post that I have a fair sum of money in another 1031 that I have to spend - trying to identify/close on a bunch of SF units within the time constraints is no fun.  Also, I would rather own two or three buildings instead of 20!

Aaron, the I-35 upper decks were constructed about 40 years ago, when Austin was smaller and before I-35 became the NAFTA highway.  Few cities and counties have the resources to construct highways - that has traditionally been the role of state and federal governments.  But Washington has slashed transportation funding (especially for transit and multimodal) and Texas hasn't increased the gas tax in more than two decades.  Hence, congestion and the recent move to toll roads.

For all the complaints about Austin being too expensive,  sure is a lot of construction going on.  Lot prices are a good reflection of Austin's desirability.  Scarcity of buildable land is only part of the equation - you also need demand to move prices and there is a lot of demand for Austin lots.  Not as much large-scale SF development as Austin does not have the raw land like eastern Travis, Hays and Wilco.  CodeNext will likely result in higher density along transit corridors, but not a whole lot else.  Rent controls?  In a state that expressly prohibits inclusionary zoning?  Doubt we will ever see it.  Density bonuses (like Austin utilizes) and land trusts will likely be the (minimal) nod to affordability.  

Austin wasn't always expensive.  I remember cheap rents in Clarksville, foreclosures in Travis Heights and 2100sqft houses in University Hills that could be picked up for 48k.  Lots in near East Austin?  2 or 3k apiece - may have to clear up some back taxes.  Too bad I was broke back then!

Todd,  thanks for your thoughts.  We may take on more debt if the value is there, but some of the most sage advice I ever received was from a long-time real estate developer:  "Have a plan to hang on to your property at least a decade."  His thinking was if you had the misfortune of buying at the top of the market, ten years would allow you to weather the inevitable downturn and make it to the next upswing.  We are fortunate that we have a fair amount of our own money to play with.

My idea is to work from OKC northward up I-35.  I have a good friend who has deep contacts in Oklahoma RE that he will connect me with.  Also have contacts in KC.  Have looked at Memphis and Detroit and there is unquestionably opportunity there.  If I was 10 or 15 years younger I would be more willing to take a shot at them.  There are some select markets in the southeast that I will look at if I can't find anything in OKC, KC or Des Moines but I imagine I will find acceptable properties in those cities first.  As I look at properties in those locales, I will also be scouting property management firms - I know how that can make or break you!

Thanks again!

Use an attorney that does title work - they will be knowledgeable of necessary disclosures. 

Even (especially) lower income working folks need a safe, affordable place to live.  Screen your tenants, offer them a good value in return for their rent and you will likely have no trouble getting and keeping tenants.  Your dad has lived and is living his own life - go ahead and live yours!

It's the old adage - buy the worst house on the best street, not the other way around.  I've been surprised what some flippers are flipping in Austin and the prices they are getting.  But eventually the music will stop and some folks will get caught short.  Be mindful of your leverage and have an exit plan. 

In North Austin I'm seeing a fair number of retail vacancies at the moment - a RE attorney I work with said that rising property taxes are putting extra pressure on NNN tenants to the point that some owners are eating part of the rent increases so to retain tenants. We are in the process of selling a commercial property in downtown but will be using the proceeds to purchase MF. IF I was to shop for commercial space it would be service oriented (can't buy it from Amazon) or a medical office space near a hospital or medical center. Specialists still need space for patient visits - be a while before telemedicine allows them to examine patients remotely. Bars and restaurants can be okay if they have the traffic or draw. If you are looking at a building that formerly housed one or the other, investigate why they moved on.

On the other hand, yoga studios seem to be doing great . . . this IS Austin, after all.

Ronald,

Perhaps I should clarify - looking for properties 8 units and larger, not a single 8 unit.

John