All Forum Posts by: Nathan W.

I saw a 3,024 SF house listed for $785/SF ($2.375m) a couple fo days ago. Not quite $1,000 psf but high considering the size. 

@Bryan Noth I agree. I've been looking into the STR / MTR model in the Austin area to get both cash flow and appreciation. If my tenants hadn't agreed to the new price hike I was planning on turning that LTR into one.

Have you done any STR in the area? If so what parts of town? Regulations are tough in Austin itself but there are opprotunities in the subburbs.

I just raised the rent on one of my rentals 22%. It still wouldn't make any sense to buy that house today though. The numbers just don't work. 

If you're buying for appreciation, paying cash, and don't care about cash on cash returns then Austin is your market. I would love to see some real world numbers from someone investing at today's prices to see what kind of returns they are seeing. Maybe i'm just not being creative enough. 

Austin is a tough market to buy long term rentals in right now. The economy is great but housing prices and property taxes are high. 

An average starter home right now is about $350k. Once taxes catch up you're looking at around $7,700 - $8,000 a year in property taxes depending on your location. That eats up most if not all of the profit in most deals. 

I would love to be wrong tough. What am I missing?

I purchased the lots and got under contract with a builder about a year ago. Even then it was a decent price. I'm hopeful the first one will be done in April. 

I'm sure there is some value left in the Disney market. But after seeing the effects of a recession on that area first hand I'm staying away. 

I worked for a home builder in central Florida in the mid 2000s. The housing crash effected the entire US but it hit that area particularly hard. I used to drive through Davenport every day on my way to a construction site in Winter Haven and it was a ghost town. Neighborhood after neighborhood of purpose built vacation rentals and they were all empty. 
I moved away but we came back in late 2012 for a family reunion. Our entire extended family rented a HUGE home in Reunion. We were all amazed at how cheap the house was to rent.

That doesn't mean the same thing will happen and this time around, but it's worth remembering. Disney is one of the most visited places in the world but it's also expensive. Parking and Park Tickets alone are enough to price out a lot of lower and middle class visitors during an economic down turn. You also have a lot of compeition from the resort hotels.

I keep hearing that lending is in check this time around. I'm not so sure that's the case, at least not in the STR market. DSCR loans are a prime example. Investors can qualify for a loan with a quick credit check and then use AirDNA data to project the income of a property. Some of these are getting down to 15% down payment and a coverage 1.2 (I've even heard of one going down to 1.0). If a loan is given based on the income of a property vs the income of a person, what happens when the nightly rate drops during a down turn? How many of these new investors have enough reserves to keep them afloat?

And that's the point. Real estate is cyclical. Even if there isn't a bust as big as last time there will be a slow down. There comes a tipping point when occupancy goes down and people start to cut their prices. To many people are doing their numbers based on today's rates with no room for things go down. 

I'll point out that even though that sounds really doom and gloom I am currently building 3 cabins in the Smoky's. I believe in vacation rentals as an investment (really more as a business).  But I stress test all my numbers before I make an investment. I know that my nightly rates can drop to less than half the current rates and I can still make my payments. I just don't know how many others are doing the same thing. I see a lot of people throwing caution to the wind and it worries me. 

There's another conversation to be had about if this is a bubble or inflation. I think it's 50/50. I think prices will come down but not to where they were. Maybe that will be enough to keep people afloat. 

It's all over the place right now. I have two under construction at $200/sqft (plus the cost of the lot). My builder is charging new clients $300/sqft now and getting it. 

There's a builder up the road that's selling specs for $450/sqft with a pool. He had 17 lots/homes and sold them all before he even built the road leading up the hill. 

@Ricardo Ramirez

STR = Short Term Rental
LTR = Long Term Rental 

@Conner Olsen Are you signing a lease for those monthly rentals? I'm in Austin and I've been considering converting one of my long term rentals to a monthly short term rental here but I haven't figured out that piece yet.