All Forum Posts by: Rick Reeder

I wouldn't give up on Del Valle just yet.  Tesla has only just begun hiring - that assembly plant will employ around 10,000 people by the end of 2022.  Suppliers will also be moving into the area and need industrial / warehouse space and will relocate or hire locally.  I tend to agree that the HQ move won't move the market in and of itself.  Maybe a couple dozen key execs will have condos downtown or places in Tarrytown/Westlake, but it won't move the needle like the Gigafactory.  Don't wait and buy real estate - buy real estate and wait! ;-)

Congrats @Alexis R Beckley!  Who did you hang your license with, and what drove your decision?  Best of luck!!

@Vierra Wong I posted this about an STR near Austin. I also have one in Angel Fire, NM. @Jordan Moorhead is right - time to get creative. :) 

https://www.biggerpockets.com/...

Great questions @Stephen Stokes... WRT inflation and interest rates going up, I think that will push buyers down the price scale, as most people budget based on the monthly payment, but I don't think that will change the fundamentals driving people to come to Austin (whether that's 50/day or 100/day).  It may affect investors more, as the cost of capital changes. 

As for exit strategies, it will depend on the circumstances at the time, should something happen that makes the STR approach untenable. At this time we probably wouldn't get all four partners to agree to put in $1000+ per month per family if rents went to zero... so we would probably sell and try to find something similar somewhere else, or just take our profits and part ways. Thought-provoking, but I hope that's a bridge we never have to cross.

There are a lot of people who are interested in investing in Austin area real estate, but if you've been looking recently you know that after a year of 40%+ appreciation and lagging rents, it is very difficult to cash flow here with 20% down. Let me propose a strategy that has worked for me - investing in a short term rental property on a nearby lake. As you have probably heard, there are a lot of people moving to the Austin area. Something on the order of 100/day for decades. Many of these people work in high tech or otherwise have decent disposable income. They're looking for things to do that are fun and don't involve getting on an airplane or staying in a hotel - like a long weekend at the lake in a short-term rental home.My partners and I purchased a home on Lake LBJ, just over an hour from Austin. The home itself has appreciated 30%+, but the business is crushing it even more. Here are some details:

Purchase Price - $885,000

Down payment - $177,000 (split by four partners)

Initial reserves - $23,000 (each partner brought $50K to the deal) 

Principal & Interest - $4,500/month

Taxes & Insurance - $2,200/month

2020 gross bookings - $86,000

2021 gross bookings to date, including ROY - $91,000

We have never had a cash-call and now we have built up our reserve to the point that we can really invest in updating the property, or we could take the house off the market and use it ourselves and just absorb the revenue hit. We could also look at a cash-out refi or HELOC and go do it again!

If you'd like to participate in the hot Austin area market, while capturing cash flow *and* appreciation, consider this strategy. 

To answer your question about index funds, listen to this podcast.  I'm sure the wealth managers on this thread will have a thing or two to say about it, but the data is pretty clear.  https://freakonomics.com/podca...

I have two STRs that are cash flowing well, net of all costs, including property management. One on Lake LBJ near Austin and one in Angel Fire, New Mexico. I use them with my friends and family when they're not rented out and I still get a great return. Happy to chat about this if you like... I've had my Series 6 financial license (expired), I have my real estate license in TX (active) and I've been around the block with STR, long term rentals, private placement investments for qualified investors and the stock market / mutual funds / ETFs.

@Account Closed I still have my W-2 job in high tech, and I've been part of that scene in Austin for 20 years.  If you're in software development, you're good at what you do, and you're not focused on some bespoke in-house developed platform that no one outside of your organization has ever heard of - Austin will be a better job market for you than Philly.  There are SO many tech companies here, ranging for startups who would pay you peanuts plus equity all the way to Fortune 10 companies with large offices here.  If you're focused on salary, you can move every 1-2 years and get yourself a nice raise (again, provided you're good at what you do!).  

I'm sure everyone has heard the news over the last 6 months that the Austin real estate market (and many others around the country) has been extraordinarily hot.

Stories of sellers getting 50 offers on the day they list, and stories of buyers having to offer $100,000 over asking with appraisal and inspection waived are fading into (recent) history.

It is still a sellers' market, though.

Roughly two weeks of inventory in Austin proper, and about 3 weeks in the MSA. For reference, a "balanced market" carries about 6 months of inventory. I say all of this to indicate that if you've been thinking of selling - now may be the perfect time.

The overall market in Austin has risen by 40% year-over-year, it is still very much a sellers market  If you price accurately, you can still count on multiple offers and getting under contract within a few days.  

If you're on BP, you probably already know that real estate is a smart way to invest and build wealth. There are many reasons for this - real property will almost never fall to zero, cash-flowing assets that also appreciate are ideal for both income and wealth-building, and there are many tax advantages afforded to real estate investors that aren't available with investments like stocks and mutual funds. One of these tax advantages is currently at-risk: the 1031 exchange.

If you're not familiar, the 1031 exchange allows an investor to sell an investment property (or set of properties) and roll any gains they may have into a new investment without paying capital gains taxes on the money they've made in the first investment. These taxes are deferred until the second investment is sold without a 1031 -- unless the investment falls to your heirs as part of your estate. Then, in many cases (consult a tax advisor), the gains are wiped out and the cost basis is reset.

The Biden administration is proposing to cap this loophole at gains of $500,000 in order to make wealthy investors pay "their fair share". Whether you agree with this philosophy (or definition of wealthy) or not, this is something to be aware of if you own real estate investments that have done well. For example, if you invested in the Bay Area 20 years ago, you've almost certainly done exceedingly well. You may also think that this market has peaked and you want to move your money to a rising market (like Austin!) to continue your success.  If so, you'd likely want to keep an eye on this news. I would even argue that you may want to move proactively *now* to make your exchange.  Post your thoughts below!

Aceable is a local Austin company.  Great UX... I did my Legal CE through them.