Leander, RR or Austin Investors?

Question

Hey, I have been looking into that market for some time now. Austin is such a great market and I can definitely see myself moving there soon. I am looking to connect with local investors to learn more about the market and get your insight.

Firstly, I would really appreciate it if you can share with me any truth worthy local agents, property managers, and leaders you have worked/interacted with. I would love to talk to them and let them know that I was referred by you

Secondly, what do you think of the Leander market? there is a duplex that I am looking at. it is good but doesn't meet the 1% rule, it is more of a breakeven deal. it got its pros and cons:

pros:

-walking distance to a good school

- currently renting at the max potential and seems to be updated so not much rehab is needed

cons:

- on a major street

- not much improvements are needed so it will be hard to add value and recoup my initial investment plus it is not really a cashflow maker.

All the "boots-on-ground" agents I have talked to encouraged me to go for it as that it very rare to find 1% rules properties in Austin MSA and this will be appreciation play. is this true? do you again for breakeven or a bit more in such a hot market like Austin MSA. or should I be patient?

The challenge is that this would be my first investment property and out-of-state so I would love to hear some of your opinions besides the agents (who are incentivized to make a sale)

Thank you so much for your help. btw, I just joined BiggerPockets and its like heaven for RE investors, feel free to connect with me (or my account would be so lonely!!)

Jeremy VanDelinder · Answer

Those that have told you the 1% rule is rare are absolutely correct. They can be found (I have had a few) but they are highly distressed--and thus a good deal or a value add proposition. If you can cash flow a property, you are in good shape as you capture the solid appreciation in this market. Good luck!

Tim Hendricks · Answer

Mena,

Congrats! Austin has been a great market. And the 1% rule is pretty much dead here, unless you find a very distressed property as @Jeremy VanDelinder mentioned. 0.6-0.8% is a better range to use.

Leander is a great submarket. Schools are good, and it's (relatively) close to the NW Austin tech employment hubs. The biggest watch out is property taxes - that part of town, esp newer developments, tend to have higher tax rates due to MUDs/PIDs/WCIDs. Tax rates vary across the Austin MSA from 1.8% to 3.2% of market value.

Leander, while a great part of town, tends to appeal more to families than what your typical duplex renter/resident would be. If you want to be in that market, I would look more at SF. If you want to be in a duplex, consider Round Rock, closer in NW Austin, or S/SE Austin.

You should be able to get a 4-5 cap duplex (a true cap rate, after accounting for vacancy, leasing, management, R&M, etc) with decent appreciation potential.

Good luck and welcome to BP!

Antonio Cucciniello · Answer

@Mena Soliman I have looked in Austin as I have been there a bunch, it seems difficult to cash flow from the analysis I have done, but appreciation is there for sure!

Danny Webber · Answer

Austin is not as good a market as the outside suburbs. There are still good off market deals here but i would look at all the areas around Austin up to Killeen.

Make sure you get you get prequalified for the purchase with a great local lender.

Antonio Cucciniello · Answer

@Jacob Pereira was my real estate agent's there he is also an investor

Leander, RR or Austin Investors?

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