House Hacking in Austin, TX Area. Will this work?

Question

Hi All, I'm looking to purchase my first property and house hack in the coming months! I'm trying to determine quite a few things, and would appreciate any and all insights.
1. I'm looking to house hack in the Austin, TX, area, and am specifically looking around Kyle, TX and Leander, TX (and Manor TX maybe?). Would I be able to get renters in these areas pretty easily? I've been told by my realtor it's a ways out of Austin and so people are less likely to go for it and commute as individuals (as opposed to families), but I feel like it would allow me to offer more affordable rents, to maybe recent college grads? I'm thinking around $600-$700 per bedroom, with maybe 2-3 people sharing a bathroom. Do you think I'll be able to get people? And is any one of those suburbs better or worse than the others for that purpose?
2. How many bedrooms is too many bedrooms? Of course, looking purely at the numbers, more bedrooms seems to make sense. The more bedrooms I get, the less I'm paying per bedroom, driving down my rent and mortgage. But would I be able to rent out a 6-bedroom house without running into issues? I'm thinking possibly I could build in a second "kitchen" with like a microwave, toaster oven etc. to alleviate any high kitchen demand with too many people.
I'm a new Pro and this is my first post, but I'm glad to be a part of the community and to be moving forward on my first investment! Thanks all!

Account Closed · Answer

@Dave Kay That will depend on property, amenities nearby, and how far away we're talking. But I don't know that you should care so much about how much rent will drop with distance. A better metric is going to be rent-to-price ratio, which will give you a measure of whether you're going to be able to cashflow. In general, Austin is not a cashflow market. But, since you're househacking, you need to get some idea for how much a room will rent for in your area. I recommend looking at active rent listings (Zillow, etc.) and, an even more representative approach, join some FB groups in the area for 'roommates' or 'room for rent' or 'roommate finder' or similar and see what kind of prices you're looking at. PM me if it would be helpful.

Account Closed · Answer

I started out house-hacking in Austin. I wouldn't go with a 6 bed house, I'd target a 4 bed 2/2.5/3 bath house closer to the city. you'll get better rent and appreciation. My favorite remaining areas to invest in Austin are Wells Branch, Parmer & McNeil area (Apple building a $1B facility), and 78724 zip code.

Ryan Kelly · Answer

@Dave Kay Because most duplexes will need more work, even at a $400k price point, I would focus on a four bedroom SFH in the Pflugerville or NE Austin area. You will be close enough to town to attract renters and still close enough to amenities like grocery, restaurants, etc. House hacking is a perfect strategy for you starting out. Good luck!

Jordan Moorhead · Answer

@Dave Kay I'm doing value add projects with duplexes. 4 beds make the most sense because you have more rent to pull in that helps cover all of the expenses. 3 beds you can only rent out 2 other rooms.

Jordan Moorhead · Answer

@Dave Kay I am doing this with a duplex in East Austin. SFH can work too, I'd look for 4 beds.

Bryan Noth · Answer

@Dave Kay

It will be tough to find a property that fits the 1% rent to purchase price rule in Austin for either a duplex or SFH on a standard single lease.  The both SFH and duplex can reach it with rent by the room.  Both of these scenarios are much easier if you purchase a property that needs work or that you can force some appreciation in.  Your rents seem on par, $500-$800 per room, master room likely $650-$950.  Location, property aesthetics, amenities, lease terms can all dictate a great deal of fluctuation for the price.  But in general, you want to avoid pricing close to a 1 bedroom apartment that someone could rent for a similar price.

And correct, that is exactly what I meant here:

Also true on the duplexes requiring work.  It's either purchase at a premium for new or rehabbed units or buy with work needed to bring it to that level.

Bryan Noth · Answer

@Dave Kay Duplex route sounds good based on this:

Your cash flow would be realized in off-set debt service.

The 6 bedroom dilemma could be an issue around 300k.  5 bedrooms is the max a standard builder uses before you jump into custom homes.  Also, pay attention to the local county and city zoning laws about number of unrelated adults per dwelling.  Could be an issue if you plan to rent out 6 separate rooms. I think 4 bed 3 bath ideally or 3 bed 2 bath for the right price is your target bread and butter for solid ratios.  They also both convert to standard single lease properties easily down the road.

Bryan Noth · Answer

Congrats on the first post @Dave Kay!  Your Realtor is correct, the further out you travel the less effective a rent by the room model for house hacking becomes.  However, for the right price, it can still be a viable model.  For the areas, Kyle and Manor have strong renter pools, I prefer Manor if you can get a nice house there.  Leander is my favorite of the areas you picked overall, but the rent by the room model there may be a bit more challenging.  What price point are you considering for purchase in the Austin MSA?

Dave Kay · Answer

Account Closed what sort of difference in rent do you think I might see if I go closer to the city as opposed to Kyle and/or Buda?

Marian Smith · Answer

@Dave Kay  Read the rooms wanted listings on craigslist.  People who rent rooms want on the bus line or a short commute to downtown or UT...or maybe Domain.  There are not enough jobs in Leander unless you want to share space with a 22 year old Cinemax employee.  Everyone else can afford their own bathroom, if not apartment.  Suburbs are for families.   Just IMO.  Duplexes work everywhere, renting by the room is not that common for a reason.

House Hacking in Austin, TX Area. Will this work?

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