Is Austin, TX a good place to invest in real estate?

Question

I am looking at moving to Austin, Tx in a bit. To buy a duplex or triplex with my VA loan and house hack it. I have heard and found online Austin is a great place to invest but I'm not truly sure. Does anyone have any insight on how it is investing in Austin? Is the real estate too expensive to create sufficient cash flow? I want to live there and I currently live in Washington, any insight is very appreciated.

Thank you!

Joe Scaparra · Answer

@Kole Moore let me pivot slightly with your question and add something that I think you should consider.  Since you are getting a Civil Engineer degree you should be able to find a stable, good income job.  If that happens to be in Austin, using your VA loan and buying a duplex is a great option to start your investment journey.  @Jordan Moorhead mentioned HOUSE HACKING can work in Austin.  You will still be somewhat negative cash flow but you will also be living in Austin cheaper than people renting.  You will also be in the market participating in Austin's appreciation.  If that interest you, Jordan is doing that very thing now!  Pick his brain as I am sure he can give you some good insight and expectations.

At the moment, some sort of house hacking strategy is in my opinion the best route to take, especially as a new investor in real estate.  Cheers.

Ryan Kelly · Answer

@Kole Moore a VA loan is a great tool for not having to put money down, but it has two major disadvantages in today's market. First, properties are getting expensive here in Austin, and as @Stephen Stokes and @Jordan Moorhead stated, you will need at least 30-40% down to be cash flow positive, and that's assuming you are renting out BOTH sides of the duplex. As a primary owner, you may be only renting one side and will still have decent monthly expenses. Still worth it for a duplex, but don't expect positive cash flow with this strategy. Second, the VA loan product can put you at a disadvantage in multiple offers against stronger financed deals and cash buyers. Sellers like to see strong financing and VA loans have more rigid rules. Plus, you cannot waive the appraisal contingency on a VA loan, while conventional borrowers can. I would save your VA loan for a less competitive market and use conventional financing in Austin. My two cents!

Jordan Moorhead · Answer

@Kole Moore It's a great place to househack but it's getting increasingly difficult to buy pure investment properties unless you're putting a large down payment like @Stephen Stokes mentioned or doing a large rehab on a place you got a great deal on. I househack as much as I can in Austin and mostly invest in Louisville where I was born and raised. I've been househacking since 2016 and have found some great deals recently for myself and clients. My househacks have made me a tremendous amount of money that I've been able to re invest after sale too.

Jess Haas · Answer

@Kole Moore

Maybe one solution is to Airbnb the other half of the duplex while living in it. It will get you more income while you are living there and once you move out you can switch it to a longer term solution(traveling nurses perhaps?). I’m not familiar with Airbnb laws in Austin. If you have questions about Seattle let me know. When I graduated from UW I househacked and rented to all my friends who had also just graduated college. It was a win win. They got cheap rent and I got my mortgage almost paid for. And it was just a nice transition from living in the dorm. But I get the need to move away from Seattle and the rain. I moved back home to California after a few years and realized how much I missed Seattle. Came back less than 2 years later and haven’t looked back.

Joe Scaparra · Answer

@Stephen Stokes WoW!  Good job! Tell us about the property you are closing on that meets those data points.  Property your closing on is positive cash flow, no money down, not even the closing cost!  I am impressed and anxious to hear the details.  Your first post on this thread tells the investor he has to put down at least 30% to cash flow, yet now you challenge me and basically saying that no the down payment is not that important?  A little confusing here.

The OP is thinking about moving to Austin.  Why?  My guess it because he is hearing about the investment opportunities in Austin.  Sounds like he is flexible and can move anywhere.  I don't know the complete details but sounds like the driving force to move is real estate, not a job or family move.  With that and the parameters he outlined, I would hate to mis-lead him in moving to Austin only to not find what he is looking for.  Just keeping this discussion in focus.  Cheers.

Joe Scaparra · Answer

Ok lets call a spade a spade, shall we.  Let's begin by answering the OPs question by using the DATA he has given us.  Start with two keys in his post.  VA LOAN and create sufficient CASH FLOW!

VA LOAN......NO!  NOT IN AUSTIN and NO on SUFFICIENT CASH FLOW!!!!!

Why do I say this.  The advantage of a VA loan is ZERO downpayment!!!!!!  In Austin, zero down gets you VERY NEGATIVE CASH FLOW!  Yes, anyone out there want to argue this???????  If you have 20-30% down then you aren't using a VA loan.  My bet, a VA loan is being used because there is no 20-30% to put down.  No problem....Austin is just not your best bet!

Now don't go changing the data.  Austin may be a GREAT place to invest, just not for Cash Flow at zero down.  Yeah if you have no problem with holding long term, I think Austin will be a good capital appreciation play.  But if everyone has no problem with holding long term then we would never have any foreclosures would we.  Cheers.

Jill Addison · Answer

@Kole Moore Austin's market is super high so not a great place for investing at this point. But as you move out from Austin you can find great deals again. For instance, I've bought two 3/2 single family homes in the last year in Temple, Texas, a small town about an hour north of Austin, for $125,000 each. They rent close to the 1% rule, $1200 in rent each month, with a cash flow of about $400/mo before repairs and maintenance. But the disadvantage of Texas is the very high property taxes, compared to other states. That's why I probably won't be investing in Texas anymore. But I do think these homes will appreciate a lot, because they're in the corridor between Dallas and Austin and I think the population is going to grow a lot in the next few years.

Joe Scaparra · Answer

@Stephen Stokes Right on brother, prove me wrong.  In all of the Austin proper do I think that there is a Unicorn out there.  Yeah probably, maybe, ok certainly so.  When absolutes are used they usually are not TOTALLY correct.  If you are going to make your living finding unicorns good luck.

Again don't miss my message.  Long term, short term, mid term is not the discussion from the OP.  I will continue to narrow this to the data points given in the 1st post.  VA loan, sufficient cash flow, Austin.  Go find me that property that fits those data points.  Ready set GO!!  Cheers.

Aaron Gordy · Answer

Austin is a great market. To say otherwise, means simply that you aren't paying attention. There are so many cranes everywhere trying to build to keep up with the demand. Sure, prices are escalating and making folks nervous. There is no doubt. The fundamentals are there though. Look at the jobs that are being created. Unemployment is very low. But always go long. Don't go short. If you have a short term horizon then you are more susceptible to getting burned no matter the situation. If you go long then you will do well. Duplexes and multis are great for house hacking. So are sfh's too.

Kole Moore · Answer

@Jordan Moorhead good to hear. Thank you! Very enlightening.

Is Austin, TX a good place to invest in real estate?

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