Sell orange county to invest in Austin Texas

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Ryan KellyBusiness Member

Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes

5y

@Di Lyu great question and worth understanding what type of strategy you want to use. Austin is a faster appreciation, lower cash flow market (at purchase) because of its rapid growth over the past 20+ years. An average single-family home in the suburbs will yield around .5% monthly rent compared with the purchase price. This means a $400,000 home will average $2,000 in monthly rent. This of course varies depending on many factors including location, neighborhood, condition of the home, etc. While you may get more homes in Austin than LA, you may or may not increase your cash flow depending on what you buy. If you are open to multi-family properties you can find a slightly better cash flow yield. The upside is the Austin metro area led the nation this past year in price appreciation for major markets. Austin and the major suburbs just increased 35-50% in value in just the past 12 months. That's a nice tradeoff for a slightly lower cash flow yield.

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Peter MckernanBusiness Member

Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes

5y

@Di Lyu

Yeah, that is a nice amount of money in your Lake Forest home for sure, and it will continue to go up till you sell, so I would say that this is a good market to sell if you're motivated to get those rentals under your belt.

I would say keep the house, continue to build the equity, maybe do a HELOC on it to do some BRRRR deals out there, that would be my move.

I have sold some properties in IE and have completed a 1031 out in TX a long time ago since then sold the properties. Ended up buying 5 out there.

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Dan BurstainBusiness Member

Real Estate Agent · Austin, TX · Member since 2014 · 360 posts · 331 votes

5y

@Di Lyu I did exactly that selling my duplex on Naples Island in Long Beach via 1031 exchange and buying 4 places including a duplex here in Austin. Your answers 1) yes 2) could do either but the strategy I took was to commit to a consistently appreciating city like Austin 3) yes it can be done pretty easily. I will DM you.

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Jacob Pereira

Real Estate Agent · Austin, TX · Member since 2014 · 636 posts · 486 votes

5y

@Di Lyu,

I'll second what @Ryan Kelly said, with a slight adjustment; he said that this is a lower cashflow market, but relative to where you are it's a higher cashflow market (in general) and the examples he gave demonstrated that. I also believe it will continue to be a higher appreciation market as well, but time will tell on that one.

Provided you're willing to deal with the added difficulties of remote management, I think there are few places in the country that are a better investment at the moment. Of course, I'm biased, but I truly believe it too.

OP

Member since 2020 · 12 posts · 7 votes

5y

@Dave Foster Thank you so much for the advice! We've decided to sell the lake forest property, and the closing date is in 2 weeks. It's a pretty tight timeline, but the good thing is we have an agent who've worked with before, so we've stared to make offers since last week (finger crossed that we get some offers accepted soon). I especially appreciate your 2nd advice, it makes so much sense! But we've had a bit change of plan and decided to keep some skin in the game in California, we decided to buy in relatively cheaper areas because we still really like SoCal (the inland empire). So our current plan is to purchase 2 there first using financing since the houses in California are generally more expensive than in Austin. After closing 2 in Cali, we will purchase in Austin with cash. I hope it works out, and thanks again for your input, greatly appreciate it!

Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
5y
Originally posted by @Di Lyu:
@Dave Foster Thank you so much for the advice! We've decided to sell the lake forest property, and the closing date is in 2 weeks. It's a pretty tight timeline, but the good thing is we have an agent who've worked with before, so we've stared to make offers since last week (finger crossed that we get some offers accepted soon). I especially appreciate your 2nd advice, it makes so much sense! But we've had a bit change of plan and decided to keep some skin in the game in California, we decided to buy in relatively cheaper areas because we still really like SoCal (the inland empire). So our current plan is to purchase 2 there first using financing since the houses in California are generally more expensive than in Austin. After closing 2 in Cali, we will purchase in Austin with cash. I hope it works out, and thanks again for your input, greatly appreciate it!

@Di Lyu, I'm gun shy for folks this week because I've already had two different people call asking to do a 1031 exchange - after they have closed on their sales!!!
If you're doing a 1031 exchange the QI must be in place prior to the closing of the sale. Two weeks should be ample time for your QI to get everything in place. But don't wait till after the sale closes.
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OP

Member since 2020 · 12 posts · 7 votes

5y

@Peter Mckernan Hi Peter, it's ways to nice to hear from a like minded investor, and congrats on the 5 properties you ended up purchasing, that's really impressive that you successfully pulled it off! Did you also buy in the Austin area?

We've actually decided to sell our Lake Forest one because we got a pretty decent offer with very low transaction costs, and i think relatively cheaper areas might have better cash flow and appreciation potential. We've actually decided to buy 1-2 in the IE and hopefully 1-2 in Austin after that. Do you mind sharing where in the IE that you sold your properties? I'll definitely consider HELOC in the future as it is such a powerful tool to scale up.

Thanks again for your recommendations!

OP

Member since 2020 · 12 posts · 7 votes

5y

@Dan Burstain Hi Dan, great to meet you! Thanks for the very clear and concise answers, yes, i'd love to connect, please DM me.

OP

Member since 2020 · 12 posts · 7 votes

5y

@Jacob Pereira OC is one of the hardest RE markets as we both know haha, and I am open to other markets. Could you share the markets that you think have better appreciation potential?

Jacob Pereira

Real Estate Agent · Austin, TX · Member since 2014 · 636 posts · 486 votes

5y

@Di Lyu

Like I said, I believe the Austin market still has a lot of appreciation potential. If I didn't, I'd sell all my properties and look somewhere else. It's also the only market that I'm an expert on, so it would be tough for me to speculate on others. My guess is that most secondary urban markets will continue to see outsized appreciation for the next few years, though.

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Jason Hirko

Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes

5y

Originally posted by @Di Lyu:

I am considering to sell the house and move the proceeds to Austin, Texas and surrounding areas.

Check out far, far, far south Austin. This neighborhood called "San Antonio!"

2 Reply

Di Lyu
OP
Member since 2020 · 12 posts · 7 votes
5y
Originally posted by @Jason Hirko:
Originally posted by @Di Lyu:
I am considering to sell the house and move the proceeds to Austin, Texas and surrounding areas.

Check out far, far, far south Austin. This neighborhood called "San Antonio!"

Haha, San Antonio definitely looks attractive in terms of cash returns and appreciation potential. Do you have a specific neighborhood/neighborhoods that you like to invest in?
1 Reply

Heath ShepardBusiness Member

Real Estate Agent · San Antonio, TX · Member since 2019 · 89 posts · 48 votes

5y

Wow there is a lot of good information here. @Di Lyu I fully get the situation you are in. My wife and I still have a house in Palos Verdes Estates and it is a constant conversation about if we should sell it or not. But we love going there so much so we keep it. I feel that Austin is a great market but very expensive because everyone across the country now knows about Austin TX. The secret has long been out and it has driven up property value like crazy as @Ryan Kelly pointed out. Those numbers are not sustainable. Should have bought in Austin 5 years ago. What everyone has said is true, there is still gas in the engine to continue growing but San Antonio has much lower costs and has more fuel in it due to the medical field and the military among many others. I think you will find better returns in SA because you can get more for your money than you can in Austin. If you would like some information on San Antonio let me know I would be happy to help.

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Allen Wu

Rental Property Investor · Member since 2021 · 335 posts · 193 votes

5y

@Di Lyu

Are you ever planning to move back to OC? If yes, maybe hold for longer term play? CA seems to always appreciate at Better rate than rest of nation.

To answer your question though, check with 1031 agent and see if you can roll the money to couple of Austin properties.

Being an out of state investor as well (I’m from Los Angeles), I found Austin was very similar to LA or OC. High appreciation and no cash flow. Lots of speculation in Austin and prices going up. No real cash flow opportunities, so mainly an appreciation like CA city areas.

I have 2 SFH in San Antonio and it's cash flowing. If you're looking for potential cash flow, try San Antonio, though market heated up and those are sometimes tough to find, but still out there.

Di Lyu
OP
Member since 2020 · 12 posts · 7 votes
5y
Originally posted by @Allen Wu:
@Di Lyu
Are you ever planning to move back to OC? If yes, maybe hold for longer term play? CA seems to always appreciate at Better rate than rest of nation.
To answer your question though, check with 1031 agent and see if you can roll the money to couple of Austin properties.
Being an out of state investor as well (I’m from Los Angeles), I found Austin was very similar to LA or OC. High appreciation and no cash flow. Lots of speculation in Austin and prices going up. No real cash flow opportunities, so mainly an appreciation like CA city areas.
I have 2 SFH in San Antonio and it's cash flowing. If you're looking for potential cash flow, try San Antonio, though market heated up and those are sometimes tough to find, but still out there.
Hi Allen,

Thanks for the inputs! We are not planning to move back to OC in the short to mid term. We've actually decided to purchase a property in the inland empire where the return is higher, and lot is bigger, and schools are top in CA.

Do you mind sharing more about your investment story in SA? I just started to look at SA and find it very interesting, but would love to learn more about specific neighborhoods and your investment strategies!
1 Reply

Allen Wu

Rental Property Investor · Member since 2021 · 335 posts · 193 votes

5y

@Jacob Pereira

Thoughts on San Antonio? Can it absorb some of that nice Austin demand?

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Ryan KellyBusiness Member

Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes

5y

@Allen Wu San Antonio is too far away for anyone to live there and consistently commute to Austin. However, I am finding more investors moving their $$ to San Antonio because of it's relative affordability to Austin. The towns are very different and attract different demographics, plus there are some parts of San Antonio I wouldn't touch. As long as you have a good team on the ground, they''ll put you in the right locations.

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3 Reply

Bee Snider

Investor · Los Angeles · Member since 2021 · 18 posts · 8 votes

5y

Hi DI, we just sold one rental house in Murrieta, CA and bought two rental houses in TX through 1031 exchange. Make sure you understand 1031 rules in order to gain the tax benefits. You have to identify properties within 45 days and close on those within 6 months. Stressful process for us during inflated market in TX. I am not an expert but want to point this out.

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Di Lyu
OP
Member since 2020 · 12 posts · 7 votes
5y
Originally posted by @Bee Snider:
Hi DI, we just sold one rental house in Murrieta, CA and bought two rental houses in TX through 1031 exchange. Make sure you understand 1031 rules in order to gain the tax benefits. You have to identify properties within 45 days and close on those within 6 months. Stressful process for us during inflated market in TX. I am not an expert but want to point this out.
Hi Bee, that is such a coincidence because I might purchase a property close to Murrieta! How did you like it living there? I am so impressed by the good schools and attractive migration data there. I really appreciate that you remind me of the 1031 exchange rules, we have a QI that we work with, and hopefully things pan out as planned!
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Jacob Pereira

Real Estate Agent · Austin, TX · Member since 2014 · 636 posts · 486 votes

5y

@Allen Wu, I have to disagree somewhat with how @Ryan Kelly answered the question you posed, although we're usually in total agreement on things. In fact, about 15 years ago I interned for the US Treasury in South Austin and there was a group of five who carpooled from San Antonio to work every day. I also lived in the DC area before Austin, and it's quite common for people to have a 1.5-2 hour commute.

That said, the price difference between Austin and SA isn't really high enough to justify that kind of commute for most people. I think if you're looking for areas that are going to soak up Austin demand you're better off looking at the suburbs between Austin and SA, such as Buda, Kyle, or San Marcos, or to the North or East, towards Round Rock, Leander, Cedar Park, and Manor.

3 Reply

Di Lyu
OP
Member since 2020 · 12 posts · 7 votes
5y
Originally posted by @Jacob Pereira:
@Allen Wu, I have to disagree somewhat with how @Ryan Kelly answered the question you posed, although we're usually in total agreement on things. In fact, about 15 years ago I interned for the US Treasury in South Austin and there was a group of five who carpooled from San Antonio to work every day. I also lived in the DC area before Austin, and it's quite common for people to have a 1.5-2 hour commute.
That said, the price difference between Austin and SA isn't really high enough to justify that kind of commute for most people. I think if you're looking for areas that are going to soak up Austin demand you're better off looking at the suburbs between Austin and SA, such as Buda, Kyle, or San Marcos, or to the North or East, towards Round Rock, Leander, Cedar Park, and Manor.

What do you think that drives the 10-15% price difference in the northern and southern suburbs of Austin? (e.g. Buda vs Leander) Is it the tax rate, the schools? I am trying to understand why the southern suburbs seem to be a bit cheaper than the northern ones.
0 Reply
Ryan KellyBusiness Member
Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes
5y
Originally posted by @Jacob Pereira:
@Allen Wu, I have to disagree somewhat with how @Ryan Kelly answered the question you posed, although we're usually in total agreement on things. In fact, about 15 years ago I interned for the US Treasury in South Austin and there was a group of five who carpooled from San Antonio to work every day. I also lived in the DC area before Austin, and it's quite common for people to have a 1.5-2 hour commute.
That said, the price difference between Austin and SA isn't really high enough to justify that kind of commute for most people. I think if you're looking for areas that are going to soak up Austin demand you're better off looking at the suburbs between Austin and SA, such as Buda, Kyle, or San Marcos, or to the North or East, towards Round Rock, Leander, Cedar Park, and Manor.

@Di Lyu the price difference in the northern suburbs and the southern suburbs is based on many factors, but here are a few. Infrastructure, distance to high-paying jobs, school ratings, shopping options, transportation, and location to lakes and the hill country. If you could drive these locations in person, you would understand the northern suburbs are simply much larger and more developed than Austin's southern neighbors.
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Di Lyu
OP
Member since 2020 · 12 posts · 7 votes
5y
Originally posted by @Jacob Pereira:
@Allen Wu, I have to disagree somewhat with how @Ryan Kelly answered the question you posed, although we're usually in total agreement on things. In fact, about 15 years ago I interned for the US Treasury in South Austin and there was a group of five who carpooled from San Antonio to work every day. I also lived in the DC area before Austin, and it's quite common for people to have a 1.5-2 hour commute.
That said, the price difference between Austin and SA isn't really high enough to justify that kind of commute for most people. I think if you're looking for areas that are going to soak up Austin demand you're better off looking at the suburbs between Austin and SA, such as Buda, Kyle, or San Marcos, or to the North or East, towards Round Rock, Leander, Cedar Park, and Manor.

@Ryan Kelly Thanks Ryan, I agree with you on the factors that contribute to the higher price in the northern suburbs. But do you think with the I35 corridor being developed, the price gap b/t North and South will narrow and even close? Also, I just read about Lago Vista, is it an area that is being built out quickly?
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Heath ShepardBusiness Member

Real Estate Agent · San Antonio, TX · Member since 2019 · 89 posts · 48 votes

5y

@Di Lyu stay on the north side of downtown. NW is up and coming and it is where I am looking personally. The ground is also more stable compared to the north east side where you will see considerably more foundation issues. But this also could present some great opportunities because fixing foundations is very scary for many people. Most areas that are along the loop 1604 corridor are pretty safe, nice, but a little more expensive. Inside loop 410 your going to see many more fixer uppers. You also have to be careful buying in this area because there are many people fixing up old houses in this area and doing sub par work. They will look great in pictures but when you get in close it's poor workmanship. I know this from experience.

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Di Lyu
OP
Member since 2020 · 12 posts · 7 votes
5y
Originally posted by @Heath Shepard:
@Di Lyu stay on the north side of downtown. NW is up and coming and it is where I am looking personally. The ground is also more stable compared to the north east side where you will see considerably more foundation issues. But this also could present some great opportunities because fixing foundations is very scary for many people. Most areas that are along the loop 1604 corridor are pretty safe, nice, but a little more expensive. Inside loop 410 your going to see many more fixer uppers. You also have to be careful buying in this area because there are many people fixing up old houses in this area and doing sub par work. They will look great in pictures but when you get in close it's poor workmanship. I know this from experience.

@Heath Shepard wow this is so informative, thank you so much for your response! I read about the soil problem in the North East side of SA, and will definitely look out for that. What do you think about Terrell Hills? I saw a pretty nice10 units multi family property there and wonder if it makes sense since I get the feeling that TH is mostly single family houses and relatively higher end? Is the area developing quickly or is it generally pretty established?
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Heath ShepardBusiness Member

Real Estate Agent · San Antonio, TX · Member since 2019 · 89 posts · 48 votes

5y

@Di Lyu you're welcome! Terrill hills is a great neighborhood. There are some very nice houses in TL. I think that if you like a 10 unit in there it would be worth looking into further. It is a great location and the San Antonio County Club is right there which is a very upscale establishment. Growth in this area is going to be about the same as the rest of San Antonio. There are many investors fixing up older homes here because it is a very solid area of SA. If it is something that you would like me to take a look at let me know.

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Ryan KellyBusiness Member

Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes

5y

@Di Lyu I don’t expect the price gap between the northern and southern suburbs to close, but both should appreciate nicely. The southern suburbs will need better overall infrastructure and higher-paying jobs to keep pace with their northern neighbors.

If you aren’t familiar with Lago Vista, I wouldn’t make it a top priority. It is more of a lake community than suburb and has traditionally been for retirees and second homes. They don’t have a major grocery store or major retail, so residents have to drive 20+ minutes back to Cedar Park for most shopping.

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