How would you rank San Antonio, Austin or in between for rentals?

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How would you rank San Antonio, Austin or in between for rentals?

Rory Butler
Lynnwood, WA · Member since 2018 · 9 posts · 6 votes

We're moving to Texas! We have a couple of properties in high-priced Seattle that we are cashing out to reinvest in Texas. We'll be home shopping for ourselves in Canyon Lake, and will be looking to invest about $600-700k additional cash in rental properties. Our goal is to maximize long term cash flow. We're trying to team up with a local realtor/management company to make the whole process work.  We've spoken with a few and there are 1 or 2 that we like, and can see working with long term. The problem is that each one only covers a certain area, whether it be high priced Austin, low rent San Antonio, or in between (San Marcos, New Braunfels). So if we pick a company we'll also be picking a location. This isn't really something we want to do piecemeal either because of 1031 concerns. Considering our budget and goals, which of these areas do you think offers the best balance of investment factors such as taxes, home prices, demographics, and economy? Where would you invest $600-700k in order to NET the highest monthly return? This forum is the best place that I could think of to get unbiased and expert opinions. Thanks so much!

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Sharon PowellPro Member
Realtor · La Vernia, TX · Member since 2014 · 153 posts · 124 votes
8y
If you’re looking for minimal risk, I would suggest choosing properties near the bases. If you’re looking for sooner rather than later, now is the perfect time to get something under contract, because PCS season is nearly here and people moving here this summer are beginning to look. My personal strategy isn’t the most popular one, but it works for me. I’d rather pay more for a newer home, not have to worry about deferred maintenance, and then target military renters for several reasons. -There is some recourse if anything were to go wrong (their supervisor would get involved) -you can see what housing allowance is for different ranks and know who will probably be interested in your home -and if it’s a good home, chances are high that they could help find your next renter when they PCS out -no property manager is really needed because I do automatic rent payments, and maintenance isn’t much of an issue It depends on what type of properties you want, but your money will likely go farther in SA than Austin, and probably NB and Canyon Lake as well.
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  • Nicholas Miller
    Investor · New Braunfels, TX · Member since 2016 · 56 posts · 24 votes
    8y

    Canyon Lake is prime for rentals. Others will disagree but that is where I am from. I flip, hold and do short term rentals in New Braunfels and Canyo Lake. There are a couple of multi family opportunities in that area as well. If you prefer the bigger cities, I would choose San Antonio. Rents are higher in certain areas but you must segment the market. S.A. is about to explode.....but so is Canyon Lake. 

    1Reply
  • Rory Butler
    OP
    Lynnwood, WA · Member since 2018 · 9 posts · 6 votes
    8y

    Thanks for your reply! Never thought Canyon Lake could vai against New Braunfels or San Antonio, but having properties close to home would be convenient. Seems the rental pool for prospective renters would be vastly smaller?

    1Reply
  • Sharon PowellPro Member
    Realtor · La Vernia, TX · Member since 2014 · 153 posts · 124 votes
    8y
    If you’re looking for minimal risk, I would suggest choosing properties near the bases. If you’re looking for sooner rather than later, now is the perfect time to get something under contract, because PCS season is nearly here and people moving here this summer are beginning to look. My personal strategy isn’t the most popular one, but it works for me. I’d rather pay more for a newer home, not have to worry about deferred maintenance, and then target military renters for several reasons. -There is some recourse if anything were to go wrong (their supervisor would get involved) -you can see what housing allowance is for different ranks and know who will probably be interested in your home -and if it’s a good home, chances are high that they could help find your next renter when they PCS out -no property manager is really needed because I do automatic rent payments, and maintenance isn’t much of an issue It depends on what type of properties you want, but your money will likely go farther in SA than Austin, and probably NB and Canyon Lake as well.
    8Reply
  • Brandon Miller
    Specialist · San Antonio, TX · Member since 2018 · 155 posts · 76 votes
    8y

    Rory, 

    Have you thought of doing AirBnB in Canyon Lake and New Braunfels? Tourism and weekend stays are more popular in those markets as compared to the others listed, due to the lake and Guadalupe River. New Braunfels is an exploding market and will continue for a while. I am from around there and growing up it was a small town. Now it is a rather vast city. If you chose the bigger city market, San Antonio is my opinion. Austin's price point compared to San Antonio is drastically different. Yes rents run lower in the San Antonio market, but so are purchase prices. I personally have investor clients who live in Austin, but invest in San Antonio due to affordability.

    Feel free to reach out with any questions

    3Reply
  • Michael Guzik
    Real Estate Agent · San Antonio, TX · Member since 2017 · 523 posts · 362 votes
    8y

    @Rory Butler That's a great question man. One thing I can say is just because a property nets the most money does not mean it is the best deal. Time is the most valuable asset you have. yes a property may make you more money but the time that the property requires of you may make it a bad deal overall. I believe all the markets you mentioned are great. I personally kind of chuckled when you said low rent San Antonio lol. I don't know where you got that idea from but there are plenty of places here in SA that don't rent cheaply.. at the same time compared to Austin or NY yes the rent is cheap it's all a matter of perspective. I would really take the time to get to know the market yourself if I were you. Many agents or companies will give their 2 cents but they don't have your best interest in mind they just want to sell you a property. Drive the areas, network with other investors who are actively investing in that area and get their 2 cents. Investors know far more about the area, trends and path of progress than almost any realtor, management company or brokerage. I wish you the best of luck man. Whatever you do make sure that you not only do your due diligence on the market and property but also the people you work with. Feel free to message me if you are ever here in SA. I always love sharing what I know and showing people the ins and outs of San Antonio.

    4Reply
  • Travis C.
    Investor · San Antonio, TX · Member since 2016 · 145 posts · 61 votes
    8y

    Hi, with $700k cash, you could end up with 12 properties using the BRRR strategy in SA each cash flowing $300/month on the far westside bexar county. I can attest because it has been my own stategy as well.

    1Reply
  • Travis C.
    Investor · San Antonio, TX · Member since 2016 · 145 posts · 61 votes
    8y

    That's if you buy off the mls single story homes around $165k-$180k range fairly newer and not fixer uppers where you could but obviously do better. just presenting the conservative case.

    0Reply
  • Rory Butler
    OP
    Lynnwood, WA · Member since 2018 · 9 posts · 6 votes
    8y

    Thanks Sharon. My thinking is very much like yours. I'd rather buy newer than keep putting lipstick on a pig. Also psychologically, people can keep things scratch free for the longest time, but once there's one scratch, there'll be more in no time. The value for the dollar seems better in NB (taxes and home prices). One concern I would have is sudden redeployments, but it sounds like it's not to tough for you to get tenets replaced. 

    I don't know much about AirBnB but it seems like it would be a bit more unpredictable and we're looking for steady monthly income.

    As for "low rent" I didn't mean second rate or anything like that, I was just trying to keep my words short. That's just the knock you here on San Antonio vs  Austin (also remember I'm from Seattle). Given my strong preference for newer properties and potentially lower maintenance cost, it sounds like the 'get more house, but less rent' option (NB or SA vs Austin) would be the way to go.

    I'm surprised no one has mentioned San Marcos. With the University, and proximity to Austin, I thought that might be a sweet spot. 

    Thank you all for your generous willingness to share. Please keep it coming. It's great when you can get advice from people who aren't trying to sell you things. That's not easy, particularly since we're still in Seattle. 

    0Reply
  • Samuel Houston stevens
    Member since 2018 · 2 posts · 0 votes
    8y
    Originally posted by @Rory Butler:

    Thanks Sharon. My thinking is very much like yours. I'd rather buy newer than keep putting lipstick on a pig. Also psychologically, people can keep things scratch free for the longest time, but once there's one scratch, there'll be more in no time. The value for the dollar seems better in NB (taxes and home prices). One concern I would have is sudden redeployments, but it sounds like it's not to tough for you to get tenets replaced. 

    I don't know much about AirBnB but it seems like it would be a bit more unpredictable and we're looking for steady monthly income.

    As for "low rent" I didn't mean second rate or anything like that, I was just trying to keep my words short. That's just the knock you here on San Antonio vs  Austin (also remember I'm from Seattle). Given my strong preference for newer properties and potentially lower maintenance cost, it sounds like the 'get more house, but less rent' option (NB or SA vs Austin) would be the way to go.

    I'm surprised no one has mentioned San Marcos. With the University, and proximity to Austin, I thought that might be a sweet spot. 

    Thank you all for your generous willingness to share. Please keep it coming. It's great when you can get advice from people who aren't trying to sell you things. That's not easy, particularly since we're still in Seattle. 

    San Marcos seems like a sweet spot to me, too. 

    0Reply
  • Mike Krieg
    Investor / Syndicator · Austin, TX · Member since 2015 · 366 posts · 220 votes
    8y
    If you enjoy being a landlord you’ll find great cash flow opportunities in San Antonio or equity opportunities in Austin. If you’re looking to put landlording behind you there are incredible opportunities in class B value-add Multifamily Apartments.
    0Reply
  • Rory Butler
    OP
    Lynnwood, WA · Member since 2018 · 9 posts · 6 votes
    8y
    Originally posted by @Samuel Houston stevens:
    Originally posted by @Rory Butler:

    San Marcos seems like a sweet spot to me, too. 

    I guess the question is, would you invest in San Marcos over SA, NB, or Austin?  I'd really like to see one come out the winner with respect to our goal of achieving the highest reliable cash flow for a $600-700k investment. It sure would be nice to be able to pick just one from a coordination standpoint. 

    0Reply
  • Account Closed
    Investment Consultant/ Wholesaler · Austin, TX · Member since 2018 · 59 posts · 26 votes
    8y

    Rory,

    If you have that much to invest for a rental property, I would say Austin is your best bet for highest net returns. The beauty of investing in this city is that you can vary your strategy depending on where you would like to take on your next project. The Northern Belt is booming for flippers who are looking get in at a lower price point than downtown for buy-fix-sell projects, but is not as hot for rents. In my opinion, the closer to downtown the better for rentals. You will have no problem finding tenants willing to pay higher rents for a quality location. Although the threshold for investing in that area is much higher than the other markets you mentioned, there is always demand for rent with Austin growing at it's current rate. The city net migrated around 38,000 people last year...that's 105 people a day! Considering that, as well as the University of Texas being located in downtown, you know there will be renters there. $600-700k would be more than enough for a job near downtown- it's just about finding the project that fits your numbers! 

    1Reply
  • Rory Butler
    OP
    Lynnwood, WA · Member since 2018 · 9 posts · 6 votes
    8y

    Wow, that's interesting. I was beginning to write Austin off. I figured that, for my money, in order to purchase desirable properties near downtown Austin I would have to purchase one fewer than I could in SA or NB (perhaps 2 houses vs 3).  Single family residences are my comfort zone. While fewer properties could mean less total tax and insurance (although dt Austin has much higher tax than North SA or NB), it still seems like the higher rent advantage of Austin wouldn't be enough to outflow 3 properties vs 2. Not mention vacant periods for a single property would mean a 50% disturbance vs 33%. Even if I could do the same number of properties it seems that I could undoubtedly purchase higher end (newer) properties in SA or NB which could translate into lower maintenance and more desirable tenants...no?

    0Reply
  • Bob Randolph
    Richmond, TX · Member since 2017 · 19 posts · 3 votes
    8y

    Great to see this thread.  I'm a newbie metaphorically standing on the diving board...  Two of my sons attended Texas State and I've been mulling over getting into the real-estate market in San Marcos.  With the University right there and the Austin, SA close by I think it's a good place the start looking.  

    Bob

    0Reply
  • Travis C.
    Investor · San Antonio, TX · Member since 2016 · 145 posts · 61 votes
    8y
    That would be way too big of a generalization to say Austin tenants are more desirable than SA tenants, to say the least and is not necessarily true at all.
    0Reply
  • Travis C.
    Investor · San Antonio, TX · Member since 2016 · 145 posts · 61 votes
    8y
    example - San Antonio is known as Military City USA and there are thousands of military families here. That crowd, who comprises a large percentage of my own tenant base is the pinnacle of desirability in my opinion both from a financial risk standpoint to other measures. Austin does not have that dynamic although of course the rental market is strong up there, too.
    1Reply
  • Rory Butler
    OP
    Lynnwood, WA · Member since 2018 · 9 posts · 6 votes
    8y
    Originally posted by @Travis C.:
    That would be way too big of a generalization to say Austin tenants are more desirable than SA tenants, to say the least and is not necessarily true at all.

    Not what I said at all. Infact it's nearly backwards. What I said was that higher end properties (newer/bigger) allow you to draw from a pool of more disireable tennents. Also in the scenario I posed, SA would the place more likely to draw disireable tennents rather than Austin.  So that was backwards.

    0Reply
  • Travis C.
    Investor · San Antonio, TX · Member since 2016 · 145 posts · 61 votes
    8y
    Gotcha. my bad and I was just reading too fast!!!
    0Reply
  • Kraig Kujawa
    Investor · Orlando · Member since 2016 · 151 posts · 72 votes
    8y

    @Bob Randolph i was also San Marcos-curious for awhile. After doing some initial research, i learned that there are some restrictions on what can be rented to students. If anyone can clarify more, please do. My memory is a little hazy, but I remember that it was enough to make me look elsewhere.

    0Reply
  • Cody R.
    San Marcos, TX · Member since 2017 · 16 posts · 6 votes
    8y
    Originally posted by @Kraig Kujawa:

    @Bob Randolph i was also San Marcos-curious for awhile. After doing some initial research, i learned that there are some restrictions on what can be rented to students. If anyone can clarify more, please do. My memory is a little hazy, but I remember that it was enough to make me look elsewhere.

    99% of properties are classified SFR anywhere close to the school, meaning a maximum of two different last names can live in the house, limiting you pretty much to families.

    0Reply
  • Kris Wong
    Rental Property Investor · Austin, TX · Member since 2016 · 361 posts · 394 votes
    8y

    With $600 - $700K to invest, do you really want to deal with finding, getting under contract, closing on, paying transaction fees on, $3+ MM worth of residential properties? Have you considered multifamily? You could invest all your funds into one apartment building, for example. I think you would find that this would greatly simplify your situation. As for the areas you mention, they're all good IMO. SA is a little more cash flow, Austin is a little more appreciation, but that can vary by area within each market. They all have strong opportunities right now. The hard part is finding a deal that makes sense, and I'd much rather find one deal than 10.

    2Reply
  • Rory Butler
    OP
    Lynnwood, WA · Member since 2018 · 9 posts · 6 votes
    8y

    Thanks Kris. I need to look more into multi family. What you said makes sense. I'm just leary that a larger more complex property might overwhelm me if something big goes wrong. That might just be fear of the unknown though.

    0Reply
  • Brandon Cravens
    Investor · Houston, TX · Member since 2014 · 94 posts · 40 votes
    8y
    Originally posted by @Rory Butler:

    We're moving to Texas! We have a couple of properties in high-priced Seattle that we are cashing out to reinvest in Texas. We'll be home shopping for ourselves in Canyon Lake, and will be looking to invest about $600-700k additional cash in rental properties. Our goal is to maximize long term cash flow. We're trying to team up with a local realtor/management company to make the whole process work.  We've spoken with a few and there are 1 or 2 that we like, and can see working with long term. The problem is that each one only covers a certain area, whether it be high priced Austin, low rent San Antonio, or in between (San Marcos, New Braunfels). So if we pick a company we'll also be picking a location. This isn't really something we want to do piecemeal either because of 1031 concerns. Considering our budget and goals, which of these areas do you think offers the best balance of investment factors such as taxes, home prices, demographics, and economy? Where would you invest $600-700k in order to NET the highest monthly return? This forum is the best place that I could think of to get unbiased and expert opinions. Thanks so much!

    Why not keep your investments in the Puget Sound area? Doesn't have to be Seattle. You don't HAVE to invest where you live.

    I think Austin would be my 'preferred' market between it and SA. All boils down to the deal IMO. If you found something in Houston, San Antonio or Dallas that met your criteria they are just down the road, when you were looking primarily in Austin, would it matter? 

    0Reply
  • Brandon Cravens
    Investor · Houston, TX · Member since 2014 · 94 posts · 40 votes
    8y
    Originally posted by @Rory Butler:

    Wow, that's interesting. I was beginning to write Austin off. I figured that, for my money, in order to purchase desirable properties near downtown Austin I would have to purchase one fewer than I could in SA or NB (perhaps 2 houses vs 3).  Single family residences are my comfort zone. While fewer properties could mean less total tax and insurance (although dt Austin has much higher tax than North SA or NB), it still seems like the higher rent advantage of Austin wouldn't be enough to outflow 3 properties vs 2. Not mention vacant periods for a single property would mean a 50% disturbance vs 33%. Even if I could do the same number of properties it seems that I could undoubtedly purchase higher end (newer) properties in SA or NB which could translate into lower maintenance and more desirable tenants...no?

    Edit, just saw this. I saw the $ amount in your original post and ASSUMED multifamily.  I have owned 5 SHF rental properties here in Texas and I don't think made enough money to buy a steak dinner on rent.  Appreciation, amortization on those properties allowed me to get into multifamily. 

    0Reply
  • Kraig Kujawa
    Investor · Orlando · Member since 2016 · 151 posts · 72 votes
    8y

    @Brandon Cravens haha, that's awesome and i can empathize. Ive been looking at a few commercial deals. At what point did you decide you had 'enough' to go big on multifamily (I do have a duplex and triplex right now) 

    0Reply
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