Looking for long term investment properties in Austin

[Shwetha Pindikuri]

As a newbie passive real-estate investor currently living in Austin, TX. I am looking to buy a fairly new constructed investment property in and around Austin metro area. While evaluating potential investment properties these past few weeks, I have realized that the average rent in Austin is comparatively lower and due to high interest rates and property tax, the outcome is mostly negative cash flow.  Although my long term goal is appreciation in the value of the property, I am looking for an investment that either breaks even or has a positive cash flow in the short term. Here are some of the options I have been brainstorming

1. Is it better to buy a primary house with 5% down and stay for 2 years after which I can rent out (hoping rents increase by then) if not I can sell it and be and be exempt from taxes on capital gains.

2. BEAF(Break even appreciation focused)  properties

3. Look into other markets( San Antonio/ Houston/Dallas)

Any suggestions are greatly appreciated!

[Aaron Gordy]

I would suggest buying 5% down owner occupy for a few reasons. One, you will get a lower interest rate than an investment loan. Two, your property taxes will be lower but you will have to file a homestead exemption. Three, your insurance will also likely be less. Fourth, just as you pointed out, you can sell with no taxes. You could also lease it out for 2-3 years and as long as you have lived there for 2 years then your taxes will be zero when you sell unless we have a house appreciation pop that is off the charts that surpasses the max benefits (unlikely to happen). Fifth, the tax advantages in the years that it serves as a rental are beneficial. 

Given that you will have 5% into it then the ROI could be astronomical, if rents go up nicely and also the prices go up nicely too. One of the best investments, in terms of ROI, has been when I bought a duplex with zero money down as a Veteran. Infinite returns.