Factors that drive long-term appreciation (besides location)

[Raphael Schwartz]

Hi y'all! Hoping this awesome community can share some wisdom for the home I'm planning to purchase in the next 6 months in East or South Austin.

I know appreciation is a dirty word in some investing circles but my guess is real-estate investors in Austin may be more in touch with planning for appreciation. 

Aside from location, what are some factors that you see as improving prospects for long-term appreciation of a single family home or duplex in Austin? I understand of course that this will depend on certain future unknowns. I am sure though that there are still certain property attributes that will drive appreciation regardless of exactly how much home prices rise overall. I’m talking 10+ years here in the Austin market. 

Factors that I would love some insight in:

-SFH vs duplex? (This is a big one for me since I'm considering SFH vs house hacking a duplex)

-ADU potential for a SFH (7500 sq ft plot)?

-Buildable land in general 

-Other zoning issues?

-Newer build vs “needs work”?-Neighborhood/schools?

-Proximity to rail?

TLDR: I realize that long-term appreciation will be a huge factor in my housing finances (once I eventually sell this thing). What should I be looking for to maximize this?

[Joe Scaparra]

@Raphael Schwartz, when discussing real estate investing strategies, it can evolve into what is better cash flow or appreciation.  But in context to your question I think the debate doesn't apply here.  

I have been buying real estate here in the Austin MSA since 1998. Since 1998 to now I would say the early half of that time the real estate investment market was a cash flow market. My strategy early on has been primarily one that put cash flow first. I bought my first of eight duplexes in Austin MSA beginning 2005. Duplexes were a dime a dozen and sat on the market forever. People told me not to buy duplexes because they would not appreciate as fast as SFH. I ignored that advice because I was in it ONLY FOR THE CASH FLOW. However, I have been pleasantly surprised by the crazy appreciation we are seeing in this market!

The market has changed from the early 2000s to now.  I would definitely classify this market as primarily an appreciation market.  But don't be deceived, many people are buying for cash flow!  They have adjusted their cash flow model from standard 1 year lease of entire property to rent by room, or rent by day or rent by 30 day minimum fully furnished.  So you can't disregard one strategy but you can make your focus one if you like.  For me it was cash flow but I am fully enjoying this property appreciation not because of the increase in property price but the increase in rental rates that have followed.  However, I would say that appreciation model is more viable today.  

Because i am an old grey hair investor who has lived in Austin since 1998 it is hard for me to pull the trigger on these crazy prices now but I do feel that those who are comfortable with the appreciation model could do very well in this environment. I think the duplex demand has accelerated because it provide one of the best real estate type properties in this market. ADU lots are in high demand because the dirt and ability to put more units on said dirt is highly desired. Austin government has relaxed zoning to allow more multi-family because population is SuRGING! Jobs and Population growth is the fuel that will keep property price climbing. I don't see a let up at all in the Austin MSA. Barring a nationwide severe recession, Austin real estate market has long legs for continued growth.

You won't go wrong with South or East Austin.  Tesla, Amazon, and Samsung among others will keep both areas going strong.  At the moment East Austin seems to have a slight edge in my opinion.  Lastly, don't over leverage yourself, stay within your means.  Confidence is the main ingredient to be successful.  Good luck and cheers!