Thoughts on the market?

[Henry Tse]

Hello, I'm a new investor looking into buying cash flowing real estate. I have been exploring different markets. I wanted to know what are peoples thoughts in the Austin area? Looking into SFH, or multi units. I'm still building capital but look to buy within 6 months.

[Kelby K.]

Hello @Henry Tse, 

  The Austin market isn't a quick find on a cash-flowing property. It's easier to find a value-add play that will cash flow a bit but there's better places in the US if you're looking for straight cash flow specifically. However, the appreciation can be good if you find the right neighborhood that's emerging. 

With all that being said, I moved here from the Bay Area a few years ago and Austin works for me because I live here. I.e. I pay no state sales tax, I know the areas of Austin metro extremely well (neighborhoods, traffic, troublesome foundation areas, etc.), and I can visit my properties, managers, and tradesmen within minutes. Another thing to know about this area compared to yours is that it is standard operating procedure for the property managers and agents that help place tenants to receive a fee for that service. A typical fee can be 50% of one months rent and a renewal is often also a % of the monthly rent. Even in this age of many great online apartment locators, the majority of tenants find properties through agents as opposed to doing it themselves. The final major expense is property taxes which are between 2.3-2.5%. 

Your dollar per square foot will definitely go much further here when compared to the Bay Area but it really boils down to your net at the end of the day and it may not be much better than nearby you unless you really drill down deep.