Property Manager · Austin, TX · Member since 2017 · 514 posts · 297 votes
I started my real estate career in 2012 so I have never actually worked in a downturn or a slow market. Lucky me. Just curious on others thoughts. I don't see how prices can keep going up. All the fundamentals are strong here in Austin. However all I can think about is school and what we learned about how markets are cyclical. Down turn has to be coming soon ? Or I am I the crazy one who is trying to talk about something that literally no one can predict?
It would be easy for me to say that prices in Austin make no sense anymore! I have been investing in Austin since 1990. Some of my first flips in Austin:
-Purchased condos off of Oltorf for under $5k
-Purchased a home in Allendale for $42000
And so on and so on. I wish I had them all back !!!
However the growth in the Austin area seems to support today’s prices. The last national downturn was more of just a slow down in Austin. While flips are hard to come by and margins are just too thin for me right now, I just do not see the bubble bursting anytime soon
Ahh Austin, Seems like just yesterday I was out looking at newly constructed retail and office buildings off Bee Caves and off 620 sitting with sub 20% occupancy. You could purchase with cash below base construction cost, but you couldn’t find a lender. Ok maybe it was 2005-6, but as I recall, Austin RE was especially hard hit for years after the last tech crash.
I too hope the good times keep rolling in TX but I have a detailed stategy and a little vulture money set aside if they don’t.
If you’ve never lived through a protracted downturn in RE markets, understand banks will cut off most folks access to any mortgage or investment lending. Hard money will get real hard to find. If part of your strategy involves short term cash out or refi, you may want to develop a Plan B now.
Seriously, you’ll be shocked how fast banks can cut off the credit Kool aid! (Don’t ask me how I know).
If you're sitting on bank loans, now would be a good time to go back and read the promissory note terms and covenants. Pay attention to any statements that mention "risk to the bank's collateral or security" (queasy stomach clauses) and make sure you understand you may get cash calls if your LTV drops.
If you want to assess the residential market, monitor multi-family rents, occupancy and concessions. “Free” rent and declining condo sales are where I recall first noticing problems the last time.
Population and employment growth are key and they’re both very positive right now.
However; there’s never been a period in my lifetime where Texas RE developers couldn’t oversupply market demand and spoil the party.
If I'm planning on investing in TX should should I be focusing on cashflow?
Cashflow should always be considered along with many other factors. Different parts of Texas have drastically different economics. Here in Austin, the bigger the project the better the cashflow. Can you tell us what you are looking to invest in so we can give you some better guidance?
@Beau Fannon At the moment still trying to decide on what I want to focus on. I'm thinking SFR, but all the BP podcasts I've been listening tend to emphasize how as a real estate investor we want to scale as much as possible. So I may start looking at multifamily units potentially if the numbers make sense.
@Beau Fannon At the moment still trying to decide on what I want to focus on. I'm thinking SFR, but all the BP podcasts I've been listening tend to emphasize how as a real estate investor we want to scale as much as possible. So I may start looking at multifamily units potentially if the numbers make sense.
I've been running a lot of comps & calcs and I'll tell you that a 30% down payment on a SFH won't guarantee a positive ROI.
@Beau Fannon my friends and I are looking to buy an SFR in north Austin. How far would you get with a 100k to put down. WOuld we be able to get a cashflow positive place?