Rental potentials in Buda TX?

Question

Hello BP rock stars,

I am looking into purchasing single family home in Buda TX as a rental property for investment and hold.

Would love to hear your thoughts about the rental market in Buda and real estate in general in that area. Do you foresee growth and why?

Thank you in advance for your time.

Jason Grote · Answer

Hi Houman, I personally like Buda, mostly because it's comfortable for me since I have been involved in real estate in this area for quite some time. Buda has done an incredible job of controlling housing growth over there years while they let Kyle overbuild in the late 90's into the 2000's. This, along with it's proximity to Austin obviously, has given property values in Buda real teeth in holding value in downturns. The area to the east has always been less valuable but had gotten much attention in the last few years. To the West, Buda will always be solid for long term growth. If you can find a good sfr, I think you can't go wrong in Buda holding for long term. Also, the SH 45 toll road just gave West Buda incredibly short access to the heart of Austin. We'll see the fruit of this in the next few years.

Joe Scaparra · Answer

@Dan Burstain yes indeed all those areas are good if you can find the right price.  Don't leave out east Pflugerville where Amazon is putting in an enormous warehouse.  Tesla, Oracle to the south, and Plugerville to the east make Manor and Elgin very attractive and is still somewhat not discovered.

I understand the SFH vs Duplex debate well.  The problem with owning a few or a lot, is just that.  Most new investors gravitate to SFH out of default not really considering the benefits of a duplex.  Also they don't know how many properties they are going to end up with.  If the thought process is "I can manage a SFH", then certainly you can manage a single duplex.  Building a portfolio of properties evolves over time.  Look at my profile.  My intention was to only buy one duplex and now look at me.  I don't buy into the logic that I will buy new to keep CapEx down.  Rather set your goals and buy the property type that best meets your goals.

Most newbies don't even have a goal in mind.  This is all new and sounds exciting but they don't have a clue as to where they want to go.  For most they evolve over time as they must conquer fears, lack of knowledge and funding requirements.  I try and help them navigate those issues, all for the cost of a cup of coffee.  I have no competition except for myself.  So I enjoy helping and guiding especially the newbies as they are more app to take action believe it or not.

Joe Scaparra · Answer

@Andrew Watson, absolutely a good question.  I have often asked myself the same question.  I do own one 4plex and even though it cash flow very nicely, it also produces more management headaches than all my duplexes combined.  Since I am 65, I now value ease of management over maximizing cash flow.  If I was 40 and had the energy I would probably go bigger in number of units per building.  Duplexes are a nice compromise, especially for newbies learning the game.  Many people progress from duplexes to apartment buildings ect.  I have considered it myself, but I also realize that moving out of individual duplexes to buy a single apartment complex also increases your risk.  I have the game won, at this point, it is now not about maximizing $$$ but ease of management and riding off in the sunset.  Another question I ask my self is why not leverage 50% of my portfolio and double my assets over night.  Again if I was young and ambitious I certainly would consider it as well.

When you get more experience and have accomplished your goals you get to a place where you say i have enough.   Cheers.

Andrew W. · Answer

@Houman Omidifar

All things equal, I would choose duplexes over single family. I bought a duplex in Austin to live in (from MLS) and it has worked out great. However, there are more SFHs available off market at discounted prices.

Cash flow is hard to find anywhere in the Austin MSA. That is what I started to buy off market from wholesalers. Unfortunately they very rarely have duplexes so I am pretty much buying single family in the suburbs such as Cedar park and Leander. Have bought a few - all under $190k and they rent for ~$1550-1650.

On a side note, I don't understand many of the prices that investors are paying for duplexes in some areas of Austin. For example, like $380k+ for a place with total rents at only $2800. Just speculating that rents will go up I guess?

Houman Omidifar · Answer

Hi @Jason Grote, thank you for the information. You have confirmed what I was speculating.

I have been looking at both north Austin area like Cedar Park and south Austin area like Buda. I have noticed for the same price, houses in Buda are newer build but the school ratings are better up north. I am going off of whats available on the MLS. I also love the Main st and mini historic downtown area. Been going there in the past few weekends.

I do agree that SH45 is making Buda more desirable.

Thanks again and keep me posted if you come a long anything interesting. Would love to connect to learn more about what you do in Buda.

Andrew W. · Answer

@Joe Scaparra

I generally agree with your thoughts on duplexes.

But why not take this logic further: fourplexes, apartment buildings, etc?

Dan Burstain · Answer

@Joe Scaparra - Hi Joe, I can tell you that I own both SFH and duplexes and handle a ton of BP clients who have invested in SFHs as well as those that invest in multi-family.  The big difference I see is that those who invest in multi-family have property management set up.  Those that are buying SFH's I find do it for two reasons.  If they are not buying 10 but one or two, they find it easier to manage.  Secondly, they can find brand new homes or much newer homes to keep their CapEx down.  Most duplexes in the Austin area are older and require more work aka time.

As for the comments on Buda vs other spots.  It is hard to go wrong in Central Texas these days but there are definitely some hot spots.  Tesla is going to build its truck plant in East Austin near 130 and Harold Green.  Buda is a 25 min. drive from there but Austin Colony with its new single family homes for about $220K is about 5 minutes from there.  Tesla is hiring 5000 workers for that plant with a min. salary starting around $40K.  I see great appreciation there as I see it in NW Austin with the billion dollar Apple campus coming to Robinson Ranch.  Amazon is building in Round Rock and there are some great buys there too.

Joe Scaparra · Answer

Happy to discuss, will send you a DM.  We can talk over phone, too much typing to be this involved.

Shuang W. · Answer

@Joe Scaparra , I've learned quite a bit of knowledge from your posts since I joined BP, but I'm still hesitated to buy 2/4-duplex :)  I would deeply appreciate if you can help me understand it better. I thought when people buy SFHs as their primary residence, they would love to pay more if the property is in a good location and maintained well. While for Duplex or 4-plex, it's mainly bought and sold by investors. And investors would only want to buy one if there is more benefit. Thus, I think SFHs would appreciate more/quicker than multifamily. And using one of the duplex I've looked at recently, the per sqft price of duplex in a worse condition is even higher than a SFR in the same location. And that duplex won't have positive cash flow with 20% down.  I remember that duplex was around 390k, and each unit can be rented at $1400 or maybe a little less. However, it was pending in a weekend... Don't understand.

Josh Miller · Answer

@Joe Scaparra "Sending you a DM"

Well now I wanna know what your brain is thinking too

Rental potentials in Buda TX?

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