North Austin Rental [SFH, 3-4 bdrm, new, appreciation]

[Andrew Der]

Hi Bigger Pockets,

I’m looking to make my first investment in real estate in North Austin. My plan is a single family home, 3-4 bedrooms, 2-4 bathrooms, new house (as to minimize repair and overhead), hoping for long term renters (ideally a family).

From what I've gathered, cash flow isn't likely but I'm okay with breaking even on PITI. Given the companies that are moving into North Austin, I'm hopeful on appreciation only while building equity.

A couple of questions.

1. How quickly is it to find renters in North Austin?
2. What specific cities of North Austin make good SFH rentals?
3. Mind sharing the reliable property managers in the area?

Happy to provide more information on my plan and get in touch with the BP community. Thanks for taking the time to read my post.

Best,

Andrew

[Joe Scaparra]

@Andrew Der, so many unknowns about you.  Bigger Pockets has a great tool, please utilize it:  It is called a Profile.  Fill it out, especially if you are going to ask questions.  It will GREATLY help us in answering some of your questions.  

Like, Where are you from and living now?  That MIGHT help me understand your desire for a new home and your desire for a property manager.   You might mention WHY you want to invest in real estate and what are your short/medium/long term goals you want to accomplish.  That would help; us understand your motivation, urgency, and direction.  Now off my soap box.

Investment real estate is different from personal real estate, unless you are just getting started and plan on house hacking to begin your journey.   With that said, we are beginning to see investment objectives change within the city limits of Austin and moving out.  It is as you suggested moving from a cash flow objective to more of an appreciation objective since the price of real estate is making it very difficult to cash flow positive.  I do think an appreciation model can work but for me I still focus on cash flow and that is causing me to look outside of Austin.  

Even if your focus is on appreciation, I don't think buy in new is the best option.   If your not local and you think new is easier to manage because of lower maintenance, you might be dissapointed.  Most of your headaches will be caused by your tenants and their upkeep of the property.  Buying new to avoid maintenance issues is a steep price to pay especially when a bad tenant can ruin the new carpet in a matter of 6 months and cook with excessive grease and cause your new appliances  to look very used in no time.  Lastly, the AC filters or lack there of can make your AC system wear out faster than you would think.  Yeah these are issues regardless of a new or old property and that gets us to who is managing the property.  Buying new and having to hire your own property manager and trying to break even is a tall task.  If your experience and tough minded it can be done but I don't know or assess that you are as I don't have any info on you (profile).

You seem to be concerned about the ability of acquiring suitable renters for the property you plan on acquiring.  In a lot of areas of the country I can understand that concern but in the Austin MSA I don't see that as a problem.  However, my experience is in small duplex units and I can find a suitable renter inside a week.  Larger homes I am not as familiar with but I am guessing it might be a little tougher but probably not something that wouldn't be very manageable in Austin.   The Rental Market in Austin is STRONG.  On the flip side, I would hate to be a renter in Austin because rents keep going UP!!  Demand is strong and supply is very limited.  

Anyone who has experience working long term with a property manager understands that the stated 8-10% management fee is not what you end up paying........it is far more.  With a property manager your vacancy rate will likely be higher than if you did it yourself (unless you are out of town, I wouldn't know as it is not indicated in your profile).  I don't know if your new to investment real estate or if you're new to buying investment real estate in NORTH AUSTIN.  Your opening line is confusing without seeing your profile.  

Now to satisfy my curiosity, why are you stuck on buying a "single family home, 3-4 bedrooms, 2-4 bathrooms, new house".  From my perspective, If your objective is to MAKE MONEY, that would be one of the worst type properties I would focus on.  Large home, requires more RENT $$$$, MORE Maintenance, Increase opportunity for a tenant to tear your place up, requiring a longer make ready time to get it back on the market and you would be limiting your pool of renters to mid-large families.  

Ask yourself, are families larger today than say 20 years ago?  Is Austin a relative older population or younger population relative to other mainstream communities?  Are the tech jobs (new age jobs) more suitable for a young professional or older established family type person?  Is my desire for a 3-4 Bedroom and 2-4 Bathrooms that is going to require more rent be more or less desirable to the single or VERY young family with only 1 or 2 small kids or no kids.  Are young people today hell bent on getting married and starting a family as those compared to 20 years ago.  Put some deep thought into these questions and you might change your focus on to what type of real estate MAKES THE BEST INVESTMENT.   

If nothing else, I hope I got you thinking about where I am going and am I taking the best path to get there.  Cheers.