Best Austin areas for appreciation?

Question

I know betting on appreciation isn't the best general strategy. However after a lot of thinking, I realized I would regret not owning a home in Austin before my move to NY. Still a lot of room for growth. I'm looking at areas near Domain, soccer stadium, Apple campus, Pflugerville, and Manchaca. Thoughts & suggestions?

This will be my first home.

Any insight is appreciated.

This will be my first home.

Any insight is appreciated.

Joe Scaparra · Answer

@Kamrava Pirouz, Howdy.  When wannabe investors come here and ask for advice, most of the time you are going to hear positive slant to your question, especially if it is leaning towards buying.  Most of the time wannabe investors don't give enough information to give UNBIAS objective advice.

You have been a member since 2015 but you have no profile.  I know you're young because in an attempt to know you I looked at some of your previous post.  5 months ago you said you were moving in 2 months back to NY.  You were wanting to invest back then and the majority of the advice given was yes do invest but multi-family would be the way to go.  Listen I understand the difficulty investing in your 1st property.  But I feel compelled to caution you on your anticipated strategy.

Buying a SFR, planning to move within months, zero real estate investment experience is a recipe for DISASTER.  I worry that this is just a phase and passing interest.  If it is, the first time you get punched in the face you are going to wilt under pressure and you will be scarred for life.  One of your post mention not much in reserves, but investing for appreciation is no problem.........really...........I don't think so!  I see no clear goal, strategy  and or demonstrated mental toughness.  I think you should continue to learn and find a way to invest where you are going to live.

My advice is plan on a house hack for your first investment and learn to walk before you run.  Right now you are wanting to run in the Olympics and you have never entered a race.  Don't buy a property in Austin, hire a property manager who will abuse you and then hate real estate for the rest of your life.  I have nothing to gain giving you positive or negative advice.  Being 65, but NOT a realtor or lender gives me the advantage to tells them like I see them.  I hope you take this advice in an accepting manner.  If not, best of luck to you.

Joe Scaparra · Answer

@Kamrava Pirouz, I get the feeling you're trying to fit a square peg in a round hole.   Let's start all over and from the beginning.  You are 26 and the fact that we are discussing this topic is great and kudos for you.  You already are ahead of most of your peers.  But we still don't want to cut any corners.

Start off by writing our your investment goal (not objective).  After you have your goal then ask yourself what is the WHY behind my goal.  You seem to want to invest in Austin come hell or high water and you rationalize saying investing for appreciation is not bad......right?  Does investing for appreciation fit your Goal and your Why?  If you had a choice to invest for appreciation or cash flow which would you choose and why?   Once you have a good understanding of your goal and why, then the next step is to assess your ability.  How does your RICE look?

R-----Reserves.  Your six month emergency fund intact?  Do you have the 20% downpayment in addition to your emergency fund?

I-----Income.  Does it support your investment projection.  Are you able to invest with a mortgage and still pay rent in New York?   Where are you in regards to living at, above or below your income needs.  What items currently take away from your income.....Credit Card debt, Student Loan Debt, Car Debt,

C------ Credit.  What is your credit score?  Realize that your credit score will affect your ability to get a loan and determine what your payments will be.

E-----Equity.  What is the anticipated equity you will have in your property.  Less than 20% equity will cause you to pay PMI.  Really that should only come into play if you house hack with a FHA loan.  Are you able to buy below market resulting in additional equity in your property?

Really all this should have been discussed with your current Real Estate Agent.  Hopefully you feel good on all the above.

Let us realistically agree that a home bought in Austin is going to cost 300k +/- 20k ok.  SO if you don't have 20% to put down in the neighborhood of $60k then lets stop right here.  You are NOT going to buy a house before you leave for New York.

If on the other hand you were staying in Austin and looking to start then yes I would be excited for you.  Yes you could get in this market with as little as 3-5% down and house hack.   I would then advise you to stop repeating a very dirty word for the next five years............that word is........................House!  No, I would advise a 26 yr old first time buyer NOT TO BUY A HOUSE, that is if you want to build wealth.   But a DUPLEX YES!!!!!!   I advise young people all the time.  If you are living in Austin and renting say $1400 a month, then you are not only $1400 NEGATIVE, you're are not even in the market and you're not even building equity!  Buy the duplex, your monthly cost say $2000.  You rent out one side for $1200 (conservative projection) and rent a room on your side of the duplex ($500) and now your monthly out of cost is $300 a month!   WHAM we are building wealth, living in Austin for $300 a month, in the market building equity!  These numbers will vary but the concept is the same.

Again, I say we are wasting everyone's time if you are planning on leaving Texas in the next few months and you don't have the 20% down required to buy.  If you do then PM and I will at least talk with you on the phone as to what you should do.  The benefit to others here in Austin or the MSA is that yes even though Austin is expensive if you're young and determined building wealth with real estate is a very real possibility for you!!!  Cheers.

Nina Hayden · Answer

I’m with Joe. It baffles me some of the advice given here, especially to buy for just the appreciation part.  Investing isn’t an overnight thing and you’re going to make mistakes along the way.  Talk to a lender first and figure out your financial options. And make sure to have plenty reserves.

Joe Scaparra · Answer

@Alex Pyatetsky, finding a duplex in Austin at 300k +- 20k is tough right now.  You will need to expand your search not only geographically but also by expanding your efforts looking.  Finding deals right now is the HARDEST task in the buying process here in Austin.

So what can you do?  You need to go above and beyond the average investor looking for properties. In addition to expanding geographically as in Taylor, Manor, Elgin, Jerrell, Liberty Hill, Logo Vista, Round Rock, Georgetown, Bastrop; you might try these techniques too:

1.  Driving for Dollars (learn what that means)

2  Check out the neighborhoods you desire and send personal letters (notes) to the owners.  Find them through the county's CAD.  Drip on them and continue to show interest to them.

3. Find some wholesalers that can birddog for you.

4.  When driving through neighborhoods, STOP and TALK!  With any adult in the area.  Start a discussion and ask questions and try and get owners contact information from renters or anyone willing to talk.  Information is gold.

If you are going to be that exception on finding a deal, you are going to either be extremely lucky or you are going to have to be exceptional in your search.  Your best bet is choose to be exceptional!!

Good luck and as always Cheers1

Jacob Pereira · Answer

@Kamrava Pirouz, North Central or Southeast, depending on your preferred area, but honestly it's all appreciating at a rapid pace.

I have to say that I disagree with @Joe Scaparra, although he is a smart guy and gives good advice. Buying before you leave allows you to utilize a conventional loan for your property and get your team and systems in place before you go and have to do it remotely. It will be much harder for you to break into the Austin market once you've moved, so if you want to own property here, now is the time to do it.

Jacob Pereira · Answer

@Jordan Moorhead, from my understanding, the one year number is a rule of thumb, and am early move-out can be justified by a life change such as a new job, marriage, family change, etc. Is that no longer the case, or do I misunderstand the rule?

Jordan Moorhead · Answer

@Jacob Pereira I'm not a lender. I do know if you buy with an owner occupied loan and do not intend to live there for a year it is fraud and that carries serious penalties.

Joe Scaparra · Answer

Ok!  @Kamrava Pirouz I have a better impression of where you stand and I must tell you I am impressed as well.

You have them means and desire...........Check!

You have a good understanding of the Strategy........Appreciation primary, cash flow secondary! ......Check!

Realistically, finding a home under 300k is going to be tough.  A condo yes!  What purchase price are able or willing to spend?

I am getting the sense based on your comments earlier that the urgency is because,  if I don't get in the Austin market now that I may miss my opportunity.  Is it your thought that maybe the "house" you purchase may be the one you live in when you eventually return to Austin?  Could that be driving the SFH route vs duplex.  A duplex may cost you more but that could be offset by the increased cashflow you should receive vs a SFH.  Regardless of which property type you go after, I think you realize the risk involve and therefore you are taking a calculated risk that has been thought out!

Network with as many investors in Austin as you can as they will be a great source of information in terms of recommendations for handymen and questions that my arise from repairs to tenant management.  I tend to look for smaller type properties.  To me I focus on duplexes and for ME the ideal duplex would be a 2 bedroom 2 bath, one car garage each side.  Mostly you find 2 bedroom 1 bath duplexes and that is fine too.

For SFH I would try to stay in the 1200-1500 sq ft small 3 bedroom two bath property.  I think if you stay in that sector you will have no problem keeping it rented.  Regardless of your investment strategy, you want to feel good about keeping it occupied.  The neighborhood you buy in make sure you feel your property is at least as good as the average and much better if you view it or keep it in better shape than what is around it.  You want to feel if you're competing for a tenant with a neighborhood competitor that your house shows better.   Good luck!

Stephen Stokes · Answer

@Kamrava Pirouz suggest to listen to what @Joe Scaparra is trying to tell you. He has very valid points all around.

Kamrava Pirouz · Answer

@Joe Scaparra, @Nina Hayden Thank you for the advice, transparency is always preferred. I wish I began investing years ago in Austin with a house hack. My move to NY was delayed due to the pandemic. Thing is, Austin is the only market I somewhat know, and I don’t have the money to invest in New York (does anyone?). So I either have to buy now, or wait years until I leave New York, and don’t want to be in my 30s without property. What if I purchased a newly built or newly renovated home in a neighborhood with good tenants? That would reduce the hassle substantially, even if I’m in another state, no? Why is appreciation a bad strategy in this case? I may not need a property manager if it’s only one property. I have more reserves now than a few months ago. Already spoken with a good lender regarding my options.

@David Chappell @Jacob Pereira @Jordan Moorhead Thank you for the tips. Full disclosure I am already working with an agent but of course I’ll consider good advice from ya’ll.

Best Austin areas for appreciation?

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