Downtown Austin Condo - STR Deal Analysis

[Sean Li]

Hey guys, I'm interested in opinions on this STR deal in downtown Austin. I've already signed the contract (lmk if you think this was hasty on my part -- would love to know why) and paid some earnest money (I'm long-term bullish on ATX) so I'm basically in for the ride, but given the market has been pretty crazy, was wondering what other people think about this. Thanks in advance

The property is a new construction condo (est. completion October 2021) in the new Natiivo high rise in the Rainey Street district. STR are allowed since build is zoned as hotel. 1BR/1B, $683,000 purchase price, HOA $580/mo. I'm planning to put 20% down and go for a conventional loan with a preferred lender.

I did some research on the Austin STR market, and ran some numbers, and here's what I believe the unit can generate from short term rentals.$44,900/yr

A few questions:

1. From my research it seems like Austin is pretty popular during the March-April and August-November seasons (due to festivals, events etc). Are the occupancy rates and nightly rates reasonable in my model? Also, should I reasonable expect these numbers to change post-Covid? (I seem to recall that pre-Covid occupancy rates were about 70% for downtown?)

2. Given high prices in downtown condos, I'm aware it's hard to get positive cashflows (I'm pretty sure these projections get me a negative cashflow as is). Should I realistically expect this deal to be an appreciation-only play? Has anyone been able to get positive cashflows on a downtown condo like this one (either short-term or long-term rentals)? Would long-term rentals be a better play here? (if so, what kinds of rates could you get for a longer-term rental downtown?)

3. Are there any reasons where a quick flip strategy (sell immediately after construction at a higher price) for this property is better than a hold and appreciate/rent strategy? Are there any other options I might be missing for this investment?

What are people's general thoughts around this property/deal? Appreciate your comments!

[Ryan Kelly]

@Sean Li If you do purchase the unit, It would be great if you would be willing to follow up in a year to share your results. Great to help the BP community learn about these types of developments.