STR Investment - Austin, TX area Lake LBJ

[Rick Reeder]

There are a lot of people who are interested in investing in Austin area real estate, but if you've been looking recently you know that after a year of 40%+ appreciation and lagging rents, it is very difficult to cash flow here with 20% down. Let me propose a strategy that has worked for me - investing in a short term rental property on a nearby lake. As you have probably heard, there are a lot of people moving to the Austin area. Something on the order of 100/day for decades. Many of these people work in high tech or otherwise have decent disposable income. They're looking for things to do that are fun and don't involve getting on an airplane or staying in a hotel - like a long weekend at the lake in a short-term rental home.My partners and I purchased a home on Lake LBJ, just over an hour from Austin. The home itself has appreciated 30%+, but the business is crushing it even more. Here are some details:

Purchase Price - $885,000

Down payment - $177,000 (split by four partners)

Initial reserves - $23,000 (each partner brought $50K to the deal) 

Principal & Interest - $4,500/month

Taxes & Insurance - $2,200/month

2020 gross bookings - $86,000

2021 gross bookings to date, including ROY - $91,000

We have never had a cash-call and now we have built up our reserve to the point that we can really invest in updating the property, or we could take the house off the market and use it ourselves and just absorb the revenue hit. We could also look at a cash-out refi or HELOC and go do it again!

If you'd like to participate in the hot Austin area market, while capturing cash flow *and* appreciation, consider this strategy. 

[Stephen Stokes]

@Rick Reeder congratulations on you and your partners' success! An amazing ROI for sure!

Seems like rents are really starting to pick up recently so maybe we are in a bit of a catchup phase with respect to rent/price ratios.

I recently saw this ABJ article and your comment about Austin's population growth reminded me of it. I have also heard the 100/day figure thrown out a TON by so many in Austin, it seems the real growth numbers for the last 10 years are closer to half that.   https://www.bizjournals.com/au...

Wonder what will happen if the fed is forced to increase interest rates dramatically to curb off effects of inflation. Curious to know what the secondary exit strategy is on your investment if the STR path doesn't work out (local regulatory changes, market softness, etc.).