Is Austin, Texas Still A Good Place To Invest?

[Breeya Johnson]

Hi! Do you guys think Austin, Texas is a good place to invest? Why or why not? 

[Jason Taken]

It is. It is just very overbuilt, and therefore, some properties sit on the market longer than others. Just pick your properties correctly.

[Breeya Johnson]

As I am learning more of the market, I would have to agree with you. I have noticed it is hard to find cash flowing properties and prices and expectations do not always align. I like the surrounding areas. Do you service or invest in the Austin MSA?

[Ryan Kelly]

@Breeya Johnson Austin has gone through numerous changes the past five years, both good and challenging. It remains the fastest growing metro in the US and also a top market for job growth. As a negative, it also has the largest gap between the cost to buy versus the cost to rent, making cash flow extremely difficult without committing more equity up front. I’m happy to share more data if interested.

[Kevin Brewster]

@Ryan Kelly why the large spread between rent and prices? too much rental inventory? Was looking over the weekend, and was suprised by the spread , but love the future of Austin

[Breeya Johnson]

@Ryan Kelly I completely agree—Austin offers a strong opportunity to build equity, especially in the current market climate. I encourage investors to buy now while prices have cooled. Although it may require a higher initial down payment to achieve immediate cash flow, the growth potential in Austin is unprecedented.

[Breeya Johnson]

Quote from @Kevin Brewster:

@Ryan Kelly why the large spread between rent and prices? too much rental inventory? Was looking over the weekend, and was suprised by the spread , but love the future of Austin

 Hey @Kevin Brewster!

I can take a shot at this. Having been in Austin for nearly five years, I've seen a significant increase in incentives for developers to build multifamily properties. Recent zoning changes now allow for three dwellings on a single parcel, and parking requirements have been lifted in denser areas, both of which have boosted the local housing supply. While migration to Austin city limits has cooled, the surrounding areas are experiencing remarkable growth and present strong investment opportunities.

In places like Williamson County and Hays County, fast-growing markets such as Cedar Park, Round Rock, Buda, and Kyle rank among the nation’s fastest-growing areas. Although finding cash-flowing properties within Austin city limits can be challenging, the outskirts, where growth is booming, offer excellent prospects for both equity and cash flow. I’d be interested to hear if Ryan would agree.

[Ryan Kelly]

@Breeya Johnson the entire market currently is in a cooling cycle with price declines and inflated expenses like property taxes and insurance. Long term, the Austin market will do just fine with strong population and job growth. For near term investors, be prepared for sizable down payments to reach a cash flow neutral stance no matter how far out you look in the suburbs. Secondary markets like Temple, Belton, Killeen, and College Station offer better options for cash flow currently.

[Sean Spindler]

Hey @Breeya Johnson!

Working at an investment brokerage in Austin, I can confidently say it's a strong market for real estate investment. However, Austin proper has a high barrier to entry due to the sharp rise in property values in recent years. Successful investors often focus on properties with potential for flipping or long-term appreciation. While cash flow can be limited within the downtown area, there are still excellent opportunities for cash-flowing rentals in surrounding regions. Some of the hottest areas I've observed include Temple, Kyle, and East Austin. I hope this insight proves helpful!

Sean Spindler

[Lindsay Davis]

@Breeya Johnson,

Austin is one of the rare cities in the Sunbelt that’s highly unaffordable. If you’re in it for cash flow, you’ll likely find it difficult to find a deal that will pencil out.

Besides, like @Jason Taken said, hundreds of thousands of new units have come online post-pandemic, so there’s a lot of new builds at the moment. Median rents in Austin declined about 8% last year, I believe, and sales prices fell about 3% as well.

If you’re willing to consider other markets in the Sunbelt, you’ll have more affordable locales to choose from. In my view, you could have better luck in areas in the southeast, like Birmingham, AL or Chattanooga, TN.