Austin/Pflugerville: Deal analysis

[Sriratana Sutasirisap]

Hey All,

I am starting to look into an investment property to do a short-term lease. I'm planning on renting out individual rooms to temporary stays (3-9months). My goal with real estate is to generate cashflow.

After some calculations, I've found two properties that I'm interested in. I would love to get your thoughts.

Property A: 4bd/3bth

Location: Pflugerville, TX 

This area sees 5.03% appreciation past 5 years. It's surrounded by some companies and has plan on development but has high tax rate of 2.9%. The city is growing due to growth of Tech companies in Austin, TX. (which is across the highway.) The thing is there are new builds coming up in this area as well. And there is a plan to build a huge shopping center in 5 years. The school district is not as good as the Property B.

Purchase Price: $184k ($35k down, and need about $3k in renovation)

Monthly payment: $1,309 (tax rate: 2.9%, $10 HOA)

Expected rent: $650 per room (4 bd total)

Total Monthly income expected: $2200 (estimated maintenance cost of $400)

ROI on original investment: 28%

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Property A: 4bd/3bth

Location: Austin, TX (wells branch area)

This area sees 6.78% appreciation past 5 years. It's conveniently located between two major highways in Austin and the city's traffic is getting insane. I know that short-term rentals in this area does well because I have friends with properties in area. It's also close to many tech companies.

Purchase Price: $235k ($47k down, and need about $10k in renovation)

Monthly payment: $1,584 (tax rate: 2.5%, $20 HOA)

Expected rent: $725 per room (4 bd total)

Total Monthly income expected: $2500 (estimated maintenance cost of $400)

ROI on original investment: 19%(without maintenance cost subtracted)

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Although I'm more excited about the ROI on property A. My hesitation on property A is that the city is still building and growing - not sure if my assumption here is correct. There are a lot more rooms to build. This means the location is not 'gold.' The location of the property B is quite prime and it has been seeing greater appreciation.

What are your thoughts? This is my first investment property - I currently rent out multiple rooms in my house and know that it can be profitable with more rooms. I'm also considering Airbnb of individual rooms for the house but that maybe more of a hassle. 

Thanks!

[Aaron Gordy]

@Sriratana Sutasirisap

I would go with property b. Property B won't have as much competition. Those new builds are competition. Two, the plan to build a huge shopping center is just a plan at this point. Plans can be doomed if the financial world falls apart, it happens. Three, school district is much better. Quality is better and safer. Also since you know that short term rentals are doing well in Property B's area then that is the safer bet. The total monthly income will be better in Property B. So, even if the initial ROI is better initially for Property A, I bet over a longer period of time the ROI would be much different. Calculate the ROI with the same assumptions over a 5 year period of time and see what the numbers are then. I bet it would be alot different.

My two cents