Nothing cash flows in austin

[Schadrac Mertis]

I am a new investor in the Austin area, with property tax and interest rates. There is no cash flow here; unless you pay cash. Has anyone had success purchasing in the last 1.5 years with cash flow? Also, for those who are still investing what is your current strategy while investing in Austin?

[Kevin Sobilo]

@Schadrac Mertis, a deal isn't what's advertised it's what YOU can make of it! I'm not familiar with your market, but what I'm saying applies everywhere.

A deal may not cash-flow on paper based on what's advertised but that only means if you buy a turn-key rental at full-ask that it won't cash-flow today. There are MANY ways to make a deal work.

Look for opportunities that you can take advantage of to improve the deal.

1. Negotiate. Is the seller motivated or distressed? Has the listing been sitting a while? If you can negotiate a better price, it may suddenly cash-flow.

2. Lower expenses. Can you pay points to buy down the interest rate? Do you believe interest rates will drop in the future where you can refi and capture that benefit? Can you appeal the assessment and lower property taxes? Can you make the property more efficient and lower utilities?

For example, I was looking at a 6 unit last week that has oil heat (included in the rent). The heating oil is costing the owner $8500 per year, but natural gas is available at that location. The gas company will run a line for free and it might only cost $4k to upgrade the existing boilers to use natural gas. That could lower the cost from $8500 to maybe $3000 per year a BIG savings immediately impacting cash-flow.

3. Increase income. Can you raise rents either as the units are or by doing some kind of rehab work? Are there other income opportunities such as renting out garage bays, adding a coin laundry, etc. Can you add a unit? Can you do short or mid term furnished rentals at this property?

These are just SOME of many ways to look for the opportunities necessary to take a property and put the work in to make it a deal. The seller wants the sale to be a deal for THEM! You need to find the opportunities yourself to make it a deal for YOU!