All Forum Posts by: Bryan Noth

Thanks for the tag @Lucia Rushton! @Brynton Lemar  

For LTRs I use PMs but for STR and MTR I self manage in the area. @Aaron Gordy hit it on the head, a good PM can make or break a property in many ways.

As for the areas you suggested those are all hot areas. Tarrytown, Clarksville, and Zilker are some of the most highly sought after locations but will require significant capital injection to cash flow. Allandale, Rosedale, and Mueller will have a lower entry price point but the ratios will also be tight on cash flow. With all of theses, the proximity to CBD, jobs, amenities is tough to match. The Domain will be the the best on purchase price to rent ratios of those you mentioned and it is nothing to scoff at with all that is developing there.

Property taxes vary by area, but tend to run from high 1s to low 3s (percentages). A general rule is older developed areas and those on larger acreage lots tend to have lower taxes while newer areas tend to have higher taxes. Broadly speaking, this is to offset the cost of adding infrastructure to the developing area (roads, utilities, etc). Each county and city can pass legislature adjusting tax rates and some are known for being higher (Manor and Buda are frequently in the 3s)

Thank you for the tag @Lucia Rushton!

@Dllen Clark house hacking rarely nets positive cash flow because you are essentially a non-paying tenant of the asset.  If you charged yourself market rent of $900 for a bedroom then on paper the property cash flows $0-$100 per month.  The advantage is once you vacate the property you can turn that bedroom into additional rental income.  Plus tax advantages, equity pay down, equity growth, etc.

Perhaps look starting it this way. When you rent the interest rate is 100% and your ROI is 0%. Every time.

$900 per month is well below the median market value for a 1 bedroom in the Austin MSA if you sought a traditional renting elsewhere. This kind of sounds like an easy 'yes' with the numbers you gave. If you wanted a truly living for free scenario than I would look into house hacking a duplex that you could STR or MTR the other unit, those numbers could offset the debt service entirely.

@Lucia Rushton I saw that report as well, Bloomberg reported on Rent.com’s findings but I really would like to see the data subsets they pulled from.  Their numbers are quite misaligned for the city of Austin when I pull data and run comps. 

Referenced Articles linked here:

https://www.bloomberg.com/news...
https://www.rent.com/research/...

June 2022 Housing Market Update for Austin, TX MSA

June 2022 statistics have been released for the Central Texas Housing market. There was a slight increase in median sales price from the preceding month and a 7% increase from the preceding year for the entire Austin Metropolitan Statistical Area.

The City of Austin saw a change in median home price from $667,000 to $615,000, a month to month decrease of $52,000 and a 7% increase from the previous year. The Austin-Round Rock MSA saw a change in median home price from $550,000 to $537,475 a month to month decrease of $12,525 and a 13% increase from the previous year.

The following infographics and data is courtesy of the Austin Board of Realtors:

Housing inventory has begun to slowly climb and now shows 2.1 months for the entire MSA which is 1.5 months increase over the preceding year. The City of Austin also remained at slightly lower inventory low levels, 1.8 months, which is 1.1 months increase over the preceding year. The strong relative increase again this month in housing inventory comes from a 19% increase in new listings (new homes hitting the market), a 217% increase in active listings (current homes available on market),and a 31% decrease in pending sales. 

The Federal Reserve’s (the Fed) continued increase of interest rates is certainly being felt with home sales. This trend is also likely to persist as the most recent CPI data is showing inflation at 9.1%. This is the largest year over year increase in 40 years going back to 1981. (Article and Data table linked below)

The Federal Reserve has repeatedly indicated a strong commitment to get inflation under control and aims to do that with further interest rate hikes. Rates have doubled within a year and that adversely affects buyer sentiment but also buyer capability. Sadly this is coupled with a second issue which is housing inventory. At both a local and national level housing inventory is low. Even with 200% increase in year over year numbers Austin is still strongly in a seller’s market. The cooling effects are being felt as we return to a more balanced market but make no mistake, the inherit need is there.  

I have no crystal ball, but I expect at some point inflation will subside and interest rates will come down. I suspect when that time comes the floodgates will open for refinances and right along with that will be home purchases. The major difference there is refinances do not have to compete against other investors who are refinancing. The following is not investment advice, just my thoughts. I think there is opportunity ahead. Right now interest rates are a major obstacle for buyers, not competition from other buyers or investors.  To use a famous adage from an investing sage:

“Be fearful when others are greedy, and greedy when others are fearful.” - Warren Buffet

Article Links:

https://www.bls.gov/opub/ted/2022/consumer-prices-up-9-1-percent-over-the-year-ended-june-2022-largest-increase-in-40-years.htm

A permit application filed June 29 with the City of Austin and approved July 1 shows Austin-based Tesla plans to build a two-floor, 500,000-square-foot space to enlarge its General Assembly 2 and General Assembly 3 operations. Currently, Tesla produces Model Y vehicles at the 2,500-acre site, which is along State Highway 130 near State Highway 71 East.

The 500,000-square-foot expansion, first reported by Tesla watcher Sawyer Merritt, would grow the size of the factory by more than 11 percent.

It’s not known precisely how many vehicles Tesla is producing at the Austin plant, but industry insiders estimate the total ranges from 2,000 to 5,000 vehicles per week. The Electrek blog says Tesla is aiming to manufacture 10,000 vehicles per week there by the end of this year.

Free Article Link:

https://austin.culturemap.com/...

A Dallas-based real estate developer has partnered with the owners of a winery and resort north of Austin to add more than 1,000 Tuscan-style luxury homes on the 600-acre scenic property in the Hill Country.

Since August 2021, representatives for Hoque Global LLC said they’ve been marketing and selling one-acre to three-acre estate home lots at a “brisk pace” at the Vineyard at Florence, a neighborhood modeled after the Italian countryside. It will spring up about 45 miles north of Austin near the northernmost end of Williamson County.

In total, the company has plans for 1,000-plus additional lots on the property, which also includes the vineyard, as well as a boutique hotel and restaurant. The full build out of the hospitality and residential portions of the development is expected to reach a $500 million investment, according to an April 28 announcement.

There are 70 lots for the initial release and more than 40 have been purchased already.  Lots are currently priced at $180k - $300k and homes are expected in the $1M-$2M range currently.  

Free Article link:

https://www.kxan.com/news/loca...

@Steve S. is it a promulgated TREC contract or custom drafted / custom addenda? 

May 2022 Housing Market Update for Austin, TX MSA

May 2022 statistics have been released for the Central Texas Housing market. There was no increase in median sales price from the preceding month and a 19% increase from the preceding year for the entire Austin Metropolitan Statistical Area.

The City of Austin saw a change in median home price from $640,000 to $667,000, a month to month increase of $27,000 and a 18% increase from the previous year. The Austin-Round Rock MSA saw no change from the previous month with median home price of $550,000 and a 19% increase from the previous year.

The following infographics and data is courtesy of the Austin Board of Realtors:

Housing inventory remains at low levels, 1.2 months for the entire MSA which is 0.7 months increase over the preceding year. The City of Austin also remained at low levels, 1.0 months which is 0.5 months increase over the preceding year. The strong relative increase in housing inventory comes from an 18% increase in new listings (new homes hitting the market), a 146% increase in active listings (current homes available on market), and a 14% decrease in pending sales.  As a reminder, a balanced market between sellers and buyers is considered 6 months of inventory.  

These numbers caused the Austin MSA housing inventory to nearly double in year to year comparison and saw a 50% increase in month to month numbers. The leaden shackle limiting buyers right now is interest rates. The Federal Reserve announced yesterday a benchmark interest rate increase of 0.75%. This is the most aggressive rate hike in nearly 30 years. This was not wholly unexpected with the Consumer Price Index release for May 2022 showing a 8.6% year over year increase. The relentless rise of inflation only highlights that previous rate increases have not been drastic enough to achieve the economic parameters the Fed is aiming for.

The Fed has essentially admitted this course of action will result in an increased burden, notably on first time home buyers. Couple other factors such as the slowdown in new construction and we may see that prospective buyers are forced into renting. This may open a prime opportunity for investors looking to employ alternative strategies such as seller financing and housing hacking which both have potential to secure higher returns than the majority of buyers out there are able to achieve under other circumstances.

Article Links:

https://www.npr.org/2022/06/16/1105397522/who-are-the-winners-and-losers-of-the-fed-hiking-interest-rates

https://www.bls.gov/opub/ted/2022/consumer-prices-up-8-6-percent-over-year-ended-may-2022.htm

Disclaimer: The information provided here is for educational purposes only, past performance is never a guarantee of future performance.

April 2022 Housing Market Update for Austin, TX MSA

April 2022 statistics have been released for the Central Texas Housing market. There was an increase in median sales price from the preceding month and a 19% increase from the preceding year for the entire Austin Metropolitan Statistical Area.

The City of Austin saw a change in median home price from $624,000 to $640,000, a month to month increase of $16,000 and a 16% increase from the previous year. The Austin-Round Rock MSA saw a change in median home price from $521,100 to $550,000 for a month to month increase of $28,900 and a 19% increase from the previous year.

The following infographics and data is courtesy of the Austin Board of Realtors:

Housing inventory remains at low levels, 0.8 months for the entire MSA which is 0.3 months increase over the preceding year. The City of Austin also remained at low levels, 0.7 months, a slight increase from the preceding year which was 0.6 months. That equates to just over 3 weeks of housing inventory for the area.

Closed sales for the MSA are down 6% from the preceding year as well as slightly down from the preceding month. Interesting to note that the City of Austin saw days on market decrease to 14 days, down 5 days from just a year ago.

I mentioned in the housing market report for March of 2022 that there were emerging data points indicating some shifting in market sentiment. Albeit slight, those data trends continued this past month. Closed sales are down for the MSA, new listings are down, and pending sales are down all while active listings are up. This explains the increase in inventory. It is worth noting that sales price continues to climb but with more options available to buyers and the daunting weight of increasing interest rates, buyers have the ability to be more discerning with home purchases in the MSA.  

Disclaimer: The information provided here is for educational purposes only, past performance is never a guarantee of future performance.

@Prash Manohar oh the can of worms you opened lol.  

If the median home price in Austin hits $1M in the next few years then I would say, with a high degree of confidence, that many owners would happily count that appreciation as a phenomenal investment. If cash flow covers the three Ms (Mortgage, Maintenance, and Management) then appreciation only needs to surpass taxes to net a positive ROI. If it does not cover those costs then you can sell to the many willing buyers in the MSA.

Cash flow is tight in Austin, but it's also tight in the vast majority of other markets.  80-85% of home purchases  in the Austin MSA are still homeowners and the remaining 15-20% or purchases are made by investors.  As the ratios become less favorable for investors that will slow activity but the demand is still quite strong and driven by genuine growth trends.  

In my opinion, interest rates are crippling buying power (for investors and homebuyers) but that honestly only serves to push rental demand higher.  This may be the silver lining for your property with stronger than average rent increases.  However, it may be after year 3 that you see your metrics stabilize.