All Forum Posts by: Scott Sutherland

We have a short term rental department in Austin that is part of our code compliance division. We register our rentals, notify the neighbors, and pay hotel taxes. 

We use state farm for our insurance and they are fully aware of how we use the property. We have coverages for damage and lost rents. We also have a $1M GL policy since the properties are in our names (financed with conventional loans so no LLC allowed). The $1M GL policy runs about $400 per year.

The neighbors are notified as part of the registration process. I believe they send letters to everyone within 1/4 mile radius. 

I would stay away from condos. Most condos require a lease to be for a certain time period (not nightly/weekly/monthly). Even if the condo rules didn't specifically prohibit vacation rentals, all it takes is one bad renter to throw a party and the board would "clarify" the rules going forward. I'd hate to buy a condo that only worked as a vacation rental and then be cash flow negative due to a condo rule change. 

In general, I try to only buy properties that would cash flow neutral long term. That way, if the local vacation rental rules change, I'm not stuck with a boat anchor.

Thanks Lynn. 

We have a duplex in Austin that would cash flow negative at its current valuation. The only justification for the value is use as a Vacation Rental or owner occupy. 

This duplex has a market value of $700K. Long term rents would be $4500 per month. Clearly not a cash flowing property using that model.

2013 rental income as a vacation rental averaged $9000 per month. Expenses for the year were about $9500 more than a long term rental so net income for the year was ($4500*12-$9500)=$44,500 greater using the vacation rental strategy. 

Short term rentals require more active management, but we feel it's worth it to make an additional $44,500 on a single property.

You could also look at Cedar Park/Leander to the North or Kyle/San Marcos to the south. There should be strong appreciation in the I-35 corridor from San Antonio to Georgetown for the foreseeable future. 

You might want to consider a vacation rental strategy. My wife and I have 4 of these in Austin and it's the only way to cash flow in the nicer neighborhoods.

I'll be the guest on BP podcast #114 on vacation rentals. It should air in two weeks. Check it out.

I'm also a re broker specializing in Austin investment property.  

Pm me if I can help .

Be sure to make the noon meetup on Thursdays at Big Daddy's. PM me if you want to grab a coffee when you're in town, I've been investing in Austin full time since 2009 and would be happy to share my experience.

You can still find some 1% properties in 78744 (southeast) or in 78758 (north). Those should still cash flow enough to hit your $100-$200 target and cover operational costs, some vacancy, and the unexpected repair.  Over time rates will rise and when combined with loan paydown, you'll start creating some equity.

You could always go the vacation rental route as well. Our rents for vacation rentals are roughly double what we'd get on a long term basis. But the management is much more active.

I love that you have a sense of urgency and are ready to get right to it. That being said, you should definitely finish your degree program.

To hit the ground running at 21 or 22 years old will put you decades ahead of most investors.

I spent 12 years in corporate before going solo as a realtor and investor. In hindsight, I could have made the leap after 5 years just as easily. But in addition to finishing my undergrad degree, I was able to get my MBA in the evenings while working. 

The degrees proved invaluable for creating a network of business partners and investors and increased my credibility with clients.

The jobs created the W-2 income which allowed my wife and I to get our first couple of investment properties with conventional loans (30 year am, 4% rate).

Good luck with everything!

Looks good Gary.

Which marketing package did you choose?

We're using the Homeaway/VRBO platinum package for our properties in Austin. It's not cheap ($1250 per year per property), but it only takes one good booking to pay for it. 

We are up to 4 units in Austin and adding a 5th unit next month. Too bad we couldn't close it and get it ready prior to SXSW. That's the biggest event of the year in Austin.

Would love to know how your numbers shake out for the year.

I"d love to have a deal like that in Austin, TX. Especially with those low property taxes. 

I guess it depends on how it stacks up to other deals ln your locale. But it's much better than what we get out this way.

TAR is used by licensed agents and brokers. TAA (Texas Apartment Association) is the second most used lease. I believe you can join TAA for a reasonable price and gain access to their contracts.