Austin is undoubtedly a hot market for real estate, and it doesn’t seem to be slowing down any time soon. Good weather that encourages healthy outdoor activities, a lively music and cultural scene, and a growing tech and startup economy make Austin one of the hottest places to live.
Austin has a high quality of life
There are more people moving to Austin than are moving out. According to KUT, there’s an estimated 55,000 people per year moving away from Austin — such as UT graduates and people leaving for better paying jobs in nearby cities. However, there are an estimated 73,000 in-migrants who are more than making up for the number of lost residents.
According to the San Francisco Chronicle, many Bay Area tech companies, including Google, Apple, Dropbox and Oracle, are opening offices in the ‘Silicon Hills’ — as Austin is being called — because of the relatively large talent pool and higher quality of life.
Austin’s downtown is maturing
Austin growing downtown skyline The growing population has spurred a boom in real estate development downtown, with many new condos and luxury rental towers changing the skyline and increasing the number of housing units available. The expanding downtown residential market is also attracting new retail businesses, including boutiques, restaurants, and nightlife.
According to the Austin’s Economic Development Department, there are over 10,000 residents living downtown currently, and new construction projects will increase the population to nearly 15,000. This is double the number of people from the 2010 Census.
If you’re thinking about becoming an investor in Austin real estate, it’s important to line up professionals to help you make offers when you find them. Because Austin is a hot market, you’ll need to move quickly if you want to land that property.
Before you start any deal making, you will need to work with an Austin-savvy real estate professional that can help you find deals that will meet your investing goals. Because they have access to the MLS, they will know about properties that you wouldn’t know about or get access to otherwise.
Assemble your real estate team before you buy
Building relationships with your team will empower you to make serious offers that will more likely get accepted by sellers. Among your team members, you will want to include:
A mortgage broker or banker, who can help you get the financing for your deal
A real estate attorney to protect you by reviewing and revising contracts
An appraiser who can help you get a correct appraisal for your potential property
An accountant who is well versed in real estate investments
A good contractor, for repairs whether you’re rehabbing or buying rental property
How to find rehab or wholesale deals in Austin
You can buy properties to fix up and resell (flip) or you can buy and hold properties that you rent out for monthly cash flow.
The advantage of flipping properties is that you can end up with a good return on investment (ROI) in the short term. For example, you buy a property for $100,000, and invest $50,000 into repairs. Once it’s rehabbed, your property is valued at $200,000, and you sell it for a $50,000 profit.
This is an extremely simplified version of ROI. There are many other factors that you need to determine to see if the numbers work in your favor — that is, you’re not overpaying initially when you buy the properties or for the renovations or holding costs.
Flipping properties means that you will need to spend more time looking for fixer uppers that may be under market value. These may be more difficult to find in a hot market with rising property prices. Beyond the actual purchase price, you will also need to factor in fixed purchase costs for inspections, closing, and lender fees.
You’ll also need to factor in holding costs. Your budget should include funds for making repairs, whether you are doing them yourself or hiring contractors. While you’re upgrading the property, you’ll need to carry mortgage payments, property taxes, utilities, and insurance.
Because of the rising property values, flip and fix deals in Austin are harder to find. Many of the good deals in central Austin have already been flipped. If you want to find rehab deals, you will need to find properties that are not right in the center of town.
Working with the right real estate professionals will help you learn which neighborhoods to consider and determine where you should focus your search.
Finding buy-and-hold rental properties in Austin
If you find the right long-term buy-and-hold rental property, you can earn consistent cash flow each month. However, you’ll need to carefully review the operating expenses on the property and what tenants are willing to pay for the space to know if you’ll make or lose money each month.
Does your long-term real estate investment make sense on paper? In other words, you will need to understand if your monthly cash flow will be positive or negative.
For example, say your total costs to buy a duplex was $20,000, including down payment and closing costs. You can rent each of the units for $600. Assuming your building is 100% occupied, you’ll make $1200 per month in income. Your expenses include mortgage payments, taxes, insurance, utilities, and management fees, and you want to set aside some cash each month for capital expenditures and routine repairs. You calculate that your expenses add up to $1100 per month. Once you subtract your expenses from your income, you’ll have a positive cash flow of $100 per month.
However, this is a very simplified example, and problems will inevitably arise. Emergency roof repairs, heating system breakdowns, broken windows that need replacing, and other unexpected expenses can eat away at your profits. One of your units may be vacant for a month or more, or you could have a tenant that fails to pay their monthly rent.
The more you can anticipate problems before they happen, the easier it will be for you to recover from setbacks.
In the Austin real estate market, you will need to get to know different neighborhoods to determine typical market rent rates you can expect to get for your property. Besides determining your investment budget, you’ll want to know what type of tenant you want to rent your property. Some neighborhoods may have higher vacancy rates—for example, vacancies are high in the summer months in buildings around the University of Texas. A bargain property may not be such a great deal if you can’t attract a stable tenant.
Once you find and invest in your rental property, you’ll need to decide how you want it managed from month to month.
Getting the right property manager
Do you want to manage your own property or hire a manager? Property management can become a full-time job. As a property manager, you’ll have to deal not only with maintenance, repairs and tenant issues, but also with insurance, fair rental regulations, and building code compliance. So if you’re not an expert in these areas, managing your own properties may not be worth your time and effort.
Hiring a professional manager can save you headaches over the long term. While you’ll have to factor in management as a fixed expense, your property manager will likely know how to better take care of routine repairs, tenant issues, and keeping your property near 100% occupancy.
Your real estate professional can refer you to reputable property management companies to help you take care of your investment.
Where should I start investing in Austin real estate?
Work with a knowledgeable real estate professional who knows about the different neighborhoods. They can help you find properties that will fit into your budget and your overall goals. Whether you’re seeking a duplex or multifamily property so you can maximize your rental income or whether you want a condo or single-family home to improve for resale, your local Austin real estate professional can guide you to the best property to suit your needs.  
Contact your GoodLife real estate professional to learn more about investment properties in the Austin area.


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