I am a 22 year old business professional living in Woodbridge, Va( 30 minutes outside of Wash, DC). I am looking to buy a property in Austin around May, however because of my job I will not be able to move there for a couple of years. My parents live in Steiner Ranch, and I know that eventually I will make the move to Austin. I would like to buy sooner than later and because of ridiculous housing prices in my area, I cannot afford to buy here. What I would like to know is if it would be smart to buy now, and rent the property until I decide to move. I know that Austin is one of the fastest growing cities in the U.S., and I would like to get in before housing prices soar. Plus, I figure sitting on the house while it appreciates can’t hurt either. Any guidance would be appreciated.

> Round Rock and Pfluegerville appreciation is non-existent. And it is because there isn’t regulation on amount of building because of there is plenty of land. Oversupply, not enough demand.

We advise people to stay away from those areas.

> barriers to entry for investors is there, but it is thin.

The barrier is absolute and very strong in many of the best subdivisions. They simply don’t need investors. When we find a builder willing to sell to investors, we worry about that unless we know they are truley limiting it to 5% to 10% of sales or it’s in a price range ($300K and up) where the number of investors is self limiting do to the price range.

Most newbie investors, chasing better cash flow and a cheaper purchase price, head out to the areas outside Austin where you still find plenty of builders selling cheap starter homes to investors. We don’t work those areas and never take buyers out there. But we do know what the better builders in the more desireable areas are now practicing, and many are not selling to investors or, if they do, they’re withholding the incentives given to the owner-occupants which means the investor is paying a premium.

> You even wrote this in another blog entry …

Yes, that was very true 2 to 4 years ago when the Austin market was still flat and builders were trying to keep inventory moving. It’s much different today on the sales side in the areas that have recovered and have plenty of demand. The hangover of over supplied rental stock still exists, but it’s turned the corner and heading the other way now.

Thanks for your comments. Much appreciated.
Steve

Round Rock and Pfluegerville appreciation is non-existent. And it is because there isn’t regulation on amount of building because of there is plenty of land. Oversupply, not enough demand.

As far as investors buying new homes, the barriers to entry for investors is there, but it is thin. There are just too many investors in austin to turn them all away. A lot fall through the cracks, like me for instance.

You even wrote this in another blog entry: “many of the newer subdivisions have been oversold to out of state investors and now suffer from surplus rental inventory, causing prolonged vacancies and keeping rent values suppressed in those areas.”

I’m a buy and cash flow strategist in austin. The price points are too low and the equity appreciation, crippled by 3% property taxes, is too miniscule to fix and flip.

Don’t get me wrong. Austin is great for investing, it has worked out for me fine. But be very careful where and what you buy. The closer to the middle the better. Always have a cash flow strategy.

Hi John,

> austin is very much like vegas – way way too much overbuilding going on and way too many california investors

I’ll have to disagree with you on that. Austin’s growth is much more measured than what happened in Las Vegas and Phoenix. Most of the production builders in Austin learned lessons from those markets, where their biggest competition became their own customers trying to flip homes at closing or shortly thereafter.

In many new home subdivision in Austin, especially those with strong demand, investors are very limited. You don’t get the same incentives owner/occupant buyers get, you have to pay a non-refundable earnest money deposit in some cases of $5000 or more, or in some cases, they flat out don’t sell to investors period. This is a double-edged sword. I’m happy to see builders doing that, but it limits the options for those we help.

All of the investors we deal with understand that Austin is a long-term investment, not a quick-flip market. Therein lies the biggest difference between us and Las Vegas of the past 5 years. It’s a different mindset altogether.

Steve

As far as freescale and samsung, yeah, I rented to someone who worked at freescale but only because he was waiting for his home to close, so if you work for big industry you probably have the ability to buy , so why rent. Just look at the flood of inventory in faraway nice areas like round rock and pfluegerville.

I appreciate your information on the markets in Austin. I sent you a direct email on my rental property.

Regards,

Don

I don’t include townhomes and condos or duplexes in the leasing stats – just houses. If you email me directly with your townhome address I’ll be happy to send you a rundown on what similar properties have been renting for. I’m pretty sure I know where your townhome is and it’s a nice complex. The rental market is very slow right now according to my Property Manager friends, so your price might be ok but you have a problem of not enough demand.

Email me and I’ll have a look for you though.

Thanks

steve

I am a licnesed broker in Outhern Orange county and have rental property in SW-and North austin. In reveiwing you nice statisitical information on the rental market, I could not determine if this included Townhomes/Condos. I am assuming that you numbers of $0.68-$0.70 cemts per SF hold true for townhomes.

I have been leasing a nice 3-2.5-2 1560 sf townhome off convict hill and Escarpment for $1275.00…getting a lot of inquiries, but all are saying this this too much? With the inclusion of Freescale and Samsung…I woud think many of this units would be an excellent rental price for $1275-$1325.

Do you have iny info on Townhome/condo rental markets fro the last 2005-2006.

Best Regards

Don

The sample sizes for monthly leases by area are too small to be meaningfull. What area are you curious about though?
Steve