East Austin Real Estate

The story below is from tomorrow’s Sunday Austin Statesman. It’s a pretty good overview of the optimism many hold for East Austin’s continued boom. I’ve stayed out of East Austin not because it doesn’t hold promise, but because rehabbing and flipping properties is a specialized and riskier form of investing, and we tend to take a more conservative approach.

Also, once one establishes a set of investment rules that work well, it takes resolve to stick with your criteria, but I believe it’s important to do so. East Austin has terrible schools, street drugs, prostitution and higher crime. It also has many asthetically displeasing aspects (it’s ugly) including many large welfare housing projects scatter about that won’t be going away any time soon. It just ain’t my cup of tea at this stage of my investing life.

That said, if I was 23 and single, as I was when I arrived in Austin in 1985, I would definately be drawn to the vibe and energy of East Austin and could see myself living there. But I don’t see soccer moms jogging with baby strollers through the East side, and that’s one of the barameters I currently look for in choosing an area to invest in.

But I thought this was a good article worth sharing.

Buyers take a fresh look at new and remodeled homes just across I-35 from downtown
Sunday, January 13, 2008

The numbers will probably surprise anyone who hasn’t ventured east of Interstate 35 lately. The 78702 ZIP code in East Austin currently has more than 150 properties for sale, and they’re just as eclectic as the artists who live in that part of the city.

A slew of modernist homes and condominiums are going for $400,000 to $600,000 or more. Remodeled homes are listed for up to $675,000. And four lots at the corner of Martin Luther King Jr. Boulevard and Harvey Street are on the market for $1.8 million.

The details reveal the big trends in a real estate area that got little attention 20 years ago. And it’s not hard to figure out why.

Despite a median home price that has risen by more than 50 percent in the past five years to $199,000, East Austin is still within reach of many potential home buyers, especially when compared with nearby Austin neighborhoods such as Travis Heights, Hyde Park and Tarrytown.

The changes have caused concerns among community groups about rising property taxes and whether longtime residents will be able to afford to stay. But few people would deny that the East Austin real estate landscape is undergoing dramatic change.

Austin Urban Partners is one of the groups making a big impact. Ian Mitchell and Jerry Pritchard of Austin Urban Partners are building more than a dozen modernist homes and condominiums in the East Second Street area.

“We have torn down and removed eight homes, but they were all boarded up,” says Pritchard, “so (we) haven’t displaced any families.”

On three lots in the 1200 block of Second Street, the team has put up five residences: four condominiums and one single-family home.

Krisstina and Garry Wise, owners of the GoodLife Team, affiliated with Keller Williams Realty, have been hired to market the properties.

One of the homes, a three-bedroom, three-bathroom house at 1205 E. Second St., is on the market for $495,000 and has 2,180 square feet. It also has what you would expect young urbanites to want: bamboo and polished concrete floors, granite countertops, stainless steel appliances and a second-story balcony with city views.

“Ian (Mitchell) put the basic plan together for the homes,” Pritchard says. “Then we took them to a licensed architect in order to get a finished version for the builders,” Stinson Property Group of Round Rock.

The colors used in the homes mesh with those used on other dwellings in the neighborhood and were chosen by Jennifer Chenoweth, an artist who lives on East Second Street. “She’s done a great job of using colors to make the modern construction fit in with the feel of the neighborhood,” Pritchard says.

Pritchard points out that “everything we’re doing couldn’t be done now” because of recent changes in city ordinances restricting the size of homes on inner-city lots. “Most of the lots here are long and narrow and accommodated shotgun homes,” he says.

But Pritchard and his team got approval for the new construction before the ordinances were changed, so the projects are “grandfathered in,” he says. The first of the homes are finally being completed and are ready to sell. They will be part of a Feb. 7 tour of modern homes in East Austin hosted by the GoodLife Team.

A home at 80 Waller St., originally built in 1910, is a good example of traditional remodeling. Owner Spiros Karamalegos bought the property in April and took it down to the studs. It’s still a work in progress, but Karamalegos says he expects the two-story, 2,664-square-foot project to be complete in the next month or two.

When it’s done, it will have four bedrooms, 31/2 bathrooms and a detached garage with 600 square feet, relatively roomy for a neighborhood where some homes average 1,000 square feet or less. The asking price: $675,000. Jane Coffman of Keller Williams Realty has the listing.

Karamalegos echoes many who have invested in the area. “It’s just so close to downtown, and if you want to buy a condo downtown, it’s really expensive. Plus, this is a four-bedroom house.”

He says the floor plan of the original home “was completely changed. We moved the main staircase and tore out just about everything so that we could make use of all the space.”

The kitchen will have granite countertops and new cabinets, and will open into a living area with hardwood floors.

Before the house was remodeled, it was appraised at slightly more than $356,000 by the Travis Central Appraisal District.

Karamalegos, who lives in Smithville, is supervising the renovations. He owns an Austin nightclub and in the next couple of months plans to open the Music Cafe, a coffee and wine bar at South Lamar Boulevard and Oltorf Street.

The Waller Street house joins a long list of recent remodels in the neighborhood.

A three-bedroom house at 1201 Garden St., with a complete update, is on the market for $535,000. Before the work, the house was appraised at slightly more than $198,000.

A remodeled three-bedroom at 1702 E. 17th St. is listed for $517,000; it previously was appraised for about $151,000, according to tax records.

And an updated, three-bedroom bungalow at 2602 Hidalgo St. is listed for $398,000, with a prior appraisal of about $81,000.

The $1.8 million listing for the four lots at the intersection of Harvey Street and Martin Luther King Jr. Boulevard is being handled by Iletra Lawrence of Coldwell Banker United.

Some might raise eyebrows at that asking price. But the market will determine what people are willing to pay for the land, which is near the University of Texas and the redevelopment of the old Mueller airport, Lawrence says.

“The lots have a total of 325,000 square feet of space,” she says, “and the zoning allows the land to be used for whatever purpose: single- family housing, multifamily or commercial.”

One of the lots at the current site is home to Lewis’s Bar-B-Q, a popular East Austin eatery. Lawrence says the various owners of the lots are related and that they’re putting the land on the market as a package.

Tax records indicate that the owners are Juanita Lewis of Manor, Alberta Black of Manor and Arthur Burton of Kyle. Two of the lots are appraised at $50,000 and the other at $60,000. The lot with the restaurant is appraised at $82,610, according to appraisal district records.

But the four combined, along with the burgeoning development in the area, account for the higher asking price.

Krisstina Wise says she thinks East Austin will continue to blossom and sees it as the next South Congress Avenue.

“We have our offices here (on East Cesar Chavez Street). We’re committed to East Austin,” she says, partly because of the diversity, eclecticism and relative affordability.

“Times have changed, and young people like the central location. Plus it still has that old Austin vibe.”

18 thoughts on “East Austin Real Estate”

  1. One mans trash is another man’s treasure. Ask Warren Buffet. I think east austin is the kind of invesment the oracle
    of ohama would make. Nice and cheap, with sky-high forecasts for the future.

  2. Hi Scott,

    True enough. I personally think the sky-high forecast has a ceiling though. East Austin is attractive to people priced out of Travis Heights, Hyde Park, Tarrytown, Clarksville, and other quaint, central Austin neighborhoods with old homes, character and charm. All things being equal, I can’t see someone choosing East Austin over Travis Heights and being willing to forego a purchase opportunity in TH over the same house for the same price in East Austin 2 blocks from a housing project. Once the prices in East Austin become comparable with the more venerable and established neighborhoods, I think it will cap out. It’s already slowed down a lot over there and there is a lot of unsold inventory.

    I could be wrong. There are many, many variable, but that’s the point. Fewer variables and greater predictability draws me to other areas, though the potential in East Austin may in fact be greater.


  3. I think that AISD transfers are probably the best and worst part of the problem. They allow parents to move into transitional neighbourhoods and then transfer their kids to other schools which speeds gentrification, but then you’re stuck in a situation where the schools are just horrible because every involved parent has transferred their kids out. It’s a real chicken and egg problem. I think ultimately to fix their school district Austin is going to have to stop allowing so many transfers.

  4. Well, as AISD gets bigger, room for transfers is already slowing. Certainly, that has happened at the high school level. Austin High has been closed to transfers for years but this year and the last Anderson and MacCallum have been too. Ultimately, that may impact neighborhoods like Travis Heights that track to one of the high schools in Austin that a national John Hopkins study labeled a “drop out factory” (Travis High). Although more TH kids are attending the local elementary, high school students are very, very scarce. Everyone moves to TH, has a kid (or two) and then moves generally when the children hit elementary school. (Steve, you fit this pattern, yes?) I don’t know, maybe the regular churn contributes to the rising prices as houses change owners more often.

    Certainly the fact that it is harder to transfer at the high school level is one factor in our own house search.

  5. I agree with Steve’s assessment of East Austin and do not invest there for the same reason. I stick to more tried and true neighborhoods and try to find and rent out undermarket properties that don’t require a lot of fixing. Flips are dependent on too many things going right for my taste and are capital intensive. The better neighborhoods are more apt to hold value in a down market too. On the other hand, a number of guys in the office have done very well in the last 2 years flipping single families in east austin north of 51st. To each their own. I prefer getting rich slow-it’s a lot easier.

  6. > Everyone moves to TH, has a kid (or two) and then moves generally when the children hit elementary school. (Steve, you fit this pattern, yes?)

    Yes, we lived in Travis Heights from 1991 till 1996. The old house just became to tiresome to live in once the second kid came along, and we moved into a 1970’s home in Cherry Creek in South Austin, and later out to Oak Hill. Travis Heights is a great place with small kids, mainly due to Stacy Park and the pools.

    Tim: Yes, the transfers contribute, but private schools also.

    Phil: Glad to hear I’m not the only one who isn’t gaga over East Austin. I take a drive through at least every 3 months and preview some homes, wondering if I’ll ever change mind mind. Hasn’t happened yet, though I also know others who have done well.

    But to me it still comes down to sticking with what I know, and staying out of hyped areas.

    Scott: About Warren Buffet – he stayed completely out of the high-flying tech stocks when everyone was getting rich in the 1990’s. I saw an interview with him where he was asked about it back then. He just waved his hand and dismissed it as nonsense, and talked more about sticking with fundamentals. He wasn’t worried about missing out on the current wave. I find that kind of discipline inspiring and wise.


  7. I have one question for Steve. How back was south congress and environs when it was bad? I’ve spoke to long-timers
    here in Austin, and they say it was awful up to the early 90’s. and only slowly gentrified through the 90’s. From what
    they say, it was a bastion of hookers and junkies, with cheap ranch-style motels that rented by the hour. Really
    nasty storefronts full of pawn shops and head shops. And NOW look at SoCo. The pride and joy of the local chamber
    of commerce it indeed is now. And not a hooker, pimp, or vagrant in sight. Now you have salons giving 50 dollar
    hair cuts where folks once pawned rings. You have upscale eateries where the downtrodden once shot up horse in
    shooting gallieries in the 70’s-80’s.
    So can present-day East Austin really be that much worse than the old South Congress? On the other hand, couldn’t
    we just as readily imagine East Austin(maybe called East End), just as gentrified and arty, maybe more so, in 5-10
    years. And who would make out like a bandit? All the folks who bought and held, ala Buffet. Yes, East Austin may
    be a bit stinky now, with scattered public housing, more than a few distressed minorities, and rather strange arty
    folks, but give “East End” another 5-10 years, and the buyers and holders will be doing a collective happy dance
    as their nest eggs double and triple in value. The projects themselves will be torn down soon, “renewal”(another
    name for getting rid of the poor at gunpoint) will be in full mode, and the urban professionals will boot the arty-farty
    types out of their cheap spaces, and proceed to tear down/rehab for days.
    In those same 5-10 years, central Austin will have TWO vital art districts in immediate DT vincinity……SoCo and
    East End. High rises will stand where public housing, effluvia, and head lice once reigned. Boutiques and high-end
    eateries will line 6th, 5th, and thereabouts for several miles east of DT.
    I think East Austin would be a perfect “Buy and Hold” strategy. JUst hold on for 3-5 years, and cash in when Austin
    decides to kick urban renewal(poor folk removal) in full bore. I don’t think you can go wrong.

  8. South Congress the street was bad in the nineties (although not horrible, watch “Last Days of the San Jose” to get a feel for the problems). You’d drive down it and point and stare at the prostitutes, but it was also a street you still drove down, so obviously it wasn’t that bad. I’d say you can point at the closing of the porn theater as probably the turning point for the street. You could actually watch as the prostitutes and drug dealers moved further south. I’m not sure other neighborhoods can be fixed that easily.

    The neighborhoods around there were still pretty nice. Travis Heights has obviously always been a fantastic neighborhood. Esther’s Follies’ running gag is that South Austin is known for cars on the lawn, junk sculpture, and garage sales. Which pretty much described the other neighborhoods. Junky, but not dangerous.

    East Austin you’re dealing with some entrenched problems. The first Austin city plan in 1928 *encouraged* blacks to move into East Austin (or give up all municipal services). They were pushed out of some of the nicer areas like Clarkesville and Wheatsville. The I-35 divide is entrenched. The black community is built up around it being “their place” and that crosses economic barriers. Much of the local political structures are built around those ideas as well. And it helps to realize this when trying to understand local politics. Austin had mandatory busing into the late eighties I believe and thanks to transfers has fairly starkly segregated schools.

    Which is not to say I don’t think it will gentrify. I just think the 3-5 years is a little optimistic.

  9. > I have one question for Steve. How back was south congress and environs when it was bad?

    I think Tim answered it well. South Congress was never what I would consider a scary street. We walked to Magnolia Cafe often to eat in the early 1990’s. It was but one long boulevard bisecting the otherwise good established and desirable neighborhoods of Travis Heights and the Bouldin/Dawson side west of S. Congress. There were not entrenched generations of welfare recipients, housing projects and poverty encircling S. Congress.

    That is not to say East Austin is unworthy of the changes (for better or worse depending on who you ask) it is undergoing. But its transformation to gentrified hip area will be more involved than cleaning up one street. I think it’s future is both promising and problematic.

    My entire point is simply that one should proceed with caution when investing in areas that are over-hyped and subject to numerous variables that are not always easy to predict. That said, someone who purchased real estate there 5 years ago and could afford to hold it until now is no doubt sitting on some good equity. Many have done well on flips also. And it still doesn’t fit the model I personally use in seeking buy and hold property, because of my stubborn affinity toward neighborhoods with good schools and soccer moms.



  10. Hey Steve! Glad we got to finally meet in person last night.

    So you know that I specialize in East Austin and that’s where all of my investments have been. It really is going to be a very different area in the next 5 years. I have another two years or so on the Mueller Advisory Commission. As you know, Mueller Austin has a 10-year build out. We’re going to have an “Alamo Drafthouse-Type mini theatre in the town centre”. There will be three lakes, an elementary school, the UT medical research facilities, and it’s right next door to the Austin Film Studios.

    You all are making a big mistake by writing off this area. It’s deflated since 2006, which was ridiculously hot, so you can pick up deals from more motivated sellers now. Here’s what’s selling: Vintage Homes or Contemporary, post modern in particular. If you’re in the middle, you’re not doing so well.

    There’s other pockets of town that are great too and East is actually still to speculative right now, but you just can’t ignore what it will be in 5-10 years.

  11. Hi Dee,

    It was great seeing you too, and you know I’ll be sending all my East Austin leads to you.

    I don’t write off East Austin. As I said, just too many moving variables for me, and I feel I’m outside my area of expertise as well as my personal investment parameters.

    Buyers interested (me included if you keep working on me) in that area would be well advised to find someone like you who is very involved in and aware of all the nuances and particulars of the different areas and what is happening there.


  12. “I don’t see soccer moms jogging with baby strollers through the East side”

    It’s funny you should say this. I live on the east side and saw a total soccer mom walking up East 18th with a double stroller just this morning.

    I think people under estimate the eastside and the rapid change happening here.

  13. Does the blatant racism in this discussion bother anybody else? Tim’s comment about blacks of all ecomonic groups feeling attached to East Austin as an entrenched problem for that neighborhood… WTF? And should we really cheer for the removal of poor people at gun point? I haven’t read all these posts, but it seems like the silence in response to some very objectionable statement is deafening. There’s a moral difference in making money by investing in companies with long term potential (a al Buffet) and investing in making a neighborhood unaffordable for its residents, demolishing their housing, and advocating their dispersal, all so you can sell at a nice profit in 3-5 years.

  14. Hi Jesse,

    Thanks for your comment.

    I’ve re-read the entire thread and think you might be mis-interpreting Tim’s comment. It’s mostly factual and seems to me sympathetic to some of the wrongs that earlier Austin city policies created for minorities. Which part did you find racist? I certainly don’t want that to be the impression and would delete any comment that I deem inappropriate.

    I don’t know what you mean by people being removed by gunpoint. You mean that metaphorically I assume.

    Sounds like you oppose gentrification of East Austin, as do many. It’s a valid position to hold.


  15. I don’t know where you got a racist attitude in my post. I wasn’t saying that blacks feeling attached to East Austin was a problem. It’s a reaction to the fact that throughout the twentieth century Austin forced its black citizens to move into East Austin, where they systematically denied them services. This has created an enormous amount of acrimony between the community and the city (which I would actually contend is generally well founded). I fail to see how that statement is racist. Go talk to prominent members of the community and see if you get a different story from mine.

    I haven’t seen anything about the removal of poor people at gun point in the comments. Gentrification is difficult, but that’s the system we live in. I don’t understand the idea of “investing in making a neighborhood unfordable for its residents”. East Austin is already unaffordable for some of its residents. Heck, it’s already unaffordable for most Austinites. It’s not investors that have made it that way. It’s proximity to downtown. Its the fact that a house a couple miles away from East Austin in Travis Heights goes for $500k+. The only reason the neighborhood is affordable at all is that the city has neglected the schools, businesses have redlined the area, there are perceived problems with crime, problems with police/community relations, and the housing stock is dilapidated. So essentially, every problem that gets fixed that makes East Austin a better place, also raises the values of the homes.

    But do we stop trying to improve the schools or lower crime just so the poorer residents can continue to afford their homes? Do we only allow slum-lord investors in, since they’ll help make the neighborhood worse? Maintaining the status-quo seems to me to be even worse.

    The lack of affordable inner-city housing is predominantly caused by neighborhoods associations consistently defeating high density projects. There simply is not enough supply of housing in the central core for any of it to be affordable. If we can increase the supply in central austin, it will eventually lower prices. Until we get more housing or some very complex legislation we’re going to keep seeing displacement.

  16. Thanks very much for your comments, I feel better about this discussion already. To clarify, the reference to removing people at gun point was to scott’s writing that in “another 5-10 years… the buyers and holders will be doing a collective happy dance as their nest eggs double and triple in value. The projects themselves will be torn down soon, “renewal” (another name for getting rid of the poor at gunpoint) will be in full mode…” Like you, Steve, I imagine that Scott meant the gun point image metaphorically. But I thought it needed to be highlighted since it seems as though scott is in favor of this aspect of renewal. I was pretty shocked when I first read that, and I still am. I wouldn’t really like to see any comments removed, I just think that some things need to be questioned. Tim, I am very grateful to you for explaining your concerns about the neighborhood at greater length- I think I must have misunderstood you, and I’m glad for the clarification. Re-reading the thread now I find that most of the things that offended me are in one post, the January 14th, 2008 at 2:13 pm post from Scott that contains the gun point image. The same post also contains the statement ” JUst hold on for 3-5 years, and cash in when Austin
    decides to kick urban renewal(poor folk removal) in full bore.” And also, “East Austin may be a bit stinky now, with scattered public housing, more than a few distressed minorities, and rather strange arty folks…” (I guess my reaction to this is that if you think the people who live in a neighborhood make that neighborhood “stinky,” then stay out, because what’s stinky to you is home to them). But I made a mistake in criticizing the whole discussion based on my reaction to one comment, and in particular I wish I had asked Tim to carify an ambiguous post rather than charge him with racism. Tim, I’m sorry, and I’m glad that you took the trouble to elaborate your thoughts on gentrification, which is definately a complicated topic with more than one very valid points of view.

  17. “But do we stop trying to improve the schools or lower crime just so the poorer residents can continue to afford their homes?”

    I hope you realize that Linder elementary is the most overcrowded school in Austin. But AISD has decided not to build a new school because they are predicting (hoping?) that East Austin will gentrify.

    Is it really your position that in the past ten years there has been some sort of investment in East Austin schools? I’m sure you know that AISD spends more per student in West Austin than they do in East Austin.


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