REAL ESTATE INVESTING IN AUSTIN TX – FAQ
Q: What does Crossland Real Estate do as agents for investor buyers?
A: We help financially qualified individuals identify and acquire residential homes as investment properties.
Q: What does Crossland Real Estate NOT do?
A: We do not help buyers find flips, fixers, foreclosures or creative financing opportunities. We do not sell duplexes, 4-plexes or apartments, just good quality “rent ready” single family homes in good areas.
Q: Do you focus on and recommend certain areas in and around Austin?
A: Yes. We generally help buyers find homes in South, SW, & NW Austin as well as Hays County communities south/sw of Austin such as Buda, Kyle, San Marcos, Dripping Springs and Wimberley TX.
Q: Why those particular areas?
A: Homes in these areas, in our opinion, offer the best combination of location, affordability, appreciation potential, schools and the median value housing stock that attracts quality renters.
Q: What price ranges to you recommend Austin area real estate investors stay within?
A: $400K to $600K, in general. Or, roughly, 25% above and below the median Austin home value of $500K.
Q: Do you recommend a certain size and age of home?
A: Yes. We recommend homes that are 3 to 4 bedroom, 2 to 3 bath, 2-garage minimum, between 1,400-2,200 square feet in size, built 1980s and newer.
Q: Do you have other criteria investors should observe?
A: Yes. When possible, it’s best to have a 1-story home that has an additional flex room, such as a 2nd living area, formal dining, 4th bedroom or office. If it is a 2 story home, it’s best to have the master bedroom downstairs. Also, we help you avoid homes with “misfit attributes” or functional obsolescence.
Q: Is real estate investing risky?
A: Yes. Real Estate investing is extremely risky. You might lose money. You should only invest in real estate with extra, left over money that you’re willing to put at risk. This means you should already be maxed out with any employer matched 401Ks, have no debt attached to depreciating assets (such as cars, furniture, credit card debt, etc), and have no outstanding balances on credit cards.
In other words, your financial house should be in order with all other investment, retirement and debt categories in your life. If you have credit card debt, car payments and haven’t started saving for retirement, you should discuss that with your financial advisor or accountant before looking for investment property to purchase.
Q: How much cash on hand should I have before investing.
A: About $125,000 to $174,000 USD. This will provide funds for a 25% down payment plus remaining reserves equal to 6 months rent. If you don’t have that amount of available funds for down payment and operating reserves, you should reconsider investing in Austin real estate.
Q: What are some basic financial assumptions about investing in Austin real estate
A: It will generally take 3.5 to 5 month’s rent to cover annual property taxes and insurance for the typical rental home.
Property taxes average 2.2% to almost 3% of assessed market value, depending on the location in the Austin metro area.
Assume 10% of gross annual rent toward repairs and maintenance
Assume 10% of gross annual rent toward vacancy/leasing, and
Assume 10% of gross annual rent toward management fees if you will be using a property manager.
The historic average appreciation rate in Texas is 4.5% over time, so that’s the rate we assume over a decade or more, even if the market at time of purchase is “hot”, as it has been since 2012, or “flat”, as it was in the late 1980s, early 2000s, and from 2008 to 2012.
Homes in Austin generally lease for somewhere between 0.4% to 0.6% of the market sales price per month. So, for example, a median value $500,000 home at 0.5% of market value would have a monthly lease value of $2,500/mo. More expensive homes have lower ratios. Cheaper homes below median value generally have higher ratios, but they are cheaper for a reason. Be careful. You want to be able to attract quality tenants.
Of course all of these numbers are averages and guesses. Two identical homes in the same neighborhood will perform differently over a 10 year period. Cash flow, or monthly “break even” cash flow amount will depend on how much down payment you invest.
You also have to factor in tax advantages, depending on your income level and tax bracket, equity pay down over time, and depreciation write off over time. A “negative cash flow” property may be positive once everything is factored in. You and your accountant should assess how real estate investing will fit into your personal financial picture, and how it compares to alternatives such as the stock market.
Q: Can you help me decide if investing is a good idea for me?
A: No. That’s not what we do, other than to say we think it’s a good idea for many, but not for most. We help financially qualified individuals identify and acquire residential investment properties, but we are not professional financial advisors or accountants. The above should get you started on considering the basic parameters we think a prudent investor should consider. We’re here to help once you’ve determined that investing is a good idea for you and your financial goals.
Q: Can you give examples of listings you think make good candidate properties for investment?
A: Sure. The list of properties below is an example of homes available in SW Austin. You can modify the search and change the criteria if you wish.