Foodies can get to know Austin, Texas, for their BBQ and Tex-Mex. But real estate investors know it as one of the most popular markets for small multifamily properties and short-term suburban rentals.
As an avid investor, real estate agent Bryan Noth knows which neighborhoods and strategies tend to work well for investors who want to enter the Austin scene. Due to the increase in buyers, an expert is needed to find the right deals. Noth is the agent who can drive investors to the real estate equivalent of a local fat spoon, and everyone knows these places are always the best.
Learn more about Austin market details in Noth’s words.
My real estate background
I have been an investor for many years and a full time agent for the past three years. Last year my team worked with approximately 250-300 clients, 50% of whom were just investors.
What makes the Austin market unique?
Austin is certainly a magnetic market for growth for both businesses and the population. This has been evident recently, but in reality the market has experienced steady growth for decades.
The geographical location also creates wonderful natural amenities. The Colorado River flows through downtown Austin, creating an oceanfront attraction and an ideal place to enjoy outdoor activities. The Hill Country to the west forms stunning tourist landscapes covered in lush vegetation. And of course, the annual festivals and music scene have a big following here.
Novelty Agents suitable for investors in Austin
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What kind of figures can investors expect in Austin?
This varies depending on the location and type of item. Capitalization rates are compressed sharply for single-family homes and small multi-family properties due to rising prices. Rental growth tends to slow, and this creates a disparity in a rapidly appreciating market.
Rental-to-purchase price ratios of 0.3% to 0.8% are common, while cap rates range from 2% to 6%. It depends a lot on how each investor manages their number and the respective asset class. For commercial properties, 3% to 5% is a reasonable expectation.
How competitive is the Austin market right now?
Austin is quite competitive right now, driven by low supply and high demand. The average number of days on the market is 17 to 18 days, but buyers and investors often feel the pressure around recently released inventory. These statistics approach the market in three to five days, and there are often several bids on the list price and contingencies waived.
What do you like about your market?
Versatility. You can have the true urban appeal of the city center and, in an hour, be on the outskirts or in the tourist cellars of Hill Country. From taco trucks to gourmet restaurants, everything is here.
Which neighborhoods excite you the most?
I really enjoyed seeing how the eastern part of Austin developed more, bringing in local businesses and very well finished real estate developments. Another favorite pocket is the aisle between Apple’s campus and the Domain. This area is ready for growth with the fundamentals of infrastructure and entrepreneurs. I hope it’s a solid, high-performance area.
What kind of properties do you think investors in the Austin area should consider?
Everything that matches your level of comfort and strategy. This is one of my favorite aspects of real estate investing – there are many ways to make money.
As for specific niches, small multifamily properties that can be converted into condominiums and sold as individual units create enormous strategic exit potential; using this strategy shifts the market from potential investors to home buyers. Similarly, zoned lots for ADU (Accessory Dwelling Unit) developments could have a great advantage for forced appreciation.
Which strategies are most successful in your market?
Flips have proven to be very successful for both me and investors who have systems in place, although margins are tighter right now. As home prices continue to rise, determining the ARV value (after repair) is like hitting a moving target, making it harder to know what you can offer.
I prefer the buy and hold properties for the game in the long run. Cash flow figures are low in the first and two years, but usually appear strong in the following years. One of my favorite features of the BiggerPockets calculator is the projection of numbers that are released over a number of years.
Short-term rents have also been strong this past year, albeit more on the outskirts. The city of Austin has short-term home restrictions.
What do most homeowners in Austin do for a living?
Austin has a diverse job landscape: technology companies (large and startups), large suppliers and distributors, physicians, universities, production, and more. There is also a strong government presence.
What types of industries are moving to the area? Which ones move?
We don’t see much out of the area. In terms of inputs, the technology sector is experiencing the highest growth. With this, we have also seen an increase in production and distribution.
What connection do you have with the professionals that investors will need after closing?
Pretty well connected. Due to the number of investors our team works with, we have many professional connections with contractors, subcontractors, service professionals, suppliers, property managers, and more.
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