Foodies may know Austin, Texas for its barbecue and Tex-Mex. But real estate investors know it as one of the hottest markets for small apartment buildings and short-term rentals in the suburbs.
An avid investor, real estate agent Bryan Noth knows which neighborhoods and strategies work best for investors looking to get into the Austin scene. Due to the increasing number of buyers, it takes an expert to find the right offers. Noth is the broker who can lead investors to the real estate equivalent of a local grease spoon – and everyone knows these places are always the best.
Learn about the ins and outs of the Austin Market in Noth’s own words.
My real estate background
I have been an investor for many years and a full-time broker for three years. Last year my team worked with around 250-300 clients, around 50% of whom were purely investors.
What Makes the Austin Market Unique?
Austin is certainly a growth magnet market, both in terms of business and population. This was highlighted recently, but the truth is that the market has been growing steadily for decades.
The geographic location also creates some wonderful natural amenities. The Colorado River cuts right through Austin, creating a waterfront attraction and a great place to enjoy outdoor activities. The Hill Country to the west forms breathtaking hilly landscapes with lush greenery. And of course the annual festivals and music scene have a lot to offer here.
New! Investor Friendly Agents in Austin
Regardless of your investment experience or investment project, contact a local broker who knows the market inside out and can value real estate from an investor’s perspective. How BiggerPockets Agent Marketplace works:
- Choose your market
- Share your investment criteria
- Play with an agent!
What numbers can investors expect in Austin?
This varies depending on the location and asset type. The cap rates for single-family houses and small multi-family houses are heavily compressed due to rising prices. Rental growth tends to lag, and this creates disparity in a rapidly appreciating market.
Rental-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 numbers and the particular asset class. For commercial real estate, 3 to 5% is a reasonable expectation.
How competitive is the Austin market right now?
Austin is pretty competitive right now, driven by low supply and high demand. The average market time is 17-18 days, but homebuyers and investors usually feel the pressure for newly released inventory. These statistics are closer to three to five days on the market, and there are often multiple offers above list price and waived contingencies.
What do you love about your market?
Versatility. You can enjoy the true urban appeal of downtown and be in the suburbs or the Hill Country wineries within an hour. From taco trucks to fine dining, everything is included.
Which parts of the city are you most looking forward to?
Really enjoyed seeing the east side of Austin develop more, bringing in local businesses and well-completed real estate developments. Another popular bag is the corridor between the Apple campus and the domain. This area is prepared for growth with the basics of infrastructure and employers. I’m assuming this is a solid, high performing area.
What kind of properties do you think investors should consider in the Austin area?
Whatever suits your comfort level and strategy. This is one of my favorite aspects of real estate investing – there are so many ways to make money!
In certain niches, small apartment buildings that can be converted into condominiums and sold as individual units offer great potential for exit strategies; With this strategy, your potential customer market will go from investor to homebuyer. Similarly, lots that are zoned for ADU (Accessory Dwelling Unit) developments could have a big advantage for forced upgrading.
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 currently tighter. As home prices keep rising, determining ARV (After Repair Value) is like reaching a moving target, which makes it harder to know what you can offer.
I prefer buy and hold properties for long term play. Cash flow numbers are tight in years one and two, but typically look strong in the years to come. One of my favorite features of the BiggerPockets calculator is the number projections over a few years.
Short-term rents were also strong last year, albeit more in the suburbs. The city of Austin has restrictions on short term rentals.
What do most Austin homeowners do for a living?
Austin has a diverse employment landscape: tech companies (both large and startups), large suppliers and distributors, medicine, universities, manufacturing, and more. There is also a strong government presence.
Which industries are moving to the region? Which are moving out?
We don’t see much that leaves the area. When it comes to incoming, the tech sector shows the highest growth. With that we have also seen an increase in production and sales.
How well are you connected to the professionals investors need after the closing?
Pretty well connected. Due to the number of investors our team works with, we have some professional connections with contractors, sub-contractors, service professionals, sellers, property managers, etc. We are always happy to help with introductions for newcomers to the market.