A Complete Guide to Purchasing a Rental Property in Austin Texas

Real Estate Agent with Keller Williams Realty Inc. TREC# 595370

Step-by-Step guide to buying an Investment Home in Austin Texas

This blog is the first part of a multi-part blog about buying an investment home in Austin. It is broken down into several different articles for ease of reading. This series is going to concentrate on investing in one-four family houses with an investment strategy of buy, hold, and rent. This is not a blog about flipping homes.

Why should I purchase an investment home in Austin?

Investment Real Estate vs Stocks

Which types of real estate make the best investments and why?

What is a property manager? Do I need one?

Which areas of Austin offer the best investments?

Learn the lingo of real estate investing

How to properly analyze if an investment home is a good investment

What is a 1031 Exchange, and how can it help me to succeed? 

Why should I purchase an investment home in Austin?

Real estate in Austin is a topic that is on everyone’s mind these days. We currently have one of the hottest and most competitive real estate markets in the United States right now due to several underlying factors. The primary reason why our market is scorching hot right now is because of jobs and quality of life.

It seems like almost every day our local newspaper, The Austin American-Statesman, reports that a new company has decided to either relocate to Austin or expand their operations here. We have a thriving startup culture here in everything from everything from oil shale mapping software companies[i] to a company that makes waffle batter in a can[ii]. Another reason why we attract so many startups here is that we have several business incubators that reside here. These incubators provide flexible office space, access to venture capital, and other services. [iii]

We also have the regional operations or corporate headquarters for numerous high-tech employers that include, but are not limited to: Apple, Dell, Google, PayPal, GM IT, Flextronics, National Instruments, RackSpace Managed Hosting, Qualcomm, Volusion, ClearCube, Intel and AMD. Additionally in the public sector, we have almost 200,000 jobs between the various governmental entities based out of Austin[iv]

Austin Skyline from Lou Neff Point

Why Austin?

When a company decides to relocate or expand their operations, they consider several factors. Some of the factors considered are the educational attainment of the workforce, the cost of living, and the quality of life for their employees.

As far as educational attainment, Austin has one of the highest rates of college-educated people in the United States. Approximately 44% of our citizens hold at least a college degree, almost double the rest of Texas[v]. This shouldn’t be surprising considering that The University of Texas is located here and has approximately 50,000 students. A few miles south of Austin, is Texas State University – San Marcos with approximately 30,000 students.  The Austin chapter of Texas Exes, the official alumni organization of The University of Texas, counts almost 100,000 active alumni in the Austin MSA[vi]

While our cost of living is high compared to the rest of Texas; we are fortunate to have a substantially lower cost of living than most places where there are an abundance of well paid, high-tech jobs. We do not have an income tax in Texas, and it is possible to find affordable homes.

Compared to the San Francisco Bay Area, Boston, and Seattle our cost of living is a fraction of theirs[vii]. A person can live very comfortably on $75,000-$100,000 salary in Austin. Someone at this salary would not have any problem at all becoming a home owner here. However, a person earning that same salary in those other cities would not be able to become home owners. Additionally, the rentals are so expensive over there that most of their salary would be consumed in housing expenses.

The quality of life enjoyed in Austin is one that few other cities can match. Austinites enjoy numerous green belt trails, hiking trails, jogging trails, parks, off-leash dog parts, community swimming pools, natural swimming holes, and rolling hills all within the city limits[viii]. These factors have led Austin to be among the top fittest cities in the United States for several years. Men’s Health Magazine has repeatedly named Austin as being among the top 20 fittest cities in the United States[ix]. We are a city that prides itself on being active and having an abundance of outdoor activities for its citizens. We are also a city that is safe and has a low incident of major crime[x]. Additionally, we have several schools in the metro area that are Texas Education Agency recognized or exemplarily schools[xi].

Barton Creek Greenbelt water falls

Lastly, in Austin we have a culture of supporting local businesses. We root for the little guy here, and it is that philosophy that gave our city the “Keep Austin Weird” motto.

So what does all of this mean to you as a real estate investor?

Simply put, people want to live in Austin! So much, in fact, that we have over 150 people moving here every single day[xii]. There are simply not enough homes available in the $150,000-250,000 price range over here for the people that want to move here! That subsection of the market is hyper-competitive. A well-priced home in good neighborhoods typically will sell quickly!

This creates a unique opportunity for people that want to purchase a home as a rental property. People that move here from either out of state or from other cities in Texas like to rent for a year or so before buying. They do this to try out various neighborhoods. That means that there is never a shortage of well-qualified tenants willing to rent. The areas of town that typically have rental inventory have seen gradual increases in both rent and appreciation. However, the homes in Austin that are good rentals have not, and likely will not ever see rampant price appreciation.

Given the market conditions, an investment buyer will always have an advantage of a traditional buyer. Investment buyers are required to have at least a 25% cash downpayment in order to obtain a mortgage. They can close quickly since they are except from government loan underwriting criteria and mortgage insurance.

In conclusion, Austin offers an attractive market for real estate investing due to employment, availability of tenants, and lack of affordable housing, and quality of life.

About Jordan Gouger

Jordan Gouger is a buyer’s agent with Keller Williams Realty’s South West Austin Market Center. He specializes in working with first time home buyers and buyers of residential investment properties. Among his areas of expertise are South Austin, Gracywoods, Quail Creek, North Central Austin, and Scofield.

Jordan places customer service above anything else and always goes the extra mile to help his clients achieve their real estate goals. He has experience working with out of town buyers and is able to help coordinate everything locally to ease your peace of mind. For all of your buying needs, please contact him at 512-693-9297 or jordan.gouger@kw.com

Photo Credits

Austin Skyline – Wikimedia Commons. Original photo by user Hequals2henry. Link to original source: http://commons.wikimedia.org/wiki/File:AustinSkylineLouNeffPoint-2010-03-29-b.JPG

Barton Creek Greenbelt – Wikimedia Commons original photo by user JTduffy. Link to original source: http://commons.wikimedia.org/wiki/File:BartonCreekGreenbelt.jpg



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