I have been debating for quite sometime about investing in Austin. While there are several fators to consider about investments, my guess is that investing in Austin would be several times better than investing here in the Bay Area.
I am pretty good with numbers, and though not very easy - I still think that I can find properties worth $200K with positive cash flow in Austin vs. in Cali.
Many of you are very experienced, and obviously the cash flow will depend on the rent, the location of the property and down payment.
If I give this example, can you please provide some insights: Cost $150K, down payment $60K, rent around $1000/1100 per month, and after taxes and all the expenses the positive cash flow is around $100/month. What do you think?
I think that if you are not going to invest where you live you need to invest in the best place to make money. I don’t know why you picked Austin but Austin is not that place. If you have $60k for down payment then you could buy a house in Houston, you can buy a 1500 sqft 3 bed, 2 bath 2 car garage for $53,000. Put $5k into rehab and be in the house for $60k. Put $10k down and rent it for $1000/month. Cash flow (versus PITI) is about $450-$500. Take the remaining $50k in your down payment fund and buy 5 more just like it. You end up with 6 houses with $300-$600/month cash flow each. You now have an enterprise worth $1million making $2,400/month to $3,600 instead of 1 house making $100/month.
Blue Moon is absolutely correct. Texas is a great market for rentals but Austin is not the place to start. Their market is still hummiong along and great deals are few and far between and when one comes along it is snapped up before it even hits the market. Houston is a great place to start especially in the areas outside the beltway.
Thank you to both of you. Thanks for taking the time to share your views. The reason I picked Austin is because my in-laws are there. That makes it a reason to visit more frequently.
As a follow up- you don’t think that even an area like close to UT - it would work to find a place in 120 to 150k range?
Also, if I do follow your suggestion and go to San Antonio or Houston - how do I go about it? Should I do on line searches, find brokers and then go visit there?
There are other sources of information that you can get from. The internet is a good way to start. There are websites that offers services and has a wide range of nationwide properties that are for sale, rental properties, foreclosed properties.
Houston just happens to be a rare city where the MLS service (the same one that Realtors use) has a public face. http://www.har.com/ You can see all the house listed without being impeded by a Realtor. You can search by price and squrefootage. Find houses that are for sale at a lot less than the average squarefootage and then search that same neighborhood for rentals and see what a house would cost to buy, figure out the note PITI, and then search for rentals in the same neighborhood and see what the spread would be for that house if used for a rental.
I don’t know about Austin but I do no about California especially Santa Cruz Ca. Property value in California always rises. I think if you invest you’ll never regret. It’s definite and huge if you talk about return.
Believe them when they say Austin is not a place for deals. I live here and am starting to see that I’m going to have to look elsewhere for starting in real estate. As was said, all deals I can find online are already snapped up when I inquire on them.
Thanks again, everyone. Bluemoon - I very much appreciate the web site address that you provded. This web site seems to have an extensive list of properties.
As a follow up to the original question, I want to see if anyone can share thoughts on two specific points:
I want to form a LLC in Cali, before I invest in Houston. I know that many folks have raised somewhat similar points in other forums and the general opinion is that wth LLC it is harder to get financing. Beyond that, can anyone provide any additional insights from their personal experiences: a. Do you invest in Houston as an individual, or as a LLC? b. In your experience - is there any significant tax advantage if you invest via LLC?
Broadly speaking, do you recommend any specific broker or real estate agent? I am also lookng for a local attorney fmiliar with real estate.
Lastly, I am new to real estae, but I work in finance. So, I can share with everyone this view:
The idea that real estate in CAwill always go up is completely unrealistic. While I agree that places like New Yok and California have probably one of the best chances of appreciaion. You have to caveat it out… there are years when real estate has gone down, and even an expensive real estate market like Manhatta’s is right now in downward trend. You can google it up and see the articles in Wal Street Journal.
If you form an LLC in CA, you’ll probably have to register it as a foreign entity in TX in order to do business there. Someone in TX can probably clarify that one.
Some banks will not lend to an LLC…period. So if you consider that to be more difficult to get financing, your answer is yes it would be more difficult with an LLC. A bank (who will lend to an LLC) is going to want you to personally guarantee the loan anyway, so be prepared for that. You’ll need to have your credit checked and provide last 3 yrs of tax returns, etc. It is true that LLCs can get financing on their own, but not early on. LLCs are tax neutral. Our LLC is taxed as a partnership and it flows over to our personal return. REI tax advantages come from depreciation and writing off legitimate business expenses. Track mileage, repair/rehab costs, utilities, etc.
Try to find a Realtor who knows something about investing. Many invest on their own. That’s not to say they successfully invest. If someone calculates monthly cash flow as “rent minus mortgage payment,” RUN!!!
Thanks for the laugh. Now really, what state have you been living in for the past several years? And instead of no about California, you should know about California, must have gone to school in Santa Cruz too, result of to many hours at the beach and not enough in the classroom. :biggrin