Austin Investors and Investment Properties

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Are you wondering what you should expect from an investment property in Greater Austin?  It used be, just a few short years ago, that investors in Austin Real Estate had to choose between short term cash flow and properties that "promised" long term appreciation. Seldom did one find a house that had both. Well, I am here to tell you that with rent prices as high as they are today and interest rates as low as they are, it is now common place for an investor to be able to get short term free cash flow and long term expectations of appreciation and profit--both. I do.

If you look at some of the basic numbers, they might look something like this model (below). Keep in mind, this is simply a model and should not be considered a guarantee for your investments. While these are very close to recent real world transactions of mine, every deal, every location, every client and deal is unique. You do not have to look for "instant equity" to make a great investment in Real Estate. If you want to start investing in Austin area Real Estate--give me a call so we can talk about your requirements. 

Example of potential investment property numbers in 2012:

• Home purchase price: $165,000
• 25% Down payment*: $41,250
• Gross estimated closing costs**: $5000-7,000
• Estimated annual maintenance***: $500-1000
• Estimated monthly PI payments based on a 30 year note: $573.00
• Estimated monthly TI payments****: $400
• Monthly HOA****: $30
• Total estimated monthly expenses: $1050-1100
• Estimated monthly rental rate: $1300-1450 (and increasing)
• Anticipated sales price in 8-10 years: $220-230k

If you are more interested in long term appreciation or retirement income, moving to a shorter 10 or 15 year loan is a good strategy. Currently, a 15 year loan should create a near even balance between estimated rental income and property expenses. So, if your exit strategy is to sell in 10+ years or just hang on to the property for a longer period of time--you could be very close to owning the home in just 10 years, assuming that costs and rental income continue to increase at comparable rates.

15 year estimated investment costs: ~$65-75,000
15 year estimated sales value: $250-275k
First 10 years of rental income: ~$150,000-180,000
Anticipated annual rental income in 15 years: ~$25,000 - $30,000 a year

These numbers are gross estimated. Every transaction, property and timing is unique. Your investment purchases will be different--higher or lower than these estimates. They will be different, but these numbers should give you some idea of what you can do with $40-50k of investments in Austin Real Estate with very little additional anticipated annual contributions.

If you are considering investing in Austin area real estate--give me a call. Let's Talk. 
 

*A larger down payment will normally give you a better interest rate. Remember to choose your lender wisely--not all lenders are the same as the next and a good interest rate is not all you should be looking for in a lender--unless you enjoy frustration and wasting time. 
 **There are many variables in a specific closing that are nearly impossible to estimate, so your actual closing costs may be very different from this example. You closing costs may include title insurance, survey, legal fees, appraisal fee, up to 12 months of prorated taxes, 12-15 months of insurance, up to 12 months of HOA dues and transfer fees and many other charges. Note: Closing costs may be rolled into the mortgage loan in some cases.
***I like to buy "newer" homes that have less annual maintenance. Older homes with good structural condition and newer systems can also be a good investment --depending upon the location. Not all areas of Austin have newer homes and there are advantages and disadvantages to all areas and communities. 
****Annual taxes can fluctuate up or down annually. Because Texas is a non-disclosure state, taxes are often contested to bring them in line with sold data in the area. To a much lesser degree, HOA dues can go up occasionally as well--though most Austin area HOA fees tend to be fairly consistent for long periods of time.

Tim Thornton
Austin Area Realtor