Interested in an investment property in an Austin Texas?
You’re not the only one.
According to Kenan Institute of Private Enterprise, a non-artisan business policy think tank, in their October 2022 report, Austin ranks 2nd in the top 10 fastest growing cities and metro areas in the US.
Austin — which has become a magnet for giant tech companies — has become a home to big companies like Tesla, Google, Amazon, and Oracle which have all recently expanded their operations to Austin. This brought a mass exodus from various metros such as the Bay Area.
This surge in real estate demand is a dream come true for investors.
In this Austin investment property guide, we’ll cover:
Austin real estate market trends going into 2023.
The most promising neighborhoods for investing in Austin.
How to find and finance your first investment property.
Let’s dive in.
Why invest in Austin real estate?
Austin’s explosive growth is fueled in part by the expansion of tech companies from California to Texas.
With fewer business regulations, lower taxes, and an affordable cost of living, Austin has become the new go-to hub for tech companies.
Nicknamed “Silicon Hills” after California’s Silicon Valley, Austin houses offices for Amazon, Facebook, Google, Paypal, and many other tech giants.
And in 2022, the giants continue flooding in.
Tesla relocated its headquarters to Austin while Apple employees began occupying their new Austin campus. Samsung, after announcing its plans to build a $17 billion semiconductor factory, also recently released its proposal to build 11 new chipmaking facilities in the Austin area over the next two decades. This move could lead to almost $200B in investments and 10,000 jobs.
With the entry of these large companies, tens of thousands of new jobs are being created, bringing in new residents who need a place to live.
Since 1880, Austin’s population has roughly doubled every 20 years. If the trend continues — and by the looks of things, it certainly could — the metro area will balloon to 4.5 million residents by 2040.
So whether you’re investing in Austin real estate for the short game or you’re in it for the long haul, the future is bright.
Austin real estate market trends
But how does all this Austin real estate buzz play out on paper?
Well, according to the Austin Boards of Realtors, the median sales price for a single-family home was $474,000 in October 2022, continuing their recent trend of more stable and sustainable appreciation. The median price increased by only 4.9% to $474,990—setting a median price record for the month of October. Homes spent an average of 47 days on market, up 26 days from October 2021.
Despite surging home values, Austin real estate still costs less than half of some other major metro areas, like San Francisco, where many new residents are moving from. Homes in Austin are 23% cheaper than the national average.
That means there’s plenty of room for long-term growth.
Rents in Austin also continue to increase. Since 1980, rents in the U.S. have gone up by an average of 8.9% per year. Compare that to Austin rental prices, which shot up by 25.6% between September 2020 and 2021, according to Realtor.com. As of October 2022, Zumper pegs the average rent for a 1-bedroom apartment in Austin, TX at $1,650, a 10% increase compared to the previous year.
But are we just in a bubble that’s about to burst?
While one study ranks Austin real estate as over-valued, the fact remains that there is still a housing shortage in the city.
According to Austin Boards of Realtors’ October 2022 report, pending listings dropped by 40.0% to 2,141 listings and available inventory increased by 2.2 months to 3.2 months of inventory, half the amount of housing inventory needed for a market to be considered balanced.
If companies, employees, and digital nomads continue flocking to Austin at the current rate, the competition to find housing can continue driving up prices. And while homes may feel overvalued by Texan standards, they could seem like a bargain for some ex-Silicon Valley tech workers.
Hot neighborhoods for Austin investment properties
North Austin is home to the city’s “second downtown,” and it’s in the midst of major growth.
It is home to IBM’s huge Broadmoor campus. The zone debuted Austin’s first major league sports stadium, the Q2 Stadium, in 2021. And now, the Uptown ATX project is underway — a $3 billion, 66-acre expansion to the second downtown area.
All of these developments are bound to make property values soar.
Samsung recently announced their plans to build a $17 billion semiconductor facility in Taylor, which would be the largest Samsung investment in the U.S. to date.
This new project is expected to create over 2,000 specialized tech jobs and thousands more non-tech jobs. Samsung also has pledged to help finance a Samsung Skills Center for the local school district.
Home values are already starting to catch fire, up 31.3% between November 2020 and 2021. By the time this project is finished, Taylor will be completely transformed.
Cedar Park is a suburb less than a half-hour northwest of downtown Austin.
More importantly, it’s a quick 20-minute drive to Apple’s new $1 billion campus. This year, the campus is expected to house 5,000 employees, with the potential to triple in size.
Cedar Park’s population has grown by 57% between 2010 and 2020, and that’s before a tech titan moved in next door.
Renters love the area because it’s outside the hustle and bustle of downtown, but still close to the city’s amenities.
The Austin-San Antonio Corridor
The strip of Interstate 35 connecting the two cities passes through San Marcos’ Hays County, which was the #1 fastest growing county in the country from 2010 to 2020 (of counties with over 100,000 residents).
If these rapid developments continue, people may soon start calling the region “Austin-San Antonio,” similar to the mega-metro of Dallas-Fort Worth.
As an investor, properties situated along the corridor are a strong bet.
How to buy an investment property in Austin, Texas
The process for investing in Austin real estate can be broken into five steps:
1. Choose a type of investment property
There are many ways to build wealth with real estate. Your first step is to decide which strategy is right for you.
Do you want a single- or multi-family home? Are you up for a fix-and-flip or a BRRRR? Or do you prefer a turnkey rental property with tenants locked in? What about a new construction project?
There are pros and cons to each real estate strategy, and before diving in headfirst, you need to determine which plan makes the most sense for you.
2. Plan your financing
Decide how you will finance your investment property before you start property hunting.
The best investment properties in Austin don’t last long on the market — especially in such an extreme housing shortage. You need a game plan in place so that when you find a winning property, you can snatch it up.
There are three main ways to finance an investment property.
- Conventional loan. Banks and conventional lenders generally offer the lowest interest rates, but they also have strict requirements, force you to jump through hoops, and can take months to close.
- Hard money loan. Hard money loans come with slightly higher rates, but they’re designed with investors in mind. They’re quick to close and have less stringent personal financial history requirements. Loan approval is largely based on the investment opportunity of the property itself.
- Joint venture. You can finance the property by pooling together funds from various investors, but this is more of an advanced move. To recruit investors, you’ll want a strong track record of successful projects.
Whichever route you choose, build relationships ahead of time. If you go with conventional lending, get a pre-approval. And if you’re considering a hard money loan, talk to some private lenders ahead of time. This streamlines the process, and they can help you assess the viability of your investment ideas.
3. Go property hunting
Start by choosing a location, then network with wholesalers and agents who specialize in that area and might be able to help you find find off-market opportunities that aren’t listed on the MLS.
When evaluating properties, make sure to consider:
- Job and population growth
- Future development projects
- Housing and rental price trends in the area
- Percentage of renter- vs. owner-occupied homes
- Vacancy rates
Don’t forget to factor in all your expenses and calculate estimated returns.
4. Secure financing
If using a bank or traditional lender, this involves piles of paperwork, an appraisal, inspections, and a lengthy underwriting process — typically 30 to 45 days.
With a hard money lender, the timeline depends on the type of loan you choose. At Longleaf, rental loans process in as little as two weeks, and short-term residential loans (AKA bridge loans) take as little as 48 hours.
5. Refinance (if necessary)
If you take out a bridge loan for fast financing, you eventually need to refinance. Bridge loans are meant to “bridge” you over from the time of purchase to the time of refinancing — usually 6 to 24 months.
You can refinance with a conventional loan if you qualify. If not, a long-term rental loan comes with fewer restrictions.
At Longleaf, we can save you fees by bundling your bridge loan together with your refinance.
Need financing for an investment property in Austin?
Longleaf Lending is a Texas-based private lender and offers flexible loan programs designed for property investors who need to close as fast as possible. If you have any questions about investment property financing, give us a shout at 979-200-2823 or firstname.lastname@example.org.