How to Buy Investment Property in Austin TX in 2024

How to Buy Investment Property in Austin TX in 2024

January 18, 2024

Interested in an investment property in Austin Texas?

You’re not the only one.

Still ranked as the number 1 city to live in Texas by US News and World Report, Austin also ranks 13th on the list of fastest-growing places in the US according to a MoneyGeek report, and 6th for number of jobseekers. 

Now the 10th largest city in the country in terms of population, Austin continues to be among the cities primed for real estate investment in 2024

In the Urban Land Institute’s 2024 Emerging Trends report for the US and Canada, Austin remains a highly sought after real estate market, ranking No. 1 for homebuilding prospects and No. 5 in the list of “Markets to Watch.” 

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 2024.
  • 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.

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.

WalletHub ranks Austin as one of the fastest-growing cities in the United States. And as tech giants Apple, Samsung, and Tesla move into the city, home values climb. It’s also a promising time to own rental property in Austin. The influx of highly paid tech employees competing for housing will push rental prices up. If you stumble on a good deal, the potential rental income could make Austin the best place to buy a rental property in Texas.

Out of Texas’ big four cities, Austin has seen the most explosive growth in home prices, in recent years. This 2024, CBA Realtors predict a gradual increase in prices, striking a balance that is beneficial for both buyers and sellers. While the rate of appreciation may be more measured compared to the past, this adjustment ensures a sustainable and inclusive real estate market that embraces affordability and value.

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?

In 2023, the median price for a home in the Austin-Round Rock MSA decreased 10.2% to $450,000, according to the Austin Board of REALTORS® December 2023 and Year-End Central Texas Housing Market Report. 

When compared to the steep 24.2% decline in pending sales in 2022, 2023 saw a slight 3.0% decline to 30,353 sales emphasizing that the Central Texas housing market continues to find its footing despite macroeconomic factors impacting the broader housing market and economy.

“In 2023 the Austin-Round Rock MSA housing market continued its move towards a more sustainable pace,” Kent Redding, 2024 ABoR president, said. “Housing inventory reached the highest level it’s been in more than eight years, and while there was a drop in closed sales and median close price, these were both symptomatic of higher mortgage rates. In the current housing market, prospective homebuyers and sellers should engage the services of an expert REALTOR® who can help navigate the real estate transaction process. Buyers can utilize this favorable market condition to get pre-qualified while sellers can use the time afforded by the balanced market to enhance their property before listing it for sale.” 

In 2023, sales dollar volume in the MSA dropped 17.0% to yield $17,498,390,950 on the Austin-area economy. At the same time, new listings dipped 7.0% ending the year at 42,623 listings.

In the month of December, closed listings across the MSA declined 8.9% to 2,295 year-over-year as sales dollar volume decreased 8.5% to $1,270,818,458. The median sales price dropped 1.4% to $443,753. New listings increased 8.4% to 1,956 listings, active listings ticked up 4.6% to 7,717 listings, and pending sales rose 13.8% in December to 2,082 sales. Last month, homes spent an average of 84 days on the market, 9 more compared to December 2022.

Clare Losey, Ph.D., housing economist for ABoR, identified higher mortgage rates as being the biggest constraint for potential homebuyers in 2023 and underscores the lack of housing accessibility, specifically for first-time homebuyers. “The single biggest factor constraining the Central Texas housing market in 2023 was the gradual rise in mortgage rates, which peaked in late October. This caused sellers, and buyers essentially, to continually readjust to the current rate environment. While we have seen some leveling off in home prices, the Central Texas region still lacks a sufficient inventory of affordable homes for sale, especially those homes priced below $300,000, which is keeping many would-be first-time homebuyers on the sidelines.” 

When looking to 2024, Losey foresees annual trends to be relatively consistent with this year and mentions that current data is favorable compared to pre-pandemic numbers. “Home prices and sales will likely remain essentially flat, to the tune of a 5.0% increase or decrease year over year in 2024. While the market continues to find its footing, it’s noteworthy that total sales dollar volume is up 30.5%, there are 21.9% more active listings and 38.4% more months of inventory today than there were five years ago. Housing demand is still strong and the uptick in the inventory of homes for sale in 2023 has provided more options for repeat buyers.”

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

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. 

Taylor

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.  

By the time this project is finished this 2024, Taylor will be completely transformed. 

Cedar Park

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 Texas real estate market is growing so fast that some predict Austin and San Antonio will become a single “mega-metro” within the next 50 years. 

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 info@longleaflending.com.