We have a long history of helping investors successfully purchase rental properties in Austin! Austin’s market is historically very safe, consistent, & resilient. The greater Austin metropolitan area has appreciated at roughly 5% annually for the past 30 years, and it has appreciated at that same rate if you look at any 10 year period during that time. (The areas we recommend have appreciated at 9.3% in the past 10 years.)
There are certainly downsides to investing in rental properties. Real estate is very illiquid and it is expensive to buy & sell. Anyone who thinks they may need their investment back in the next 3-5 years probably should look at more traditional investments. Likewise, rental properties can have surprise expenses that are expensive, so anyone with a low risk tolerance should look elsewhere. A new roof will cost $10,000 to $15,000 and HVAC systems are roughly $10,000 per system. There are many surprise expenses in the $1000-$2000 range that do occur. Bear in mind that the question is never “Will this happen?”, but rather “When will this happen?” No roof or HVAC lasts forever and tree limbs eventually seem to fall on every roof (or something else surprising happens.)
The primary requirement is cash. It’s impossible to cash flow any property in Austin with less than 25% down and we generally recommend putting 35% to 50% down. We also recommend that you keep $20k in reserves for surprises. In real numbers, this means $100k to $200k per rental property that you want to purchase.
The S&P historically returns 10% annually and Austin historically appreciates at 5%, so this is a great question. (The areas we recommend have appreciated at 9.3%.) The reason that rental properties make sense is due to leverage. Here are some simple examples:
Austin's broader market has appreciated at roughly 5% annually over the past 30 years and it's consistently around 5% if you look at any 10 year period. You can generally expect 5% annual appreciation over the long haul. If, however, you pick a great area, you can buy a property that can appreciate at up to 10% annually over a 10 year period. That's not a great expectation to have, but it's certainly a great goal. Here are return examples with a 6% appreciation rate:
Our happy investors have a high risk tolerance. In simple terms, this means that they’re laid back and they don’t think about their rentals too much. They pay for property management, they don’t stress small repairs, and they check their properties’ values every year or so. Many of these investors have made very high returns, but most importantly, they sleep well.
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