INVEST IN RESIDENTIAL INCOME PROPERTY
INVEST IN RESIDENTIAL INCOME PROPERTY
U.S. STATES TO INVEST IN
Right now, we're recommending buying in Austin, Texas. So far, we've been pretty accurate with targeting areas that are ready to take off. We purchased in Orange County, CA, back in the 90's. We bought Las Vegas, NV, three years ago. We bought in Phoenix, AZ, two years ago. We bought Orlando, FL, a year ago. So far, all of those markets zipped up in value AFTER we purchased. Scroll down to read about other states...
TEXAS - Mark and I spent a week in Austin in Spring, 2005. Then, Mark went back for 8 more days to buy some lakefront property on Lake Travis. We've been back to Texas many times times since then, scouting out terrific investments (Click here to see some mediocre photos of our trips -- sorry -- the photos aren't very good): http://www.selectrancho.com/austin.htm. In the past year, we've built a batch of new homes from the builder, plus, we're currently building a 2300 sq.ft. David Weekley home for $192k in Round Rock (includes lot premium and all upgrades) that will rent out for $1500/month, and rehabilitating a couple of fixer-uppers out in Lago Vista, on Lake Travis.
Austin isn't what I expected. We've been to Dallas
(a huge city, flat and dry, looks like Texas oughta, and the new home
inventory has been overbuilt), Houston and Corpus
Christi (lovely - but hot and sticky - downtown Houston is a bit seedy). Austin had beautiful rolling
hills covered in green scrubby oak trees (looks a lot like Temecula - only
greener), the Colorado River has been dammed
creating Lake Travis (with wonderful vacation opportunities), a fantastic
downtown with the 6th Street bars and music venues, and a small town feel.
The climate is mild, and it doesn't get outrageously hot in the summer.
There are new home builders all over the place.
Prices are low. Austin has only recently started to go up in value.
We predict slow and steady growth on our
houses in Austin. If there IS a real estate market crash (remember,
real estate is cyclical - it goes up - it goes down - but mostly it goes
UP), Austin is not currently in a real estate bubble, so there's no bubble
to pop.
LOTS of people are moving to Austin to enjoy the less
expensive lifestyle and the slower pace of life. However, when people
move en masse from high to low cost housing (referred to as 'the salmon run'),
they actually CREATE appreciation by pushing up the demand for homes.
THE TIME TO BUY IN AUSTIN IS NOW, before property appreciates
(property has gone up perhaps 15-20% since we initially invested in Spring
of '05, but there are still excellent values!). Property taxes are very high -- around 3%.
You must factor this into your monthly costs of owning income property
(use the Excel spreadsheet on the home page to figure your costs).
Taxes are high because Texas has no state income tax, which makes Texas
an attractive place to own a house (think about it -- when you're retired, that could be your state of residence and you
wouldn't have to pay state taxes.).
We became very well acquainted with the Greater Austin area
during our weeks there. We narrowed the area for our new home purchases
down to Round Rock and Hutto (but don't overlook Cedar Park or Pflugerville). You can buy south of the city or
east of the city -- we just preferred the north and the north east for
investments.
Although there are some gorgeous communities up in the hill country by Lake
Travis (rolling hills, spectacular views), the prices are higher and we feel
it would be easier to obtain and keep tenants closer to downtown and the big
employers like Dell and IBM (a bit of trivia: we watched a City
Council meeting on TV, and Dell Computers provides something like 50% of tax
revenues for the entire city of Round Rock).
Steiner Ranch is a lovely master planned community with pools and golf
courses -- and would be a nice place to live, but prices are well over $100
per sq.ft.
Round Rock homes to the West of I35 are selling in the $80-$100 per sq.ft.
range, and it's a very nice community with excellent schools (14:1
student/teacher ratio). We purchased THREE houses in Round Rock, our
Office Manager bought one, and our neighbors just flew to Austin and bought
two. Avery Ranch in Round Rock is very nice, but on the
expensive end.
Cedar Park is another nice area - very comparable to Round Rock in both
housing prices and schools. Our Office Manager bought a 5000+ sq.ft.
KB Home in Cedar Park, and our friends bought a house there as well.
Heck, some other friends liked Cedar Park so much that they're selling their
Orange County house and moving to Texas. There's a new road being constructed that
will make access to Cedar Park a breeze in a couple of years. KB Homes
in Silverado Ranch has extremely low priced homes in a spectacular
community, but KB Homes has an on-again, off-again relationship with
investors. You might need to buy a "second home" instead of being an
"investment shopper" to buy in this community -- Go to:
http://www.kbhome.com/Community~CommID~00868017.aspx for more
information.
Hutto, Georgetown, Taylor and Pflugerville have the cheapest houses, priced in the
$60-$100 per sq.ft. range. I think we'll see more investors buying in Hutto,
because the houses are cheap. BUT, the builders are selling homes out
in the middle of cow pasture. There's a train track running right
through town. It will be some time before the community is built out
(a new tollroad is being put in about a mile east of Hutto),
but it will be lovely someday. We bought one house in Hutto and we'll
buy more when we can come up with more money. There are photos
of Hutto on
www.selectrancho.com/austin.htm. Even though I bought one
house there, I wouldn't recommend it. It'll probably be five years
before Hutto becomes a nice suburb, and in the meantime, it's Podunkville.
(Note: We paid $130,000 for a 2300 sq.ft. house in Spring, 2005, in
Hutto - and now that same floor plan is being offered at $157,900 - that's
up 20% in less than a year.)
If you're interested in more information (builder price
lists, spec/inventory homes/sample floor plans), send me an e-mail at
SelectHomes@cox.net. I
have more information I can forward to you.
REAL ESTATE BROKERS
IN AUSTIN
If you're ready to invest in Texas, please contact our
Austin Brokers, Mark and Shannon Wisner, at e-mail
Realtors@Texas.net, or call her at (512) 238-7355.
Not only will they guide you to the BEST investment available, they'll do
the work (walk through's, paperwork, meeting with the builder) for you.
You should fly to
Austin, talk with Shannon or Mark and get an orientation about
where to shop (and then off you go to look at new homes!), or you can call
her, tell her exactly what you want, and she'll choose the best house for you to
buy. Their web-site is
www.HomesInAustin.com. If you prefer
hand-holding (having Mark or Shannon drive you around and show you the best
investments), they're happy to do that as well.
In Austin, try to stay off the freeways during rush hour. They're
currently building a huge infrastructure of tollroads and overpasses, and
the roads are a MESS. Downtown Austin (which is a small city) is as
bad as Los Angeles during rush hour. However - that'll change in 2-3
years. If you see a Bone Daddy restaurant, go in and order a sliced
beef brisket sandwich and a $2, 16 oz. Shiner Bock beer during Happy Hour. YUM! And get down
to 6th Street in downtown Austin some evening and walk around and listen to
music.
PHOENIX, ARIZONA
- Been there. Done that. Can't currently recommend it as an
investment. If you're planning to retire there, then sure! Buy your
retirement house. But if you're looking for the best place to invest your
money, let me guide you back to Texas.
LAS VEGAS / HENDERSON,
NEVADA - We haven't recommended Las Vegas for several
years. The Vegas market went CRAZY (prices quadrupled) about 4-5 years
ago. Those high-rise towers along The Strip make us nervous - even though we know
folks who have made some big bucks buying and flipping those condos in the early
phases of development.
FLORIDA - Florida
will come back. But don't buy there right now.
UTAH - Haven't been there yet, but we've read that
a lot of retirees will be moving to Utah.
GEORGIA - Atlanta has been overbuilt with new homes, so there are good
deals to be had, but that makes it more difficult to find a renter. Values
won't shoot up anytime soon, due to the overbuilding.
NORTH CAROLINA - very attractive - retirees are flocking to the sun belt.
Might be a good idea to buy in an up and coming retirement community.
NEW MEXICO - haven't heard/read
anything good OR bad, but for some weird reason, I just like the idea of owning
property in Albuquerque.
CALIFORNIA - prices are quite high in most of
California. There may be some good deals in Fresno/Clovis (do an internet
search on "new home builder fresno california" and you'll see what I mean).
The new home builder prices are excellent, but I haven't had the opportunity to
do any research on prospective tenants, jobs, rental prices, etc. However,
if you're going to shop new homes in that area, I would love to hear your
comments. Also, take some of my business cards with you - I will rebate
all but the first 1% of commissions paid by the home builder to you (new home
builders generally pay a 3% commission to the real estate broker who represents
you). Of course, I'm happy to work a deal like that with you on ANY
property in California! Drop me an e-mail and I'll pop some business cards
in the mail.
PLEASE! IF YOU HAVE ANY THOUGHTS OR TIDBITS ABOUT INVESTING IN PARTICULAR AREAS OR COMMUNITIES, PLEASE SHARE WHAT YOU KNOW. SEND ME AN E-MAIL AT: SELECTHOMES@COX.NET
Where to invest
- Right now, we HIGHLY recommend Austin, Texas
(not Dallas, not Houston...)
Buying a new home from the builder
Tenants
Property Management
Never pay capital gains tax - 1031 Exchanges
Depreciation is your friend
Leveraging your money (it's a beautiful
thing!)
Tenants in common -
TIC Investments
Excel Spreadsheet
Investment Property Analysis worksheet
(note: you must have Excel on your computer to open this)
When To Sell
Miscellaneous - And
recent remarks by Suze Orman