If you’re looking for a smart “Buy and Hold” real estate investment that offers a return on investment and relatively low risk you won’t find in the volatile securities markets, then Austin real estate is a must add to your portfolio.
Know When to Hold-em
Buy and Hold is a long-term (more than five years) wealth building strategy based on the principle of leverage. In other words, when you minimize your initial investment by taking out a mortgage, you create an opportunity to control a valuable asset (the house) with only, say 25% down for a non-owner occupied rental property.
What’s the big deal with leverage? Let’s say you purchase a property for $100,000 with 25% down. If the property goes up 8% ($8,000) in value, you’ve earned 32% return on your $25,000 initial investment!
Think Macro and Act Micro
The Buy and Hold strategy is a mix of interpreting macro-economic variables, like supply and demand, and proactively managing micro elements like purchase price and rent. Properly navigated, the Buy and Hold strategy has the potential to create strong returns on your investment.
Some of macro variables or neighborhood factors include:
- Proximity to transportation corridors and access to employers. In other words, what is the commute like?
- Community amenities such as quality schools, shopping, medical services and entertainment venues
- Single family home neighborhoods with strong demand based on measurable market data
Micro variables are based on the property itself. They include:
- Rent level that creates breakeven or better cash flow at 25% down
- Very good or better condition with minimal property preparation needed to rent at market levels
- 3 or 4 bedroom floorplan with a minimum of 2 bathrooms
- Garage parking
- Livable area within a typical range for the neighborhood
- Opportunity to add differentiation to the home’s perceived value at the end of the holding period with basic upgrades (budgeted for up to 5% of the future sale price, typically in the form of flooring, paint, etc.)
Prime Property: Falcon Pointe/Blackhawk in Pflugerville
In the greater Austin metro area, the opportunities to capitalize on property appreciation are almost everywhere. But one area, in particular, stands out as a great example of macro and micro synergy.
The Falcon Pointe/Blackhawk area in North East Pflugerville combines a very favorable mix of macro and micro elements to minimize risk and deliver a substantial, projected return on a Buy and Hold investment.
Situated just east of the TX 45 and TX 130 intersection in northeast Pflugerville, the Falcon Point/Blackhawk area combines affordable to move-up home prices and strong rental rates. With easy highway access to major employers in and around downtown Austin, as well as a superior mix of highly-rated schools, shopping and recreation, this area has the right mix for long-term price appreciation.
Welcome to the Neighborhood
While the lower end of the range is affordable for investors, prices climb to the mid $400Ks, for larger, more upgraded owner-occupied homes. This range creates “Price Elasticity,” or opportunity to increase the perceived value of a home when it comes time to sell.
A master-planned community situated around the Blackhawk golf course, and bordering Lake Pflugerville to the southeast; this area also includes two community pools, clubhouse, fitness center, and a huge ramada with playscapes for the kids.
Homes in this area date back to 2000 with attractive architecture and good quality construction materials. There is ample raw land in the surrounding area for the ongoing development of a compatible mix residential and commercial uses. One of the projects in the works is future development of the Sunshine Village Town Center and SunTech Office Park, a massive, multi-use development projected to bring more than 9,000 jobs and $1.5 billion total revenue stream to area taxing authorities during the next 30 years.
A Solid Opportunity to Diversify Your Investment Portfolio
Falcon Pointe/Blackhawk is just one of many examples of a promising real estate investment. Need specifics? The area experienced an 8% year over year average sale price increases from 2011 to 2015 per MLS data.
It’s important to acknowledge that past markets do not indicate future performance. But with about 160 people moving to the Austin area each day and the influx of good-paying employment opportunities that bring them here, I expect the market will continue on its current course. Need more proof? Read What America’s #1 investor has to say about investing in real estate.
If you would like to learn more about investing in the Austin real estate market, I would be happy to help you get started. You can reach me directly at (512) 426-2694 or [email protected]