For the better part of a decade, the Austin real estate market has been hotter than asphalt baking in the Texas summer sun. People have been moving to our city in droves, infrastructure has been built out, businesses have hired hundreds of thousands of locals, and life has been good. But COVID-19 has poked some holes in the economy – locally and nationally – and has forced investors to ask the question: Is it still a good time to invest in Austin rental properties?
It’s Always a Good Time If…
Before taking a look at some of the current factors that are influencing the Austin real estate market today, let’s be clear about something: It’s always a good time to invest in real estate if you’re able to find a deal that fits the following criteria:
- It’s affordable. The question of affordability is a personal one. It comes down to whether or not you can make it work in your budget. For example, you might find a listing for a $800k property that would produce strong cash flow, but if you can only afford to take on a $250k property, it’s not a good time to invest in that property.
- It’s in a good rental market. The good news is that Austin, as a whole, will continue to be a good rental market. So you can give this one a big fat check mark – no need to worry for the near future.
- It will produce positive cash flow. You want to be sure that any real estate investment will generate positive cash flow so that you’re making money on your money.
- It will appreciate over time. While cash flow is traditionally the goal, it’s also nice to know your real estate is appreciating over time. Study the local trends to get a feel for the direction of the market. If it’s positive, you’re good to go.
In today’s COVID-19 world we’re living in, you’ll also want to make sure you have a strong job security; possess the cash for buying an investment property and/or meet mortgage loan requirements for approval; and have cash reserves you can tap in case you need to throw additional money at the property after purchase (repairs, vacancies, etc.).
But What About COVID-19 and Economic Volatility?
Prior to the pandemic, Austin’s housing market was among the strongest in the nation. But no market has been immune to the COVID-19 crisis – including ours. When it hit, rent prices were increasing alongside real estate values. But more recently, the price of a one-bedroom unit in Austin has fallen 0.31 percent to a median of $1,291. Likewise, two-bedroom units dipped 0.7 percent to a median price of $1,563.
Any time you have a dip in rent prices, there’s reason to be concerned. And the fact that these losses have come during the typically strong summer rental season is definitely reason to do a double-take. But should investors who are in a position to buy properties wait this one out? Or is it still a good time to deepen your investment portfolio?
If you talk to most experts, they’ll agree that now is still a great time to buy cash flowing investment real estate (as long as you’re in a position to do so). And here are a few specific reasons why:
- Historically Low Rates
Banks are basically giving away money – at least if you compare the current rates to historical rates. So if you have the cash to cover the down payment and carry the property, you’re getting a great deal on the borrowed portion. It really is unprecedented.
- Less Competition
Let’s be honest: The Austin real estate market was getting a little too crowded. By the end of 2019, everyone and their mother felt like they could touch something and turn it to gold. But this pandemic has proven real estate investing isn’t for everyone. If you know what you’re doing, you’ll benefit from slightly less competition than you would have faced six months ago.
- Bigger Pool of Renters (Potentially)
If you believe a recession is coming, the rental market is actually where you want to be. Whereas home sales decline during periods of economic contraction, the pool of renters increases. This leads to heightened demand for competitive rental properties.
- Austin is (Fairly) Future Proof
Trying to flip a house in this market might not be a great idea (unless you really know what you’re doing), but if you’re playing the long game, you can rest assured that now is still a good time to buy.
“Those looking to buy a home and hold onto it in the long term, particularly as a rental property, won’t face as much risk,” MarketWatch finance reporter Jacob Passy writes. “Indeed, 64% of investors who primarily buy investment properties as rentals said they planned to increase or keep their acquisitions, despite the pandemic, according to a recent survey from Auction.com.”
It’s also worth recognizing the state of Austin right now. With so many businesses having moved here – including businesses that aren’t drastically impacted by COVID-19 – the city is fairly future proof. If there’s one city in America that’s built to survive something like this, it’s Austin.
- Better Than the Stock Market
Compare the real estate market to the stock market during this strange pandemic season, and it’s easy to see that the former is much more stable than the latter. The stock market took a massive dip, followed by a sharp “V-like” upswing. There have been massive sell-offs, followed by huge buy-backs, and very little consistency. Talk about nerve wracking and unpredictable!
With real estate, COVID-19 has produced a noticeable dampening effect, but there’s been very little up and down movement. Things have held relatively steady, albeit slightly chillier in terms of values and cash flow. If you’d rather ride out this wave, Austin real estate is a much calmer vessel than Wall Street.
Rest Easy With Green Residential
At Green Residential, we’ve been in the rental property management game for years. And when you choose to trust us with your real estate investments, you can rest assured that we’re going to do everything in our power to maximize your cash flow on an ongoing basis – pandemic or otherwise. For more information on our comprehensive property management services, please don’t hesitate to contact us today!