The Best Ways to Invest in Austin Real Estate, Part I
By Graham Summers
September 19, 2007
I just had the best BBQ of my life.
Sam's BBQ, located in east Austin, Texas, is a rundown shack. When I say rundown, I mean rundown: The door was held in place by duct tape and a bungee cord, and the upholstery was torn and cracked.
Yet, inside this humble setting, you could run into politicians, sports stars, models, even famous musicians. The walls of Sam's are covered with snapshots of former customers. Among the mix, I saw Muhammad Ali, Hillary Clinton, and blues legend Stevie Ray Vaughan.
Sam's is located on the corner of 12th and Ciccone: one of Austin's worst corners... but also one of the hottest real estate markets in the city. And Austin in general is hot right now. It was voted...
- Second in CNN Money's 2006 10 Best Big Cities
- Eighth in Sperling's 2005 Healthiest Cities in the U.S.
- First in Expansion Magazine's Best Metros for Future Business Locations
- Fifth in Kiplinger's 2006 Smart Places to Live (Nashville was No. 1)
With no state income taxes, a high quality of life, great restaurants, more live music venues per capita than any other U.S. city, and strong job growth, Austin is undergoing a real estate boom.
According to Bishop and Gardner Investment Group, residential sales prices in Austin increase at an average of 12% per year. When you add in commercial sales, it's 21%. According to one realtor I met, 4,000 people relocate to Austin each month.
Sam's is located on the east side of downtown. The area is undergoing a massive shift in ownership. Older, dingier residences are being torn down and new homes put up. You'll see several rundown properties in the $80,000-$130,000 range bordering a brand-new $350,000-$400,000 home. But there are still plenty of small pockets of value throughout the neighborhood.
The best way to invest here is to buy one of those older properties, tear it down, and build a new home... or buy a property in decent condition, gut it, and rehab the interior. Either way, you're going to be doing some work. But you'll be living two to three miles from the center of downtown, with a skyline view, for less than $500,000. At current appreciation rates, these homes should be at $750,000 or more within five years.
Another area to consider for buying a home is the Mueller redevelopment plan in the Northeast of Austin. Developers are turning a defunct airport in to a residential area. One-fifth of the land will be green space – trails, parks, etc. – while the rest will become homes and shopping centers. Basically, you're looking at a new suburb in its entirety coming online.
Just beyond the Mueller redevelopment project is Windsor Park. One very smart real estate agent I met named Maxwell McDaniel is looking to buy a home for himself there, believing that the Mueller project's development will spill into Windsor. Maxwell's great at finding value: He made roughly 50% on his last house in only three years' time.
Austin's West Side is more developed and more expensive than the East Side. But the upside potential here could be just as great. A six-bedroom, 15,000-square-foot mansion within a stone's throw of Lake Austin was bought for $6 million, 18 months ago. It just sold for $7 million.
I have to say I was truly blown away by Austin's market. The opportunities here are tremendous. And with its music scene, parks (Austin has three beautiful lakes within city limits), and strong job growth (Central Texas jobs grew 3.1% in December 2006 alone), Austin has more going for it than just about any other place I've seen.
We'll tackle Austin's condo and raw land markets in our next essay. Until then...
Good trading,
Graham
P.S. For information about east Austin, contact William Bartholomew at 512-577-1266. For information about Windsor Park, contact Maxwell McDaniel at 512-236-0223. And for more on west Austin's, call Sharon Hillhouse at 512-560-0777.
I receive no compensation for mentioning William, Maxwell, and Sharon... They are simply smart people who know their way around town.
