The Differences Between the Austin and San Antonio Real Estate Investing Models
Many beginning investors are interested in the “bread and butter” model of real estate investing. What they may not consider is that this technique varies from city to city, and in Texas, real estate investing in San Antonio and real estate investing in Austin are two very different propositions.
While the typical “bread and butter” model is much more applicable to San Antonio, many investors remain very faithful to Austin and are willing to give up the greater opportunities for equity and cash flow in San Antonio to invest there. However, if you do want to invest in Austin, don’t give up hope- with a little extra time and capital it is possible to find great deals there as well. But bear in mind, the sooner you detach yourself from emotionally investing in specific cities, the sooner you can start reaping the benefits of investing where the truly great deals are.
To make this comparison simpler, the “bread and butter” model is generally defined as a property that’s after repair value is around $80-$120 thousand, has three bedrooms, two baths, and a two car garage, renting below $1,000 monthly. Because of the appreciation Austin has seen within the last 20 years it’s not easy to find property in the “bread and butter” price range. As time passes, and property continues to appreciate, it makes less and less sense to invest near downtown. Because of this investors have had greater luck investing in real estate in towns just outside of Austin like Kyle and Buda. Newer properties in the Round-Rock area also fit this model. Because of the mass amounts of people moving there is recent years, lots of homes were sold by lax lending practices and are now being foreclosed on. This has led to sale pricing on homes that offer greater equity and little necessary repairs. This situation provides great opportunities for new investors who need not be frightened of huge rehab costs since the homes are new. Although these deals are great, many of them require $20,000 out of pocket, a sum that proves too great for many investors.
In San Antonio however, there is significantly less competition while homes are being sold at nearly 50% discounts. This environment has led to a great option for investors with little capital to start with- hard money. Typically, hard money lenders will put up 70% of the money for the deal but tend to have higher interest rates than other lenders because they are private lenders. Because of this investors usually go into these positions with an “exit strategy,” like refinancing.
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