Iget many calls from people interested in buying in various cities and want my opinion .
One of the popular markets right now is the Austin metro area . People get excited about the overall thriving of the local hightech scene , Elon Musk publicly decamping to Austin , and others moving there from California . It is tempting to think of Austin as a good destination to buy in 2021 . However , in my opinion , it is not ! Austin , in fact , is a good city to be a SELLER in 2021 . Austin prices have climbed rapidly in the past six years , while rents went up much more slowly . As a result , the rents are too low to cover all expenses .
One expense in Austin ( and in the state of Texas overall ) is the very high property taxes . The property taxes in the Austin metro can get to almost 3 % of the home value per year ( depending on county and town ). That is over 2.5 TIMES the property tax rate in Oklahoma ( or California ). Together , the high prices , relatively
Image by Achim Thiemermann from Pixabay
low rents ( relative to the prices , that is ), and the high property taxes , as well as high insurance costs , create an untenable cash flow .
Here is a partial headline of a Business Insider article “ Elon Musk and other tech powerhouses are flocking to Texas , pushing an already bonkers realestate market to new heights ”. Just logically , do you want to be a buyer in a market that is “ already bonkers ” and now is being pushed up even more ? They have a name for such a market in the real estate world : “ A strong Sellers ’ Market ”.
Do you want to be the BUYER in that strong Sellers ’ market ? You will be the one paying “ bonkers ” price to the savvy sellers , fending off multiple offers higher than list price .
It is very tempting for a California resident to say , “ What ? I can buy a new home in Austin for “ only ” $ 320,000 ? That is so cheap ! Yes , it is “ cheap ” relative to San Francisco prices . However , it is not cheap to buy as a sound rental home , and has bad cash flow .
Austin is a place where many of our savvy investors are now SELLING , as the selling market is strong . It is not uncommon to see an investor selling one Austin home and buying 3 brand new homes in a 1031 taxdeferred exchange in Oklahoma City , or Tulsa , or Baton Rouge , or Central Florida . This move creates much more quality real estate owned , more 30year fixed loans at todays ’ super low rates , and brandnew properties with brand new roofs , ACs and all other parts of the homes .
Similar logic applies to the Dallas Ft Worth metro area ( DFW ), Houston , Phoenix , Las Vegas , Nashville , Denver , Salt Lake City , Boise , and others . I even get some investor talking about Seattle and Portland , which make no sense at all . Some misguided reporters ( who in many cases have no actual experience in real estate investing themselves ) confuse high prices and growth with an attractive place to invest in . The two are not necessarily linked .
An example of another very popular destination for Silicon Valley people leaving to other states , is Miami . Miami is popular , large ( much larger than Austin , for example ), has an international airport , great weather , beautiful beaches , and proximity to great vacation spots . Miami also has a thriving tech sector . Sounds perfect , right ? We should invest in Miami , right ? No ! Miami prices are way too high to make sense at this time . While the property tax is “ only ” about 160 % of that in Oklahoma or California , the price / rent ratio makes it an unattractive place to invest . Miami has been a magnet for the wealthier set of tech and finance people as of late . The prices reflect it .
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