As investors, if we are looking for a market or a city that we want to invest in, we want to know a little bit about the dynamics of that market. We've been hearing a lot about people and companies moving to Texas. Why is Texas, and Austin specifically, such a hotbed for investors?
We’ve invited Daniel Davis, a local expert in the Austin market, who also works for Mynd Property Management, to talk about the growth of the real estate market in Texas. We discuss demographics, rental market, business opportunities, new builds, and urban flight as the important factors that make Austin a hot market in 2021.
2:06 - The main reasons behind the continuous growth of the Austin market.
7:12 - The indicators that are showing Austin’s housing market growth.
11:00 - High demands for renting properties and the challenges for investors.
14:45 - Why investors should consider the opportunity to invest in Austin.
17:00 - Predictions for single family properties in 2021.
18:14 - Which facts and data can help you determine where to invest.
21:15 - What other cities in Texas are attractive for investors.
22:17 - How to get in touch with Daniel and other agents at Mynd Property Management.
Steve Rozenberg 0:07
Ladies and Gentlemen, welcome to another episode of The Myndful Investor Podcast Show. I'm your host, Steve Rozenberg, Head of Investor Education over at Mynd Property Management. And, you know, we do this show, really to gear it towards investors and understand certain cities, certain dynamics, what are some challenges people are having as investors, we bring on experts to help, but we also want to identify, as an investor myself, if I'm looking for a market that I want to go to, I want to know a little bit about the market. That's part of the due diligence, and, we've all learned, I've learned personally that it's never done through emotion, and gut feelings, it should always be done through data and all the metrics that drive that data. Again, I personally know from experience that don't do it the other way, because it doesn't always work out the best. But being in Texas, Texas is always on the radar, especially lately, we've been hearing a lot of stuff about people moving here, things going on. So we wanted to bring on an expert, a local expert here in the Austin market, who works for Mynd Property Management. And we're going to talk to him about what what is he seeing about Texas? Why is it such a hotbed for investors? I'm in Houston myself, an investor in Houston, so I'm very familiar with my finger on the pulse of what's going on in Texas. But I'd like to know from another perspective of why do they see Texas as such a hot market, specifically, Austin? So we have Dan Davis here. Dan's our local expert for Mynd Property Management in the Austin market, as well as all of Texas. Dan, thanks. Thanks for being here today. Appreciate it.
Daniel Davis 1:49
Yeah, absolutely. Thanks for having me.
Steve Rozenberg 1:51
So tell everyone a little bit, just give me an over note of what are some trends that happened throughout 2020, that you think are causing the market to shift towards Texas as strongly as it is?
Daniel Davis 2:06
Yeah,, there's a lot of reasons. I think something to take note of right off the bat is, as COVID developed over the past year, we've seen people moving out of major metropolitan areas. So cities in California, like the Bay Area, and Los Angeles, New York, Chicago, they're looking to escape that metro area, come to a less crowded environment, maybe get a little bit more bang for their buck, more open space. So urban flight is one of the reasons that Austin was able to remain very strong in 2020. Along with that, we've also seen all these major tech companies, companies in other industries moving here as well, just to name a few - Hewlett Packard, Oracle, Tesla. And as these companies continue to grow, or continue to come here, the real estate markets only going to grow. Price appreciation was something to take note of as well in 2020. So we saw an increase of 13% year over year, which is huge, and something I think is something that's super important as we progress into 2021, to see how that develops as well. Yeah, just to name a few right there.
Steve Rozenberg 3:26
Yeah, I think also what a lot of people don't realize is number one, the state of Texas does not have a state income tax, so if you're an employee there, it's very favorable number one. They do make up their revenue in property tax, so that's a lot of people say, 'Oh property taxes is where they get you.' Well, they've got to make their money somewhere, and that's where the state gets the revenue from, from property tax. Normally it's going to be anywhere between 2.7% to about 3.1% of the assessed value of the property. But also, again, I tell them, you got to factor in, that you, if you live here, and your renters are not paying a state income tax. So it's just something to remember, you've got to look at the whole equation, which a lot of people do, and that's why businesses are moving. I remember, there was a number at one point that said that Texas was the 10th most business friendly state, and the reason it was number 10, and not number one is because it does charge a franchise tax for business owners. But what was interesting is, if you calculated the first nine states, like Alaska, South Dakota, Wyoming, they were they were great areas, but all of their nine combined GDPs did not add up to what Texas produced in revenue. You can call it what you want, but it's very, very clear that businesses are seeing that. When you have businesses seeing that, businesses start growing for whatever financial reasons, they need their employees, and we know Austin is a huge, huge mecca for tech, music, there's so many trends that are going on. They've got movies, there's a lot of movie industry moving there to film. So there's just a lot of stuff that's going on that I think a lot of people don't realize that this has been going on for a while. I think a lot of famous, Elon Musk and other people are what's causing a lot more notoriety of going 'Hey, what's going on over there.' And of course, you got a lot of people coming in and price and demand. The one thing as you know, about Austin, as well as other Texas markets is, there's a lot of land. So in the epicenter of the city, prices are very high. If you start going out a little bit, prices start dropping, because there's a lot of land out there, depending on obviously, as you know, how far out you want to go and how close to the Tesla plant and these other plants, obviously, that's going to be a huge jump in pricing, which we're already seeing. Let me ask you this Dan. Do you think the Austin market, do you see it staying strong in 2021? And what kind of data and indicators are telling us that at Mynd?
Daniel Davis 6:02
I think you said it yourself. With the expansion of these tech companies either setting up shop or building new plants out here, all the surrounding areas are going to continue to grow as far south is like Kyle, Texas, for example. I've been speaking with a lot of investors who are buying in Kyle, which a couple years back wasn't really on the radar. And now all of a sudden, people are realizing well, it's only 40 minutes out from downtown, it's a good place, single family homes, new construction, new builds, things like that. But yeah, I absolutely expect the market to continue to expand in 2021. Hopefully, as things die out with COVID, people will start moving here or moving to Austin, and taking up the surrounding areas. Some things to look at is the appreciation rate. Fom 2012 to now, the homes have appreciated nearly 91%.
Steve Rozenberg 7:02
That's crazy, man. I mean, those numbers, I live here and I see these things, and you're like, wow, why didn't I buy 10 houses in this area back then. That's what I always think.
Daniel Davis 7:13
Yeah, absolutely. And Austin's total housing market has also grown by $22 billion. So as we see these trends continue, we've never really had a dip or a downside, we only see things going up. From 2012, with the average home costing around $220,000, now we're over $420,000. It's only going to grow, with more people coming in, young entrepreneurs, families, new families, even people relocating for these jobs or for just a change of scenery, and with the low supply of homes due to high demand, the rental market is going to continue to grow because people are going to continue to need a place to live.
Steve Rozenberg 8:00
Something to think about as we're talking, as you and I know, the Austin market, one of the things that I've learned about Austin, I would say, is the traffic situation. So the traffic was not the freeways, like many cities, were not built to take this type of cars coming in, the influx. So what you're seeing is, you're seeing a lot of construction and a lot of stuff going on, because now they're trying to catch up. There's that corridor between Austin and San Antonio that was basically barren land, was mountainous country, the hill country, beautiful area. And now all of a sudden, those two gaps are closing to where there's really not much differentiation between Austin and San Antonio. And now it's starting to go north, towards north of Austin, like Georgetown and other areas, and now it's going towards Dallas. We're seeing, just like any major city, in the epicenter, it's very expensive, but it's also very congested. I think what we're going to see in Austin as well, is because of people being able to telecommute and they don't need to live in a apartment in downtown Austin, they could buy a ranch style house outside, put an office in their house and get everything they need. I think we're gonna see a continual growth outside, because they don't really need to go into the city of Austin, because that's not necessarily where the epicenter is of a business. I'm not sure what your thoughts are, if you're seeing that as well.
Daniel Davis 9:30
I agree with that. These major plants, they're not downtown Austin, they're on the outskirts, and also with the the big push to work from home and virtual work, I don't see that changing in 2021 either. Not even in Austin, but what you hear across the country and major industries is, companies are reevaluating their office setting altogether. So I agree totally with what you're saying. People can buy bigger home with extra rooms that they can convert into an office, and be able to be close to work but also have a little bit more space, and save money compared to buying a flat downtown or something like that.
Steve Rozenberg 10:09
I think also, even where Mynd is located, in the Silicon Valley area, you get people that work there that are now saying 'you know what, I don't need to be here, I can go back home to Texas or wherever, but a lot of people go and saying 'I can make my paycheck and it's tax free, state tax at least why don't I go live there?' And so they're going there, and they're saying 'why don't I buy some real estate here while I'm here?' Because Texas is huge, there's a lot of expatriates that come in and out, you've got the oil business, Dell computers don't forget is there, now you got Elon Musk go in there. There's just so much going on. Dallas has the most fortune 500 companies of any city, Houston, you've got everything going on there. You just see a lot of growth going on in it. At one point, I don't know if this is still true, there were more U-Hauls coming to Texas than anywhere else in the country. They have a big problem here in Texas, getting U-hauls out of here. So if you know, if you want to take one to Texas, it's pretty expensive. If you want to take a U-Haul out, it's fractional cost, because they need to get them back to the original cities, because they have so many people coming in. It's a good problem to have, but it's still a problem, because, my perspective being an investor, people still need a roof over their head. Whatever you're doing, and you get a lot of people that are moving in here from Tesla, and other places, HP, all these businesses, they don't know where they're gonna live, they're not really sure. They're saying, you know what, why don't I rent for a couple years? Let's see if I even like Texas. Let's see if I figure this out. And then we'll go from there. So I think that's why we're seeing such a high demand, and I'm curious what you're seeing about active listings and stuff regarding that, because I know in Houston, things are just flying off the charts here, because of the fact that people need places to live, and I'm not sure where they want to buy. So they're saying, you know what, why don't I rent for a little bit? Are you seeing anything with listings going on?
Daniel Davis 12:08
Yeah, so active listings right now, according the last time I checked, we're down 50%. The opportunity to buy is tough and it's getting harder, it's getting more competitive. So, like you said, the ability to rent is going to be an option for a lot of these people moving here. I didn't even think about the fact of let's see if we even like it here. But also, there's not going to be many other options for a lot of these people. Individuals who normally want to buy a home, they're going to be able to get a house on the rental market a bit easier than they are going to be in a competitive situation with all these other, not only just regular home buyers and sellers, but as well as investors.
Steve Rozenberg 12:50
I think one of the other challenges people need to remember, if you're thinking of purchasing a property in a city like Austin, they can't build the houses fast enough. So they're trying to build the houses, but there's only a certain amount of manpower and staffing that they can do to build the quality houses that somebody wants. So there are people that maybe have down payments on houses, but they're on waiting lists for a year or two years, if they want to be in certain parts of Austin. So again, it makes so much sense, the renter that you're getting, if you own a rental property is not the renter that you may think that you would be renting to. These are people that have very high paying jobs, these are people that are going to pay the rent, they're not going to be a problem, and the nice thing, especially with Mynd Property Management, you don't need to live in Austin to own the rental property. You can live anywhere, buy the asset, hand it to a management company like Mynd, and they take care of it. To me, it's the ultimate form of leverage when you want to be an investor. A lot of people may say I don't want to live in Austin, I don't want to live in Texas. Well, that's like saying, I don't want to buy stock and Chase Bank because I don't live in Massachusetts, but you don't buy stock that way, you buy stock based on numbers and ratios, and PES dividends. Same thing when it comes to buying real estate. You look at the numbers. Like I said in the beginning, the numbers and the data are dictating whether or not Austin makes sense, making sure it aligns with your strategy to get you to your end goal. That's another conversation that you, as an investor need to make sure, but at least, and I'm curious about your thoughts moving forward to 2021, but if you were to look back at 2020, every single indicator, at least for me as an investor, I would say are all pointing to the fact that this is a market that you got to get into, and this is a market that is clearly showing a lot of upside. There are no indicators of downside. Do you agree with that, or what do you see?
Daniel Davis 14:42
Yeah, I think the opportunity to invest in Austin is something that every individual should take very seriously. And you said remote investors, I would say most of the people I talked to on the phone are remote investors. They live in other areas of the country, and they enjoy working with Mynd because they're able to manage a whole portfolio right from their phone or from their computer, they don't have to worry about the day to day, they let us take control of all that. So I agree, I think that in 2021, the opportunity to invest is something that we should all take very seriously, with low interest rates, the high demand, and the cost of homes is predicted to be a little bit more modest than what we saw in the late half of 2020, so people who may have been a little intimidated are going to have that opportunity to come in invest, and reap the benefits.
Steve Rozenberg 15:40
At the end of the day, real estate, like anything, is a cycle. It goes in cycles, it goes up, it goes down, it goes sideways, it will always go in a cycle. If I was looking to buy an investment property, I would be looking at this saying 'you know what, this cycle is gonna go for a while. It's not going to stop anytime soon. I don't see the exodus coming out of California and other high cost states to end in the next couple of years. They're all going to keep coming in. A lot of times people say like, oh, it's already too expensive. Well, I grew up in Los Angeles and I wish I would have bought 10 houses back then when I was a kid, because everybody said it's not going to keep going higher. Well, if you go back 30 years ago, you think of what costs were back then, I think this is what Austin is right now. I think in Austin, you're going to look at pricing, and you're going to go, why didn't I buy 10 of these things way back? You just said the numbers of what it went from $223,000 to over $400,000. That's some crazy numbers. And the thing is, what I like about Austin is the companies are moving there to sustain that growth. It's not like this inflated growth it goes, how are they supporting this number, and it's gonna collapse on itself. Businesses are moving in, so people are actually buying these houses because they need them. They're not doing it for flipping or other reasons. They're doing it because they're saying my business is here and I need to move here now. I think it's going to be very, very strong, because you're basically redistributing the wealth from other states, and they're coming to Austin. It's very clear living here, I can tell you, I see it. And I know you see it from all the investors that want to buy. Let me ask you this, when it comes to single family properties, what do you think is gonna happen in 2021? What's your prediction?
Daniel Davis 17:28
There's a lot of things to take in consideration there. As I mentioned earlier, with the low interest rates, the opportunity to buy, it's a great time to buy just based off that fact alone. If you look at 2020, we saw values went up 11%, or close to, and they're forecasting another rise in the next 12 months, between 8% and 9%. I think that single family homes or residential is going to continue to grow, it has not reached its peak yet, It's far from it. Austin is going to remain a very strong market for all the reasons we've named - the low interest rates, the people moving from major cities, the tech companies. I think sky's the limit for 2021 when it comes to Austin.
Steve Rozenberg 18:14
I think also something that people need to remember is that, when you're looking at a city, when you're trying to determine a city again, like Dan had said, everything is based on facts and figures. if I was looking to move into a city, I would want to know, first of all, I want to make sure that this city aligns with my goals, and is part of my strategy. Then I would start looking at more specifics, meaning what is the price point of the property? What is the rent amount of the property, and does that align with where I'm going? Then I would look at other type of factors, for example, I would look at what is the occupancy rate of a city? So are people staying in the places that they're renting? And what are the days on market? So what are the average days on market for a vacant property? Right now in Austin, it's about 35 days, which is down 19 days! When you factor that in, when you want to rent a property, you have a business and that business needs to make money every single day, you just get it in the form of what's called rent at the end of the month. So every day that property is vacant, you just gained 19 days of revenue that you have to factor in. I'd also look at what are the eviction rates for a city. These are the things you want to look at, and you want to think of like, okay, now you start going active listings, what is for rent? Right now, active listings are down 50% in the city of Austin. So all of a sudden, I say, wow, occupancies up, properties are not staying on the market, and there's not that many there. Now, the pending sales have gone up 28%. So again, my whole point of all this is that you've got to look at what the data is telling you because the data is telling you a story. Now we can tell you look, you can watch the news, and you can see all the businesses that are coming and everything going on, just like Dan had just said. But I think the key here is to really, really think about what does a city offer, whether it's Austin or whether it's Dallas, Houston, Atlanta, wherever. Always look at those numbers and look at that data, because that data is telling you a story. Whether or not it is your story, and it aligns with where you want to go, that's for you to decide as an investor for your own business model. Dan, I'm just curious if you have any other thoughts or some finishing things on Austin and Texas in general?
Daniel Davis 20:27
I think that every everything that's important to consider about Austin has been said, and you've touched on it. If people are interested in hearing more about those numbers, they can not only reach out, but all that information is available online through our website, so something to take into consideration. And then if you look at all the other major markets - I work in San Antonio, Fort Worth, or Dallas Fort Worth, and Houston. You've already talked about the economic growth in Dallas, you can't ignore that, so Dallas is another great city that's going to continue to grow in 2021. And then I've actually been seeing a lot more in San Antonio as well, with home prices being low, it's a big military place. Just worked with an investor actually who's been in there for a few years, got orders to transfer, and now he's putting his home up on the rental market. So it's great, it's also becoming a very popular place. And we actually spoke about closing that gap between San Antonio and Austin. I've been seeing more and more of that as well. I know we're focused on Austin here, but all the major markets in Texas are doing well, and they're going to continue to grow over the next few years.
Steve Rozenberg 21:39
Yeah, I 100% agree. Maybe I'm partial because I live in Housto, but I can tell you from from being in the heat of battle and seeing this, and being an investor myself, the numbers are clearly saying that this is the time. If you're thinking of buying property, and you want to be an investor, especially in Austin, I don't know when this window will happen, I don't see a crash coming, there's no eminent data and information that supports that this is a false start for Austin. This is a real start, and it's happening, and we're seeing it. Dan, if somebody wants to get a hold of you, and they want to talk to you about Austin or any of the Texas markets, what's your email?
Daniel Davis 22:17
They can reach me at Daniel.Davis@mynd.co. And then another way to just get in contact with anyone here at Mynd is through our website. Request a time to speak with one of the professionals here, whatever market it's in, happy to hold any conversations with you guys, answer any questions, whether you're a homeowner or not, we're here to help and answer any questions in terms of investment.
Steve Rozenberg 22:43
Yeah, that's great. Thanks so much for the information, definitely helpful. Again, I think it's very important for people to educate themselves, especially in a city that they are thinking of going to or not sure, this is the time that you sharpen that mental axe before you actually buy a property, and realize maybe it was the wrong property for you, or it doesn't fit your goals. That's one of the things at Mynd, if you want to go to our website, it's mynd.co. There you can set up a free consultation for us to talk to you to make sure. Maybe Austin is the right city, maybe it's not, maybe it could be one of the other 20 markets, We are in nationwide, of all the different cities, and maybe it's Atlanta, maybe it's Charlotte, maybe it's San Francisco, Seattle, it just depends. Maybe it's an AND and not an OR. Maybe a couple properties here, a couple properties there. I think that's what we're talking about. It's great, you're an expert for Austin and Texas and everything, and that's the great thing, cuase you can just tell them, these are the pros, these are the cons, based on what works best for you. At Mynd, that's our goal, we just want to make sure that whatever you're buying is helping you achieve the goals that you want. Ultimately it's your property, you're gonna own it, you're responsible for it, we just want to be part of that team that helps you get it across the goal line to make sure that you achieve what you want.
Daniel Davis 24:05
Another thing to keep in mind is, even if you're just starting out, you may not even put much thought into this at all. You can contact us, we'll let you know next steps, we can refer our agents. We've got partnerships with different home insurance companies, things like that, so we can really help you from start to finish in obtaining those investment goals.
Steve Rozenberg 24:25
Yeah, so true. You don't need to be an investor right now. Having those initial conversations is always, always important. Look, you're the product of the people you surround yourself with. If you want to be successful, you got to step up and you got to ask these questions, and you got to be okay being uncomfortable, going to another city going to another market, learning new data, learning new information, and just exploring it. You may do the mental gymnastics and realize maybe Austin's not the right market for you, but you may find out what is the right market, maybe it is Atlanta. And again, that's how you do this by having conversations. So Dan, thank you for taking the time, I know you're really busy, so thank you for doing that. Anybody if you're looking to talk to anyone at Mynd, give us a call or go to our website mynd.co. Again, it's mynd.co. And just want to thank everybody for watching today. Learn about the Austin market. Definitely, Texas is booming, this is where you want to go. So on behalf of Dan, myself, and Mynd Property Management, I want to thank everyone for watching today and we will catch you next week on the Myndful Investor Podcast Show. See you everyone!
Daniel Davis is Account Manager at Mynd Management specializing in Austin and Texas market since 2020. Previously he was Account Advisor at Grubhub, Licensed Home Advisor at Opendoor, and Dealer Support Specialist at Uber. He is also a licensed Arizona Real Estate Sales Agent.