Single-family investing poses tough challenges, Austin expert says

Staff Writer-Austin Business Journal
 

Dallas-based HomeVestors recently proclaimed that Austin is the top market in the country for single-family home investors.

The survey seemed a bit light on specifics — just heralding Texas as "a sweet spot for real estate investing," given healthy job and employment growth.

Local real estate investor Gary Ennis said that from his perspective, single-family real estate investing in Austin is a challenge for even the savviest investors — and there are plenty competing in the marketplace.

"A few years ago it was a lot easier to buy properties at the right price points," said Ennis, principal of E51 Properties LLC, a small Austin-based company that buys single family houses in Central Austin as investments. "With the current market conditions, it's very tough to purchase and rehab a single-family residence and get it to cash flow."

Though Austin historically has not been a hotbed for wild speculation — compared with places such as Phoenix, Miami and Las Vegas — the dynamics have changed radically since Ennis became a landlord years ago.

A former corporate marketing director, Ennis moved here 22 years ago from the East Coast and eventually relocated to Houston for a couple of years. He decided to rent out his Austin house, a wise decision given the appreciation.

"I made a lot of money on that house," Ennis said.

Back in Austin he leveraged that experience and purchased a 1920s house in Travis Heights — another profitable venture.

Ennis was hooked on real estate. During the past decade or so, he and his wife have owned about 10 rentals — a side business to their day jobs. They've focused mostly on buying and holding onto their properties.

A year ago Ennis decided to pursue his real estate passion full time, and it's required every bit of his veteran marketing skills.

"It used to be that you could easily pick up properties on the MLS, but all that has dried up," Ennis said. "You really have to dig down to find people who still have a need to sell their homes."

He scours the Internet and other sources for property owners such as out-of-state landlords or existing landlords who just want out. He tracks down folks who have inherited property but don't want to hold onto it.

"I give my business cards to mail carriers and the UPS folks," Ennis said.

They're the people who see properties every day and may have a hunch that a house has fallen into a distressed condition.

But it's still not easy, especially if you're an investor who abides by the "2 percent rule."

"The monthly rent should be at least 2 percent of the purchase price to be a good investment. If you've paid $100,000, you should be receiving $2,000 in rent," Ennis said.

Yet prices are so high — especially in Central Austin — that those rents aren't always achievable. And Ennis doesn't want to own properties in the suburbs, where a real estate bubble might be more likely to form.

As the window of opportunity has narrowed, Ennis has turned to flipping — buying a property, fixing it up quickly and reselling in a short time-frame.

"Austin is still a good market for flipping, but the competition for distressed properties is significant," Ennis said. "Prices have been bid up by investors and margins are getting thinner."

He's down to owning three properties at the moment but hopes to secure more soon.

"Our goal is to have about a dozen when we're at full retirement age," Ennis said.

Jan Buchholz covers commercial and residential real estate, construction and architecture and retail and restaurants for the Austin Business Journal.

Author: Monte Davis

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1 Comment

  1. An experienced real estate professional can help reduce investment challenges.

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