ROI Estimates on Austin Real Estate Investments in 2023
Many analysts consider an 8-12% ROI to be a healthy range for rental properties. Flipping profits vary widely across local markets, but 30% ROI is a good place to set your sights. With flip projects being short term (and considering our current economic environment) it may not prove as lucrative in 2023.
Austin real estate is in high demand. High demand and low inventory, among other factors, have sent residential prices through the roof. Commercial property has also been doing quite well, with Austin taking a top spot on many lists of the best markets for commercial real estate investment.
The city’s population has exploded in recent years as major companies like Tesla have opened locations in the area. This trend seems likely to continue, even if, as some predict, the real estate market cools down a bit.
What kind of return on investment (ROI) can an Austin real estate investor expect from different types of real estate? That question never has a simple answer but recent trends can offer some idea of what’s to come. You may consider adjusting your strategy from one type of project to another.
Commercial properties
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The investing platform CrowdStreet named Austin the #1 city for commercial real estate investment in 2022. It cited the city’s population and job growth, its numerous college and university campuses, an abundance of STEM majors, and “relative affordability compared to other tech hubs.” FortuneBuilders also placed Austin at the top of its list of commercial real estate markets, and fourth on its list of “the top 10 markets to pay attention to in the year ahead.”
Surrounding areas are also seeing hot commercial real estate markets. Hays County, for example, had vacancy rates in mid-2022 of 1.75% and 3.18% for retail and industrial properties, respectively. Experts have predicted that the volume of commercial real estate deals shows few if any signs of slowing down any time soon.
Read more: Capstone Capital Partners’ Commercial Bridge Loan Advantages
New construction projects
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If you’re inclined toward residential ground-up construction investments, the greater Austin area needs you. The inventory can hardly keep up with the demand, and the Austin “area” seems to continue expanding, especially north and south on the Interstate 35 corridor. Even San Antonio is teeming with new construction opportunities for residential investors.
New construction can be risky, whether you are building commercial, residential, or industrial property. Demand for residential property is high, so the main question for investors looking to build new residential properties might be where to build.
Austin is also one of the fastest-growing markets in the country for warehouse and distribution center construction. The city had over 8 million square feet of industrial space in the works as of mid-summer 2022. As businesses continue to move to the Austin area, this trend seems poised to continue.
Read more: Capstone Capital Partners’ Ground-Up Construction Loan Advantages
Residential fix and flips
The market for house flipping has slowed down to the point where many experts are advising investors to focus on rental properties instead. According to FortuneBuilders, “nearly a decade’s worth of appreciation has made long-term strategies more attractive.” That particular advice was geared towards 2022, mind you, but more recent assessments predict a shift from a sellers’ market to a buyers’ market in 2023.
Material and labor costs are up, and it’s increasingly difficult to locate golden flip opportunities with the Austin city limits.Fix-and-flips can still be lucrative, but they will require more research and even more careful planning than ever before.
Read more: Capstone Capital Partners’ Fix & Flip Loan Advantages
Multifamily properties
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Many experts have stated that multifamily rental properties are second only to industrial properties in the Austin market this year. This trend could continue into 2023, considering how rents have risen along with housing prices. Demand for units for sale in multifamily properties has also been on the rise.
The potential cooldown of the single-family housing market could also have an impact on investments in multifamily properties. If Austin switches from a sellers’ market to a buyers’ market, as many are predicting, some renters could become buyers. The question is whether it would be enough people to affect the viability of multifamily properties as an investment. Most predictions state that the real estate market will remain hot, just not as hot as it’s been since 2020. Multifamily properties are likely to continue to be a good investment for some time.
Read more: Capstone Capital Partners’ Multifamily Loan Advantages
Fund your project with true local experts!
An exit strategy is a key part of the approval process with hard money lenders in Austin, including us: Capstone Capital Partners. Capstone will help evaluate your project and determine if it will be a win for everyone involved.
Capstone lives and invests in the Austin area, and has been extremely successful. The lending professionals at Capstone know the nuances of the Austin market, and we’d be glad to have a conversation about opportunities for you.
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