Kevin Guerin is an investor-focused real estate agent and part of the Roofstock Certified Agent network. Serving the Central Texas Market for over 20 years, Kevin is a wealth of knowledge for investors looking to expand into the Central Texas market.  

In this episode, Michael and Kevin discuss neighborhoods, price points, tax assessments, rates of appreciation, common issues that investors need to be aware of.  

Contact Kevin: https://www.guerinpropertyservices.com/contact

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Transcript

Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.

 

Michael:

Hey, everyone, welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum and today I'm interviewing Kevin Guerin who is our Roofstock certified agent out in Central Texas. Kevin's going to be talking to us today about some of the Central Texas markets as well as the Austin market and some of the things that we as investors should be aware of. So let's get into it.

 

Kevin Guerin, out in Austin, Texas. Thanks so much for joining us. How are you today, man?

 

Kevin:

Good. Thanks for having me.

 

Michael:

Now, my pleasure. My pleasure. So I know we were chatting just before we hopped on recording here, but for everyone listening at home, or in the car, or wherever they are. Tell us a little bit about yourself. Are you an Austin guy born and bred and how long you've been in Texas.

 

Kevin

Born and raised in Texas, which doesn't happen that much anymore, it seems but I've been a I was born in Houston moved to Dallas at a young age than it was in a small town called Granberry outside of Fort Worth through high school. And then as soon as I graduated high school, I came down here to Central Texas and went to school. It used to be Southwest Texas now it's called Texas State. But that was in 1987. And I haven't gone anywhere since. So I've been down here a long, long time.

 

Michael:

Right on and in that time. I mean, just from what I've seen in Texas, or Austin do in the last five to 10 years. You must have seen it really changed in the last 30 years.

 

Kevin:

Yeah, the last 30 years have been crazy. This place went from you know, the capital of Texas with the University of Texas downtown to all of these tech businesses moving here and just the growth of people just moving to the city. The high rises downtown. They kind of they call it crane city from time to time because there's just there's cranes building all of these big condo buildings and just people moving here left and right. Because quality living is great, that's a beautiful city. People just love being in Austin.

 

Michael:

That's awesome. That's awesome. What do you love most about living in Austin?

 

Kevin:

Well, we live out by the lake. there's a there's a few lakes that are out here. So we live out by Lake Travis. So you know, we take the kids, wakeboarding, and hay out of the lake as much as possible. And a bunch of hike and bike trails out here and sports and fitness is huge. And in the Austin area. And so we're on a baseball field or a golf course on the lake most of the most of the time and just kind of get out into the, into the nature in the wilderness and enjoy life.

 

Michael:

That's awesome, man. All right, well, let's jump into the meat and potatoes here of the episode. And I would love if you could share with everybody a little bit about Austin as a market and who is coming to the market in terms of companies.

 

Kevin:

Yeah, so Austin. Austin has been a solid market Austin and the cities around it has just been a great place for for investing, you know, for years now. Tons of people moving here, our rentals just don't sit vacant very long, because there's just still a shortage of supply. I remember one time I looked and it said that about 186 people per day were moving to the city of Austin. So when you think about that number and how many buildings are here, it's just you know, it's a supply and demand thing.

 

So now we've got you know, Apple is expanding Amazon. Tesla, obviously in Tesla's the latest announcement, I guess they're moving their home offices here. Samsung's talking about putting another big operation where they're building more chips or things in town. It seems like every week, there's a different tech company that's moving here and not just from California, they're coming here from other places like VR Bo is here. Indeed is here there's a lot of different companies that love to have their base here. So it's great with the University of Texas here and the other universities here is huge talent pool of, of employees. And so they're here and they're taking advantage of that.

 

Michael:

That's awesome. I mean, it's really sounds like a mini Silicon Valley or another Silicon Valley might even be bigger geographically than what we have out here in California.

 

Kevin:

I think it is I think we still have more land to build on. A lot of our current investors like to purchase things that are going to be a little bit closer into where all these tech companies are going. But there's still a lot more land around where you know, we're gonna have the appreciation because of simple supply and demand and people are going to want to buy and live closer in but it's, it's just never going to get as congested as some of the other places because you know, we don't have an ocean right on the other side to where that we have to stop building. There's there's Still space out there. There's still farmland. But I think prices are going to continue what they've been doing for years just because not everybody wants to be an hour out. Everybody wants to be 15 minutes away.

 

Michael:

Yeah. Yeah, yeah, that makes total sense. So let's talk about prices for a little bit, what are you seeing and maybe you can give people kind of a high level 30,000 foot level tour of Austin and some of the different markets and sub markets within the city where they could look for rentals if they're looking at they're interested in investing in Austin proper.

 

Kevin:

Yeah, prices. Who would have ever thought that through a COVID we would see price increases the way that we have over the last couple of years, but the days of trying to find something around 200,000 or even gone like we're, we're definitely creeping up to more expensive markets, or the sweet spot is kind of in between three and 400,000 that's gonna get you to 2000-2500 square foot house or so. A lot of the markets that that investors are really interested in are going to be kind of north of downtown Austin.

 

So we've got some other sub markets or smaller cities up north of Austin called Round Rock, there's Georgetown, there's Cedar Park, Leander, gosh, Liberty Hill even now hadow bunch of these little areas that have great subdivisions, masterplan subdivisions that have the hike and bike trails, and the resort style pool and the gymnasiums and things that are that are there that that they offer for, for people who live in these places. And, you know, we can rent them out quickly for a nice amount of rent. It's just, we can't get enough of them. We manage a bunch of properties. Here, we manage about 250 or so. And we may have two or three vacant right now. And that's just because we just put them on the market a few days ago. So things go really quick.

 

South is also pretty pretty happening right now because the Tesla that everybody knows about is down right by the airport. So there's some some markets maner Dell Valley and Kyle Buda people are buying those areas to because they know that there's going to be you know, however many 1000 employees at Tesla, they're going to need places to live to so we don't really focus as much in the city of Austin itself. The school systems not as good there as it is as some of these sub markets. So most of my most of my investors want, you know, the better schools. So we go into the other places that have higher rankings in the school districts.

 

Michael:

Okay, that's great. And just as kind of a ballpark figure in that three to $400,000 rental, the 2000 2500 square foot, what would an average rent and north of the city expect it to be?

 

Kevin:

It all depends on the sun, the square footage and sub square footage in the subdivision. And you know, the age of the home. So if it's a newer home $350,000 and it's going to be 2020 200 square feet somewhere in there. Again, it depends on which subdivision is but we're anywhere from 1900 a month to 20 $500 a month somewhere in there nowhere near the 1% rule that we used to be yours in the past but now hopefully we're still we're still able to you know at 20% down are so we're still even able to get to at least even or maybe cash flowing just a little bit after property management fees and taxes and HOAall that all that good stuff.

 

Michael:

All that fun stuff. Yeah. Talk to us a little bit about property taxes. Since this is one of the biggest misses I see, especially for new investors, and even those seasoned investors investing remotely. How do those work in Austin, just again, high level cuz I know county by county, it's likely to differ slightly.

 

Kevin:

Yeah, we're gonna be a little bit higher than most of the other markets, we're gonna be anywhere from two and a quarter to 3% of the county assessed value. So a lot of people think when you buy a house at 400,000, that that that percentage is going to be based off of that 400,000. But what it's actually based off of is what each county assesses that property for so the county may think that this house is only worth 300,000. So then then that the 2.5% is only off of that 300,000 instead of the 400,000. So it is definitely a little bit higher than some of the other markets that Roofstock is in. But we thank goodness we don't have a state income tax here. And it is how they pay for a lot of the schools. That's why some of the schools are good. Most of the people here go to public schools, they don't have to go to any kind of charter private schools because the public school system here is really good. And a lot of that comes from property taxes.

 

Michael:

That's great. Do you know how often the properties are reassessed

 

Kevin:

The property taxes are reassessed every year, and I believe the taxes the tax bills are due may 31. But most people are going to have a mortgage and it's going to be you know rolled into it but they reassess it every single year.

 

Michael:

Okay, perfect. So in theory, if you buy that house for 400,000 County assessor's it for 300,000 a year you buy it that could go up year over year. And you know, is there a limit for the amount that that could go up and could have jumped to 400,000? The following year,

 

Kevin:

There's a cap, I want to say is 20%. cap. So I don't think you can go all the way up to the top, you know, can't can't jump 100,000.

 

Michael:

Okay. Okay, perfect. So that's great to know. And also great to keep in mind for everybody listening, as you're looking to determine what your property taxes are. Definitely chat with Kevin chat with your local personnel on the ground to get a handle on, you know what that current assessed value might be, and to wrap your head around what it might be able to get up to?

 

Kevin:

Yeah, all those records are posted on the county website. So the tax assessor website, so whenever we're running our analysis, we go straight there and look to see what it was last year, and see what it was the year before that to kind of get an idea of what the increase may be going forward. But all of those numbers are on there to where you're not really guessing you're you're looking at the actuals.

 

Michael:

You're calculating? That's great. That's great. So Kevin, I know there's a lot of other really great markets in Central Texas. Can you talk to our listeners about what some of those might be? And maybe a little bit, they might be a little bit less competitive?

 

Kevin:

Yeah, so we, we've helped people buy homes from Killeen, Texas, which is up. That's where Fort Hood is. It's a little bit north of Austin prices are a little bit cheaper up there. We had one listed the other day for rent and my leasing agent said he had to finally just just shut it off because he got so many phone calls on it, but homes up there are going to be you know, under 200,000 or so. So they're a little bit a little bit more affordable.

 

New Braunfels is another market that has just exploded last I saw it was like the seventh fastest growing city in the country. And it's halfway in between Austin and San Antonio. So what I think a lot of people are doing is, you know, mom may work up in Austin dad may work down in San Antonio, but they live in New Braunfels and split the commute time.

 

Georgetown is also another area that if you look on a map, it's going to look like it's a good distance away from Austin, but it's simply not they've we've built some toll roads here where you can legally drive 85 miles an hour on them and get places really quick. And Georgetown has just exploded over the last few years. It's got a it's got a university there, Southwestern University, it's got a bunch of medical but there's just the ton of great subdivisions going on up in the Georgetown area.

 

So that place is also exploded, and, you know, even all the way down to San Antonio, San Antonio is going to be a little bit more affordable. I've been nervous in the years past about how long things were gonna sit in the market, vacant for rent in San Antonio. But those days are gone too. I think people have just been priced out of the Austin market a little bit people that are moving here from different states. And they're going to some of these other areas that are just a little bit more affordable. And San Antonio is definitely one of those along with Killeen, New Braunfels, Georgetown, I mean, I would take a look at all those areas, because I think you're gonna get some really good deals that are going to fill, fill quickly. And you're still going to have that appreciation play that everybody says it's kind of icing on the cake. But around here when it's historical, and it's been 15% over the last 10-15 years, you kind of have to consider that when you're you're looking at the different investments that you want to make.

 

Michael:

Yeah, absolutely. And in talking about some of the different price points and some of those different markets you mentioned, does the rent scale fairly linearly, or does that does that price to rent ratio actually get stronger with some of these more affordable markets?

 

Kevin:

That definitely get stronger if somebody's strictly looking for cash for the cash flow play, they're going to have to go in some of these sub markets because it won't quite be the 1% but it's going to be a little bit more affordable on the on the price of the home and rents are going to be stronger. Austin the rents just can't keep up with the explosion that we've had with with home prices going through the roof rents are always going to be lagging when it comes to you know, being able to get up to that next levels but some of these other markets that didn't have the explosion that's Austin's Austin's had over the last few years they're definitely stronger on the on the cash flow play.

 

And a lot of our clients that's what they're doing they're buying it they get that they get the easy one that's going to have the cash flow every month and then after they get that one and get some rents coming in then they look for that growth play property that's going to be close to Apple or close to Samsung and and that way they kind of they're kind of a wash when it comes to you know how they're looking at their investments when they're making a little bit monthly on one but they know that in 10 years is where they're gonna make make most of their money on the on the Austin property.

 

Michael:

Make the big money. Yeah, that makes sense. And just as a frame of reference for people, how far is it to drive from Austin to San Antonio because I just like being California I have no idea how long that takes.

 

Kevin:

So it's it's depending on what side of town you want to be on but you know from like the downtown area to the downtown area is about an hour and a half. And what they're saying is Dallas and Fort Worth is a Metroplex that kind of grew together. Now there's our LinkedIn in between where the Cowboys play and the Rangers play, but it's it's they call it Dallas Fort Worth metroplex. They're saying the same thing is going to happen here because in between Austin and San Antonio are these other sub markets from Kyle to Sam Marcus, where they go to college to New Braunfels to Selma and shirts and San Antonio so it's all grown together and you can I mean obviously I've been here for 30 plus years I've seen that happen you used to be driving in the middle of nowhere but now you're just driving driving within cities.

 

So it's you know, some parts are hour hour and 15 minutes to get from one part to the other, but they're pretty easy to get to and again with those toll roads that they've added, you can you can fly down there and get there really quick.

 

Michael:

Yeah. And that makes total sense then for those folks splitting the difference one partner living working in Austin, the other in San Antonio, it's a 45 minute split down the middle. I mean, especially someone coming from California. That's like a dream to commute. 45 minutes to work.

 

Kevin:

Yeah, yeah, no, most places here if you're going 45 minutes, they feel like it's a long way. At most things around here. point eight V is going to be you know, between 20 to 30 minutes to get from, you know, these cities that are up north of town to downtown or to the university or to the Capitol. It's pretty easy to get around except for I 35. I 35 is the one interstate that runs through Austin and they can get congested just because of all the people that are here but as I said, they've built some toll roads and they're continuing to build them that helps people get around a little bit quicker.

 

Michael:

Okay, that's great. Kevin, talk to us a little bit about insurance cuz all I hear about not all I hear about but I so often hear about hail storms, tornadoes, hurricanes, these type of issues in Texas. So in Central Texas in Austin and some of these other markets do you have a lot of those natural hazard issues?

 

Kevin:

Hail is the biggest one. When we get hurricanes that hit the coast here, a lot of people kind of hope that that it makes it up to Austin to fill the lakes that are historically 10 to 15 feet low. So hail is the one thing that you know if you buy a house here and you're gonna hold it for 10 years you're going to replace the roof, the roof is going to need need to be replaced at some point because a hailstorm is going to roll through here with golf ball and sometimes baseball sized hail that will damage your roof. Tornadoes or just south enough to where we don't have a whole lot of tornadoes knock on wood that has not been a huge issue flooding is not an issue here it's it's literally the only thing that you have to worry about is hail.

 

And then we do have foundation issues at time to time there's some of the the ground around here is has some issues with some shifting and so we get an inspection on every single property just to make sure that homes haven't settled a little bit too much but those are two of the biggest things that we look for is how's the roof does it need to be replaced and you know is the foundation doing as it's supposed to do it most of them are going to be slab up here because most of them are going to be newer construction we don't have basements here so we got to make sure that the foundation is doing what it should the roof is in good shape and insurance will cover the roof it won't cover the foundation but insurance is not expensive here either I'm not sure what it is and other parts of the country but most people are getting really good coverage for you know eight sometimes 700 800 to 1100 a year to cover those things again not the foundation but wind and and rain and hail that kind of stuff.

 

Michael:

Oh that's super cheap on like a $300,000 property I mean that's that's pretty amazing.

 

Kevin:

Good. Well we can we need it with some of the property taxes that we have to pay.

Michael:

Yeah, it all it all evens out. So would you say that foundation and hail damage are two things that somebody kind of colloquialisms unique to this central Texas that people should really expect to see or not be shooked. If they see that on an inspection report or other other things that are kind of unique to Central Texas that hey, every property just has termite damage for every property is going to have this type of thing. Because a lot of remote investors when they see certain things that they're not used to seeing get really spooked. So talk to people about what they what they should be expect to see and what how they should keep their cool.

 

Kevin:

Yeah, yeah. Almost every inspection report is going to state something about a hairline crack because of a foundation shift or you know, they're going to say that they can tell that there's been some sort of movement, we shouldn't freak out about it because It's going most properties are going to move just a little bit. But you know, in 10 years, if it's only moved a quarter of an inch, I think we're going to be good, you know, the HV AC system because it is hot here. Most of the time, we'll only have a few months where it's cool. People's hv AC systems are going to be used a lot. So when we're doing our inspections, we also really dive deep into how the unit looks. How old is the unit? Does it look like it's you know, somebody's been cranking it down to 65 degrees every day for the last three or four years it changing out that AC filter, but you know, we're looking at the ACS really close the roof, obviously the foundation, but none of them scare you away, if you know if we can get the sellers to take care of whatever small items there are.

 

But I would say the foundation is one that yeah, if it's got if it's got major issues, we're going to get a foundation company to go in there and take a look and see if it's something we should just run away from the roof. Literally most people don't even know that their roof has the damage on it. So we get somebody out there to take a look at it. And you know if they say yeah, this, this area had a storm six months ago, and there's enough damage on there, we have a lot of sellers that are that are taking care of replacing the roof before we close because that needed to be done. They just didn't, you know, nobody's hopped up on the roof lately to see that it needed to be done.

 

Michael:

And to just give people an idea of what a roof replacement costs, do you have a ballpark idea for your, you know, 2000 square foot property.

 

Kevin:

Yeah. 7500 to 12,000, depending on all the peaks and how high it is. I think two stories are going to be more expensive than a you know, a flat one story, but they're gonna be last one we just saw was right around 7500 for a full replacement.

 

Michael:

Okay. Okay, that's great to know. That's great to know. And then, Kevin, my last question for you is we're recording this mid October 2021. So for everyone listening, keep that in mind. But what are you seeing people do who are winning offers? Are they coming in all cash? Are they going over ask and you can talk specifically to kind of each of the sub markets that you touched on if you'd like, but just you know, what do folks need to do to win these twin these properties?

 

Kevin:

Yeah, you know, I think that the craziness of for about 10 months last November was the first time that I ever had anybody wanted to make an offer above list price. Like that was unheard of here. I've never seen that before. And I actually told him I said, You're crazy. We don't we don't do that here list price, we'll win it. Like No, no, we need to go. I think it was $20,000. Over I said, well, that's the craziest thing I've ever heard. And then every offer after that for about 10 months had to be above lists, we had multiple offers on things I was one of 75 offer one of 75 offers on a house in Pflugerville. It ended up going for like $100,000 over on a $300,000 house, it was chaotic, those times a little bit. They've slowed.

 

So we're still a strong market, there may be a couple of offers on property, but it's not the way it was. So now I would just suggest, you know, you definitely can't come in significantly lower and expect to win anything sellers, sellers are still sellers are still living in the past, when they think that they're going to get 75 offers at $100,000 over list. Those days are gone. So right, they have to be educated things have slowed down a little bit, let's price it appropriately, and then hope that we can get that price.

 

So you know, if we're coming in at less price financing is fine. People are still writing the appraisal waivers. So if it does get appraised a little bit lower than what they're willing to offer, they're coming to the table with a little bit of funds. But I'm not even seeing those as much as we were there for a little bit. But I would say it depends on the days on the market is something just hit the market and somebody really likes it, it checks all of their boxes, let's go in at list price and try to get it wrapped up. If it's been on the market for 20 plus days, maybe able to get a little bit of a discount, but I would you know $10,000 off or maybe 15-20,000 try to meet at $10,000 off somewhere in there.

 

But we've got to be strong with them. Just again, because there's not as much inventory as we've had in years past. There's more than there was a few months ago but sellers are still expecting to make a little bit of money on on their cell and they're getting it so nobody's giving away properties. Nobody's discounting big. We just got to make a lot of the other terms good, you know, we want to try to close within 30 days, our due diligence periods, try to make them a little bit shorter. Give them a nice deposit at the beginning to where they know that we're serious. So we try to sweeten the pot that way. And if we can if we can go in with a highly qualified buyer close in 30 days at what people are asking then Hopefully we can we can capture some deals.

 

Michael:

That's fantastic. All right Kevin My last question for you is you are a rootstock certified agent out in Central Texas so what is it that you're looking for when you're publishing properties to the rootstock select marketplace program?

 

Kevin:

Sure so we found that most of our clients are they like newer they like newer properties in nicer areas with better schools that are going to obviously rent quickly so we try to get something within you know, built within 2010 and newer, if we can't find enough of that then we go to the year 2000 and newer, we try to get to 1700 square feet to about 23-24 maybe 2500 square feet depending on the area and just something that looks clean that has what everybody's looking for you know the granite countertops the the good looking wood floors, we don't want any you know green bedroom green walls in the bedrooms and pink bathrooms we try to go pretty basic but you know, modern looking looking homes that that is not going to ship they're not gonna scare a potential renter away when they walk in there.

 

A lot of our clients just don't want to go in and spend a bunch of money up front they just want to buy something that may just need to be cleaned and maybe one wall painted and then they put it on the market and get it rented really quick and the price range you know we kind of talked about it some of these sub markets will look and try to find something in that 225 range and then you know everybody realizes when they're buying in Austin it's just gonna be a little bit more so we try to put a good variety out there because you know everybody's looking for something different for the most part.

 

Michael:

 Alrighty everybody that was our episode a big big, big thank you to Kevin, I learned a ton about the central Texas markets as a whole hopefully you did too. Check us out wherever you listen to your podcasts, Google, Spotify and apple. We love comments and ratings. We look forward to seeing on the next one and as always, happy investing

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