Austin Mod Squad and $/SF

So I was reading the Statesman Homes section this Easter Sunday and came across this article on Austin’s leaders in modern homes (article here).  The so called “Austin Mod Squad” included developer Robert Nash who was quoted saying that due to increasing demand and limited supply, modern construction tends to command more $/SF than traditional homes.  I agree with that, and that got me thinking:  How does that fact help buyers and sellers navigate the value question in today’s marketplace?

You see, when a seller lists their home for sale, they try to come up with a price that will sell the home in the desired timeframe, without “leaving any money on the table”.  In real estate practice, that is alot easier said than done.

When a Realtor runs comparables on a property, it is easy to get an average $/SF for a particular comparables area.  It becomes alot more challenging to figure out where the listed property falls compared to that average price.  Even when a finite range can be identified, it may be that the listed house is so different, so unique, that it falls outside that range.  This is often the case for these modern homes in Austin’s central neighborhoods.

Personally, I believe the days are numbered for using $/SF as the key metric for determining value.  With so many choices on the market today, and an increasing variety even within neighborhoods, this metric is no longer reliable in my opinion.  Of course, savvy sellers and buyers will use it to their advantage when it so lends, and I applaud that.  But here is a sample list of concepts to consider in addition to square footage:

1. Lot size and location
2. Energy efficiency
3. Building materials
4. Architectural design
5. Views
6. Layout
7. Aesthetic
8. History
9. Upgrades
10. Upgrade potential

So when you are selling a home, pay special attention to those things that set your home apart from the competition.  When you are buying, be careful to assess those features which make the house more valuable.  At the end of the day, real estate is only worth what a willing seller and a willing buyer agree its worth.  This is the beauty of supply and demand.

Forecast for Austin Landlords

One of the top economic gurus in Austin is encouraging residents to buy up real estate for rental property.  (Related story here) Angelos Angelou commented on the continued influx of residents into the Austin area and the growing need for rental property.

As a property manager in East Central and South Central Austin, I can attest anecdotally for the strong demand in rental housing.  One of the top apartment locators in 78704 recently told me that all the available housing inventory had been fully leased out for March and he was busy fishing out any available properties for his list of clients (most coming in from out of town).  That translates to a virtual 100% occupancy rate.  Rings nicely in the ears of landlords.

So if you’ve been on the fence about whether you should invest in rental property in Austin, now might be a good time.  It is one way to diversify your investment holdings in case Wall St. is not currently meeting your needs.

If you do make the jump, be sure to find a Realtor that knows the strong rental areas and can advise you on important items such as capitalization rates, maintenance assumptions, landlord/tenant considerations, and property management.  A good question to ask your Realtor is whether or not they are landlords themselves.  That might be a good start…

Daisy Run 5K showcases Holly St hood

Austin Runners Club’s Daisy Run (map) took runners through the up and coming Holly St neighborhood this morning.  Runners enjoyed beautiful weather on the short course from Rogue Equipment down to Town Lake and back.  It was great for me and our dog, Noodles.  We watched the runners go by near the Mile 2 marker.

The Holly St area has recently been undergoing some major change, sparked in part by the closing of the Holly St. Power Plant.  Graced by some of the prettiest parts of the Town Lake Trail, the Holly St. area features a mix of humble fixer-uppers, renovated bungalows, new construction, and plenty of parkland along the trail.  Varying lot sizes and home styles give the area an eclectic feel, while maintaining the cultural heritage of the neighborhood.

Many runners, triathletes, and town lake enthusiasts have begun to move into the Holly St and surrounding areas to take advantage of the location and neighborhood vibe.  Two years ago, Karen and I bought a house here as a renovation investment opportunity.  We loved the area so much, we decided to move here.

As of this morning, there are 47 properties on the market in the area bounded by I-35, Cesar Chavez, Pleasant Valley Rd, and Town Lake.  Prices range from just under 200K to 675K.  Further north of Cesar Chavez and East of Pleasant Valley there are many more options available.

House by House West

South by southwest (website) is a huge money maker for Austin.  A recent article in the Statesman quoted the mayor as saying that the local economy brings in upwards of $100 Million as a result.  Proof of this can be found by trying to find a parking space downtown, or even better, trying to find an available hotel room.  It is evident that the local economy is raking in the dough.  But how can John and Jane Homeowner get their fair piece of the pie?

The answer is what I call “house by house west”:  Rent out your house during the festivities in exchange for some cool cash.  Most places are going for $200-300 a night, and when you compare the full luxuries, privacy, and amenities of an actual home to a standard, run-of-the-mill hotel room, it makes for a win-win situation for both homeowner and sxsw patron.

This is serious business.  Take a look at craigslist (website) and see what people are offering out there.  I know one guy who, after successfully renting out his house last year, spent the entire week sleeping on the floor of his office at a local high-tech firm.  A small sacrifice for a nice chunk of spending money! 

I estimate that at least one million dollars is spent on this temporary housing market.  We see a spike in Austin during big events like sxsw and ACL, but you can pursue this as an option on the internet.  My wife and I spent a week in Tuscany by finding a place this way.  Our “hotel room” was a completely private old stone villa, with all the modern conveniences, views to die for, and on a ten-acre organic olive farm.  All this for only $80/night.  Not bad when you consider the exchange rate with the euro!

If you are interested in checking this out on your next vacation.  Check out sites like craigslist, VRBO, and HomeAway.  Or contact me for other ideas.