Are you interested in house hacking Austin? This isn’t surprising considering Austin is an incredibly vibrant city renowned for its tech scene, culture, and the city consistently makes the Top 5 or Top 10 for most lists of best cities to live in the United States.
Austin is also one of the hottest, most popular markets in the country and has consistently been so for well over a decade. Because of this, finding a good deal can be a challenge, but with a city with as much to offer as Austin many find it worth the trouble to find that deal. The high demand certainly makes real estate a very tempting investment.
In this post, we’re going to give you all the information you need to master your house hacking options for Austin, Texas. We’ll look at whether Austin is in a landlord or tenant-friendly state, the six demographic data points we use to analyze a market, and navigating the particular challenges that the Austin market provides.
Let’s dive in!
Austin: Tenant Friendly, or Landlord Friendly?
No one is likely to be surprised to learn that from the state level, Texas is one of the most landlord-friendly states in the United States. The majority of lists of landlord-friendly states have Texas near the top, if not at the very top of the list. In fact, you can see where Texas falls on the landlord versus tenant-friendly graph here.
Austin itself is the most tenant friendly city in Texas. Austin is known for its very liberal lean with politics and fierce pride in independence from the rest of the state, leading to popular mottos like “Austin: Let’s Keep It Weird” and “Austin: It’s Surrounded By Texas.”
This also means more tenant rights than other cities in the state. That said, I wouldn’t be scared off from house hacking in option because the state rules are still the overarching framework for landlord-tenant legal rules in the city, and the additional rules tend to be moderate, such as 7 days for a tenant past due on rent to start a cure process versus the standard 3 under state law.
If you have invested in real estate or were getting advice on El Paso house hacking, or house hacking in any other Texas city, it’s worth doing a little extra research to understand the extra tenants’ rights or regulations in Austin to make sure you understand the full picture.
Even with Austin being so tenant-friendly by Texas standards, this city is still going to be very landlord friendly in comparison to the statewide rules from states that are known for being tenant friendly.
Austin Demographic Data Analysis
The 6 demographic data points that we’ve learned to use when analyzing a market are population growth, income growth, property value growth, crime level, crime change, and job growth.
When it comes to these six metrics, this is how Austin compares to our benchmarks:
|Data Point||Benchmark (since 2000)||Austin|
|Property Value Growth||40%||213.2%|
|Crime Level||< 500||302.3|
|Crime Change||0% or declining||-30.4%|
Overall, an Austin house hack looks quite good based on the 6 metrics above that we analyze. It has met, or exceeded, every single one of our benchmarks, and the increase in property value growth is just eye-popping because of how good it is.
The biggest limiting factor in Austin is not the demographic data, but rather the pricing (for most people). It can be hard to find a good affordable deal in Austin because the demand heavily exceeds what is generally available.
Just take a look at this 2019 data released on the average property values found in Austin:
- Median Value All Housing Units $465,905
- Median Condo or House Value $378,300
- Detached houses $481,494
- Townhouses $377,002
- 2-Unit Structures $439,394
- 3-4 Unit Structures $296,080
- Mobile Homes $150,504
Those are huge numbers, as even mobile homes are coming in at many times what they cost in many other urban locations even within the state of Texas.
That is a fairly high barrier, even before taking into account things like property taxes and the cost of living for a city like Austin. But with an average rent of $1,334 a month, it’s worth the effort to find a property that can hold one or more roommates to house hack that property in a market with over 213% value growth the past 20 years.
5 Strategies for House Hacking Austin
There’s never any shortage of people looking for a rental in Austin whether short-term, long-term, or an Airbnb style of rental agreement. Because of this there are some great options for using house hacking as a strategy for getting into, and profiting from, this hot market.
Fund with FHA Loan
Because price is going to a major obstacle for many investors when it comes to buying real estate in Austin, finding a way to get around the massive upfront costs is important. If you haven’t bought a house yet, an FHA loan can be one of the best options out there.
An FHA loan requires only 3.5% down as opposed to 10% or 20% that most banks are going to require for a conventional mortgage.
This can be a great way to get your foot in the door with a good property that you can’t afford the down payment to, but could afford a lower down payment. House hacking after buying that property then helps with making the monthly mortgage payments.
Fund with a VA Loan
Veterans have the option of taking advantage of a VA Loan to help with getting a loan they can afford to buy a house or other property. These loans are a major benefit of service in the armed forces, and contrary to what many believe, it’s okay to house hack with a property bought with a VA loan.
This is a great option for individuals recently out of the military who qualify and might be one of the best ways to get your foot in the door for an Austin home.
The Classic Roommates House Hack
The classic house hack strategy of purchasing a house and renting out rooms, or finding a duplex or triplex and renting out the other units. The challenge in Austin is going to be finding affordable or reasonably priced property that doesn’t already have dozens of bidders lined up.
Checking the MLS for deals is crucial, as is checking out less conventional resources like local Facebook groups, Craigslist, or even taking walks in neighborhoods of interest in the off chance that you can spot a “For Sale By Owner” sign.
Finding a good deal and closing on it fast is extremely important as a market as hot as Austin will have people always looking for good real estate. The competition is fierce so if a good property is lined up where house hacking can work, it’s important to jump on it.
Airbnb Austin House Hack
The first step for house hacking via the Airbnb route in Austin is to make sure you are properly licensed to do so. Unlike most Texas cities, to rent in Austin you must acquire an operating license as a short-term rental.
This is an absolute requirement to legally use a property for short-term rentals in the city of Austin.
The total cost can vary as there are multiple application fees, but according to the Austin Monitor the cost for a license is $643 for the first time and $355 annually.
This can seem like a lot up front, but it’s well worth the cost. Austin is incredibly popular with tourists every time of the year. Home to the University of Texas, there are always families and alumni looking for temporary housing in addition to major world famous festivals like South by Southwest.
Austin is the Live Music Capital of the World and their Greenbelt of hiking trails, protected woods, and parks throughout the town attract even more visitors.
The Airbnb hack is one that is worth considering both full-time or part-time (like opening up for major local events) to help supplement your house hacking income.
Check out this neat, obtainable property in Austin that could be used as an Airbnb:
Look at Nearby Round Rock
Although not technically in Austin, Round Rock is a commuter city just a little to the north that has plenty of attractions of its own. A popular commuter spot, this allows people to be very close to everything Austin has to offer while not having to deal with problems like higher crime rates or famously bad traffic.
The prices, while not cheap, are also much more affordable than the main city of Austin. Yet properties in Red Rock remain in demand because the city has plenty to offer in addition to being a natural commuter city for Austin.
House hacking Round Rock can be a great way to benefit from the Austin area real estate market when you’re unable to find a good deal in the main city of Austin that makes sense.
If you’re struggling to find an Austin property that meets your needs for house hacking, then consider nearby Round Rock as a great possible alternative that still gets you adjacent to the Austin market.
4 Tips for House Hacking Austin, TX
Austin can be a challenging market for beginning real estate investors, but the potential here is too good to ignore. For many looking for cash flow, the Airbnb strategy may be most successful as Austin is a popular vacation destination that sees short-term rentals in high demand throughout the year.
The additional cash flow from Airbnb can help offset the higher purchase prices in Austin.
There are some important tips for helping to navigate the Austin real estate waters:
- Get creative in finding properties – there is so much competition that relying on one source is going to result in disappointment
- Know your funding options beforehand because it’s important to be able to make an offer fast
- Consider blending long-term rental and short-term Airbnb to maximize your profits
- Network and ask around as many of the best deals to be found are by finding out about an off-market deal before others in Austin
If you want more insights into someone working in the Austin real estate market right now, this Apple Podcast episode is with a house hacking investor figuring out how to make house hacking work with new constructions in the city of Austin. It’s a fantastic listen!
Overall, Austin is a great city. If you’re moving to the area, or you already live in the area and you’re just doing research, you now know house hacking Austin could be a great option.