The Live Well Team by Perry Henderson Central Texas Investor Frequently Asked Questions
Why investors like 1-4 unit investment property
Why investors like Central Texas
Why have investors from around the world worked with The Live Well Team by Perry Henderson?
The benefits of a well rounded portfolio
Can I qualify for investment property?
How much will it cost to get started?
Typical Austin Neighborhoods
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Why investors like Central Texas? Return To Top

Central Texas is Pro-Business

Austin is at the heart of a dynamic five-county region recognized for its talented workforce and superior business environment. Forbes Magazine confirms what businesses already know-that Austin is the Number One place to do business and advance your career. Austin's well-educated workforce, overall low business costs and available, affordable commercial space offer unparalleled opportunity for business growth.

Austin is considered one of the "Cities of Ideas" along with Seattle, San Francisco, and Portland. High tech knowledge-based industries such as semiconductors, software, internet, biotech, wireless, and nanotechnology make their home here. Austin based Dell Computer is recognized as the world's leading computer manufacturer.

As these industries continue to grow, they will seek to locate in cities with a mixture of high quality of life (including an excellent climate, parks, natural beauty, and a strong cultural base), relatively low cost of living, and with a strong base of highly educated employees - all strong characteristics of the Austin and central Texas areas.

Texas, with its business friendly environment and lack of a state income tax is increasingly considered one of the leading states in the country to start as well as relocate a business (as many California firms have already done).

With all of this projected growth (doubling of population by 2025), new residents are going to need housing. This will serve the dual purpose of increasing rental income for investment property owners as well as increasing the equity value of their investments.

Because Austin invests heavily in "smart growth" initiatives, developers concentrate heavily on infill development - a positive thing for property investors, because suburban sprawl is de-emphasized, and inner city real estate investments appreciates on a more similar pattern to geographically supply constrained areas such as Los Angeles, San Diego, New York City, San Francisco, and Boston.

Central Texas Has Boomed Before and Will Boom Again. In 2001 it was not uncommon for a client to make an offer on a house and find out that they lost out because five other bidders made an offer before – every one of them over the asking price for the house.

This period marked the tenth year of an economic expansion in Austin that saw the median home value double as well as average rental values for residential properties skyrocket 80%.

There were three major factors that sought to “dim the lights” of the area residential housing market around 2001:

Interest rates continued to fall through the floor, allowing many renters to purchase their own homes (leading to decreased rental values)

The dotcom craze lost its luster leading to the demise of many local firms and their accompanying high paying jobs

Class A multifamily builders all witnessed the 98% occupancy numbers of 2000 and decided to build like crazy -- further increasing supply just when demand was falling. Yet despite these factors, 1-4 unit investment property has been remarkably resilient. Even with the economic uncertainties of the past few years median home values have risen every year since and in some areas, 2-4 unit property neighborhoods have downright exploded in value.

As of early 2005, economists have measured marked increases in new hirings, increased net migration to the city, and an overall dramatically improved economic outlook moving forward. It is highly likely that the market has “turned”, and this is the ideal inflection point to jump into the market and strap in for an exciting ride.

Central Texas is a Great Place to Live

The Greater Austin area ranks high on the livability scale, which is why Austin frequently ranks high on national lists of Best Cities. In 2003, for example, Austin came in fourth on Travel & Leisure’s list of best loved cities, first on Forbes’ list of Best Cities for Singles, and third on Hispanic Magazine’s list of Best Cities for Hispanics. In 2002, it was in the Money Magazine’s Top !0 list of Best Places to Live. Lots of reasons are given-a cosmopolitan atmosphere without big city hassle, great scenery and recreational opportunities, a reasonable cost of living, a great music and cultural scene.

Austin is nestled among the rolling hills and lakes of Central Texas, the seat of state government, an educational Mecca with seven area universities and an entertainment complex that includes the best of live music, the arts and all the fun of the great outdoors.

There are simply no other markets in which the cost to “get into the game” is as low as it is in Austin combined with a market that so many experts feel is poised for tremendous growth in the coming years. Forward thinking investors that jump on board now are likely to reap substantial benefits in the future.

Why investors like 1-4 unit investment property Return To Top
Real estate is an important part of a balanced portfolio for any investor or prudent individual saving for their retirement. Some of the benefits of real estate investment:

Highly leveraged - potentially recognize large gains with relatively small investments (0% down loans in some cases)

It's tangible - see it, touch it, and live on it

Tax benefits through depreciation and mortgage interest expense deduction

High current income

Stable long-term returns

Low volatility

Inherent inflation hedge

Predictable cash flows

Great opportunities for good deals due to inefficiency of real estate market place

Every real estate market in the United States has different types of residential property that has become predominant for various reasons (geography, economics, cultural, historical, and political influences). For example, fourplex properties in San Diego have been some of the most lucrative investments in the U.S. This has much to do with the geographic constraints of that market (mountains to the east and the Pacific ocean to the west) combined with the tremendous demand to live in a great climate and booming economic center. Fourplexes represent the ideal way to increase density of housing in a tight market and have seen their value rise accordingly.

Meanwhile, Las Vegas has seen a practically surreal boom in single family home values over the last five years. It turns out that 110 degree summer weather doesn’t deter many retirees and young families from moving out into the dessert. Investors who purchased single family homes in Las Vegas (as well as Phoenix and other western markets) made out tremendously well over the last few years.
Central Texas’ high point from an investment perspective is duplexes (2 unit properties). With over 12,000 duplexes in the area scattered in practically every neighborhood from North to South, East to West - there is a highly liquid market. Duplexes offer tenants and investors the best of both worlds – the yard and neighborhood of a single family house, without the common walls and hassles of living in an apartment building.

40% of Austin duplexes are purchased by “owner occupants”, creating a market that is tied tightly not only to the value of single family homes in the area, but also to the investor market – since 60% of duplex owners (many out of state) purchase the properties for long term appreciation value.
Though The Live Well Team by Perry Henderson has placed investors in single family home investment properties, these types of investments generally do not offer the same long term appreciation potential or the higher rents of duplexes. To wit:

Single family homes in the central part of Austin are very expensive for the region ($300-$500k and up), yet do not garner much rent ($1700 for a $300k house is about the average). An investor would have to see stratospheric equity appreciation in their investment in order to make up for the negative cash flow that they would surely incur over the life of the investment.

Single family homes in the outlying parts of the city are certainly less expensive (new construction starts as low as $90k in some areas). And though rents for these properties don’t have to be as high to pay down debt service, they generally are not high enough to cover the entirety of the monthly payment (principal, interest, taxes, insurance, maintenance, vacancy, and management expense). Further – because we live in a massive state with farmers in every direction who are all too happy to sell their land to a new homebuilder – we have little in the way of supply constraints. Therefore, it’s likely that it will be many, many years before the new home sites on the periphery of the city see any type of substantial appreciation.

We’ve also put investors into fourplexes in affluent areas of town (these only rarely change hands). But in general – fourplexes do not represent as strong an investment in Austin as they do in other areas of the country. A lot of out of state investors are surprised to hear this, but there are good reasons:

There hasn’t been a fourplex built in Austin in over 20 years – so deferred maintenance tends to be higher and they tend to be in worse areas

It’s more expensive to finance a fourplex – meaning more money down, less leverage, and higher interest rates

Insurance is almost twice as expensive

Vacancy expense is higher – why would a tenant choose a property with all of the hassles of an apartment with none of the amenities (particularly if the area wasn’t very strong)?

Duplexes, on the other hand, tend to cash flow positive immediately with low down-payments, have lower insurance costs, lower vacancy, and higher resale value and equity appreciation. Rents for duplexes increase quicker than any other residential real estate asset class in the area as the economy improves.
The benefits of a well rounded portfolio Return To Top
Investment advisors will typically recommend a balanced investment portfolio including stocks, bonds, real estate, and cash. The Live Well Team by Perry Henderson similarly advises clients to diversify their real estate holdings.

For example, for a client who has $50,000 to invest in the Central Texas market, it would be prudent to consider the diversification of his or her holdings. Assuming the client was to put 10% down on three properties (generally the lowest down-payment that still allows for a positive gross cash flow), we might advise the client to diversify as follows:

Geographic diversification – there are several growth areas in the Central Texas market that can be identified down to the neighborhood. One duplex in each of these keys areas allows the investor to hedge their bets and insure that no matter which area of growth sees the largest spike in equity appreciation, their property is like to be in the path.

Cash flow vs. equity appreciation diversification – there is a scale in residential rental property in which at one end lies property that throws off cash in every direction. Unfortunately, with that stellar cash flow often comes increased maintenance and vacancy expense (these properties aren’t generally in the fanciest neighborhoods).

Further, the properties that cash flow the best now generally tend to be the least likely to appreciate substantially in terms of their equity value. We will often look to offset this disparity by putting clients in a range of properties – some that do very well in the cashflow sense, and others that may not cash flow tremendously now, but are far more likely to appreciate from an equity perspective over time.

Financing diversification – Low interest only financing and option ARMs are irresistible to some clients. Though our personal investment strategy tends to focus on 15 year amortizations (ask us!), we recommend in some clients’ cases that they use an interest only or 30 year vehicle on properties that are poised for greater equity appreciation than current cash flow, and perhaps recommend the more heavily debt serviced 15 year terms on properties that are cash flowing more heavily now.
Why have investors from around the world worked with The Live Well Team by Perry Henderson? Return to Top

The experts at The Live Well Team by Perry Henderson are experienced, educated, and knowledgeable when it comes to Central Texas investment property. It takes more than a real estate license and a home office to understand the macroeconomic investment climate and trends that shape the direction of the market.
We've owned investment property ourselves for many years. We know the Central Texas market inside and out and know what it takes to locate the best properties in the neighborhoods that are most likely to appreciate - and then negotiate the best prices. Our relationships with property owners and listing agents who sell investment property allow us to often negotiate better deals than other buyer agents – they know we bring serious, qualified buyers and professionally execute on our commitments.

We have invested tremendous time and energy into developing relationships with 1-4 unit property owners throughout the city. An increasing number of our listings are “private listings” not available to other agents in the area. We are actively and aggressively soliciting the sale of these properties in the best investment neighborhoods in the area for direct sale to our buyer database. There is no other firm that can bring an investor the wealth of quality 1-4 unit investment property in the area.

We partner with the most experienced professionals in the industry. The The Live Well Team by Perry Henderson team is comprised of the most experienced lender, title company, inspectors, appraisers, transaction coordinators, insurance providers, and property manager in the business. Clients regularly report to us that the experience of working with The Live Well Team by Perry Henderson was the smoothest and most professional real estate transaction in which they’ve ever taken part. We’re proud that more than half of our business comes from referrals of existing clients.

Once you've become an investment property owner, our partner Neighborhood Property Management offers the highest caliber of property management services designed with management best practices and the latest in information technology to minimize vacancy and maintenance expense - and maximize the financial return to our clients.
Can I qualify for investment property? Return To Top
Qualifying for an investment property is easier than many first time investors think. The mortgage brokerage industry is one of the most competitive in the world and lenders are practically tripping over each other to provide financing for borrowers of all means and properties of all types.

We refer our clients to Ascot Mortgage, a professional mortgage brokerage that has originated thousands of loans over the last decade. They are consummate lending professionals, and have creative solutions for almost any possible financial situation. Approximately 90% of our clients use Ascot to finance their investment properties.

The most affordable financing available to real estate investors is (conveniently) for the purchase of duplexes and single family homes. Because our clients purchase property in their own names (as opposed to an SEC-registered fund or limited partnership), they receive the most favorable interest rates available - often only a quarter point or less above the rates that "owner-occupy" homebuyers pay.
How much will it cost to get started? Return To Top
Investors can purchase property with as low as a 5% down-payment. With closing costs, it is possible to buy a cash-flowing duplex for as little as $12,000. In order to receive the best rates, we recommend most clients to consider a 10% to 20% down-payment. Our experience has shown that the investment properties that represent the best investments in central Texas are generally priced between $140,000 and $220,000.
How are you compensated? Return To Top
As Realtors focusing on buyer agency, convention is that the sellers of investment properties pay our fees, not the buyers.
Typical Austin Neighborhoods Return To Top

Central Austin
Central Austin is seeing a revitalization in its housing market, with several loft renovations and the introduction of new housing to historical structures such as the Brown Building. You can find apartment and condominium developments near the Central Business District, the Capitol Complex and the entertainment district, or you can choose to live in the historic communities that surround the University of Texas, where Victorian and craftsman-style homes are available.

East Austin
Diversity among the neighborhoods east of I-35 includes groundbreaking master-planned communities, neighborhoods that sprang up in the first half of the century and homes that reflect Austin's Victorian roots.

West Austin
West of downtown to Lake Travis, neighborhoods range from student rentals, and tastefully updated homes to some of the area's most exclusive environs.

North Austin
Close-in North Austin neighborhoods offer optimal access to the city's north industrial market at an affordable price. Many of the city's new apartment complexes are located in the North Austin area.

Northwest Austin
This area is one of Austin's fastest-growing sectors, drawing services like Seton Northwest Hospital, as well as considerable retail attention.

Far Northwest Austin
Newly developed master-planned communities combine elegant new homes with substantial acreage and terrific access to the lakes, the wealth of retailers at Lakeline Mall and new employment centers.

Lake Travis
As Austin's first and one of its most elegant master-planned communities, Lake Travis offers residents superior access to lake recreation and numerous golf courses.

South Austin
Quirky and a little eccentric, South Austin features the eclectic SOCO shopping district (check out First Thursdays), older close-in neighborhoods like Travis Heights and Zilker as well as the 4,000-acre master-planned community of Circle C Ranch.

Far South Austin
"Bedroom" communities like Manchaca, Buda and Kyle offer country living—from large "spreads" to cozy cottages—within easy reach of the city.

Southeast Austin
Southeast Austin is experiencing a transformation accompanying the airport and Advanced Micro Devices' chip plant.

Southwest Austin
Southwest Austin offers the extraordinary natural beauty of the Texas Hill Country and the challenges of strict environmental ordinances.

San Marcos
The city of San Marcos, south of Austin, is a charming community with a river winding its way through small streets and a historic university reigning on the hill. With shady streets and friendly neighbors, San Marcos attracts many who want to escape the everyday bustle of the big city. Affordable homes are available in master-planned communities.

Round Rock and Pflugerville
Two of the fastest growing cities in the area, Round Rock and Pflugerville offer close proximity to new employment centers as well as newly built homes.

Georgetown
Georgetown is being transformed from a quiet county seat to a bustling hot spot. With the creation of the Sun City Georgetown retirement community, steady growth has given way to an out-and-out boom.