A recent article in the Austin American Stateman reported that the rents of Austin apartments have increased 6.1% from June, 2020, and from December to June the rate of increase was 7.1%. That’s a nice bump if you are the landlord, but not so good if you are the tenant because wages can’t keep up with the increase without a struggle. It’s been my experience that rents can be increased about 3.5% a year for existing tenants without causing the tenant to move “just” because of the increase.
The article quoted Charles Heimsath, a local real estate forecaster who stated that some of the reasons for the rental increases comes from the area population growth, job growth and rising home prices. Heimsath went on to state that renters who may desire to purchase a home simply can’t afford to do so and have no alternative but to rent even with low interest rates.
Regarding the escalating value of Austin area houses, Heimsath stated that he believes the rate of appreciation will slow in the future but will remain strong and that a person who is selling real estate today because they may think that they are at the top of the market “…is pursuing a fool’s errand”.
Sam Tenenbaum, director of analytics for CoStar Group, a real estate data gathering firm, stated in the article that the market is firmly in the hands of landlords as vacancies have fallen to 6.5% from 10.4% since January.
I experienced similar economic dynamics that are occurring Austin when I resided in San Jose, California in the 1980’s when we purchased our first home. The appreciation rate on that home was earning almost as much as I was making. So, I took out a second lien on our home and purchased a rental, and the rest is history. Every experience is different, but with all the businesses relocating to the Austin area, and with all the jobs being created, and with the readers of the real estate tea leaves all being so bullish on Austin, it would seem to make good sense to have Austin area residential rentals as a part of your overall investment program. As always, check with your financial advisors before making investment decisions.