Some exciting developments are on the horizon for big names in Austin. Between new construction at Apple’s campus in Northwest Austin, several expansions for the Tesla Gigafactory, and a mixed-use development rising up east of the Austin-Bergstrom International Airport, Austin commercial real estate is skyrocketing in 2023.

Apple NW Austin Campus Construction

Apple will be beginning construction on several huge developments at its Northwest Austin campus. In early January 2023, Apple filed plans with the Texas Department of Licensing and Regulation to construct a four-story and five-story building, each costing roughly $120 million.

Tesla Gigafactory Expansions

Big things are coming to the Tesla gigafactory in east Austin this year. In 2023 alone, the company has filed plans for future construction at the gigafactory, estimated to be more than $775 million in cost. The last filing (the fifth in 2023 so far) appeared on January 10th for a project called Die Shop. This development aims to construct a new building on an immense 107,468 sq. ft. lot, costing roughly $59 million. With the addition of this new Die Shop project, Tesla’s total footprint of projects will reach 1.5 million square feet.

Colorado Bend Industrial Mixed-Use Development

A massive mixed-use development is on the horizon for Southeast Austin. According to a recent filing, the first project for this development will be Colorado Bend Industrial, just off state highways 71 and 130. The one-story Colorado Bend Industrial building will span 453,658 square feet and cost $44 million. Construction is set to begin on May 15th, 2023, and is expected to be finalized one year later, in 2024. 

This is just the tip of the iceberg when it comes to commercial construction in Austin. 2023 is poised to be an eventful year for our favorite city. Stay tuned for future Austin developments by following my blog or contacting me directly at tmcneil@kw.com.

September has been an eventful month – with a long-awaited change in season, the beginnings of countless thrilling fall events, and the highly-anticipated news of the soon-to-be tallest tower in Texas, Waterline Tower. While construction began on this project in mid-June of this year, its completion is not anticipated for three to four more years. 

Upon completion, the 74-story skyscraper will surpass the state’s tallest building record of 1,002 feet, currently held by the JPMorgan Chase Tower in Houston. The Waterline Tower will be co-developed by two companies operating out of Texas, Lincoln Property Co. and Kairoi Residential LLC.

The Space Inside The Waterline

While a large portion of the retail space on the first two floors remains unclaimed due to the longer timeline of this project, the following 13 floors have already been booked with 1 Hotel Austin, a luxury hotel featuring a ballroom and rooftop pool.

The next 27 stories will contain roughly 700,000 square feet of office space. Spectacularly, this office space will only take up one-third of Waterline’s entire height. To further entice the Austin workforce, the office space will be created with large corporations and smaller technology companies alike in mind. 

Lincoln Property Co.’s Seth Johnston remarked “In Austin, Texas, you don’t go only corporate or only tech…Big corporations and tech companies intermingle every day, so what we tried to design is a building that can suit both and be as flexible as possible.”

Residing above the impressive office space will be 33 floors consisting of 352 luxury apartments, with many details still to be determined.

What This Means For Austin

Downtown Austin has been booming, drawing attention from across the country. Now, with not only a new record-setting skyscraper but with additional office, retail, and residential space, the Waterline Tower will be an incredible contribution to the city. 

Katie Keenan, CEO of Blackstone Mortgage Trust, who provided the construction loan for this property, commented on the mission of the Waterline Tower: “We continue to see strong demand for new, best-in-class residential, office and hospitality assets in high growth markets like Austin and are excited to support this trophy, mixed use development that will make a meaningful contribution to the community as well as the Austin skyline.”

As we learn more about this fascinating development, feel free to reach out. I always welcome discussions about this incredible community and what the future holds for us. 

One of Austin’s most prominent tech giants is making a move. That’s right! IBM has recently filed for new office space in Austin. With two offices already situated near The Domain, often fondly referred to as Austin’s second downtown, IBM seems to be on the move to expand. First arriving in our lovely capital over fifty years ago, the renowned company quickly established its presence in Austin and has stayed ever since.

IBM’s Vice President of Enterprise Operations and Services, Joanne Wright, reported that IBM would consolidate this upcoming space with its two already-established offices into a cohesive hub of operations in the city. “We can see an opportunity to bring our systems team, our software team, our marketing teams — all teams that support IBM in the Austin city limits — together in one single team.”

Developments In The Domain

With The Domain poised as the nesting ground of even more IBM developments, residents can expect a boom in the surrounding areas. One of IBM’s landlords near The Domain, Brandywine Realty Trust, has extensive plans for the site. The Broadmoor office campus – which currently houses IBM – is one of many buildings owned by Brandywine, and they have big plans for the area. Refreshed buildings are on the horizon for Broadmoor, along with an expansion of Brandywine’s well-known Uptown ATX. 

Stonelake Capital Partners, IBM’s other landlord in the Austin area, has also been at the core of various developments in The Domain. With plans to upscale the area, Stonelake has been making continuous improvements. One of their recent developments, A Domain office tower, has gone on to attract yet another tech titan, Paypal, to the area.

Looking Forward

Because of these upcoming developments, competition for office space in The Domain has been high. Many companies look to Austin’s second downtown as a prime location to place their roots, further establishing The Domain as a hub of technology and innovation. 

These improvements and developments to the area can mean great things for the surrounding neighborhoods, attracting new businesses and creating a thriving environment. As always, don’t hesitate to reach out with any questions or curiosities about upcoming developments coming to the area.

Closing day is, arguably, the most exciting day in a real estate transaction. It’s the day where you get to take possession of your new asset or collect proceeds from the sale of your home. In a standard residential transaction, this may seem like another term or step in the process — one that is 30-45 days away from the contract’s execution date. But did you know that strategically choosing the closing date could provide you with up to an extra 30 days to pay your first mortgage payment? Find out how you should be leveraging your closing date!

You see, your first mortgage payment is due on the first day of the second month following your mortgage closing. Meaning, if you closed on June 15th, your first payment would be due on August 1st. Paying your mortgage differs slightly from making rent payments, which are typically paid for the upcoming month. Mortgages are paid in arrears, which means you’re paying for the previous month.

For this reason, closing early in the month can provide both investors and homeowners more flexibility with their cash flow. As an investor or a homeowner, it could provide you a full 60 days after closing before your first payment is due. This could be extra time you use to take care of make-ready repairs, find and vet the right qualified tenants, or purchase some appliances or furniture. It can also significantly change the numbers on your cash flow for a rental property if you can find and place a tenant within the first 30 days. The prorated rent + the first month’s rent would all be a net income because there is no MPI expense until the following month.

Utilizing this strategy can also help you in a leaseback scenario with multiple offers. Oftentimes sellers expect a free leaseback or look for one when considering offers. Paying a mortgage while someone else occupies your new home could be a tough pill to swallow for a lot of buyers. Aligning the closing date to be on the first of the month with the leaseback termination date to be on the first of the following month could provide you with a win-win scenario that gets you to an accepted offer. That’s because the first payment wouldn’t be due until 60 days after closing.

As you can see in the chart below, the earlier in the month your transaction closes, the more time you have to make your first payment. While sellers will often prefer the fastest close possible when reviewing offers, it may be a term you can negotiate in a give and take scenario. Using this payment schedule, you can leverage your closing date to maximize your cashflow flexibility.

I am happy to help you leverage your closing date to work for your schedule and your budget. As your real estate advisor, I put my knowledge and expertise to work for you, and I offer all kinds of resources, including a deal calculator. If you have any questions, please contact me at tmcneil@kw.com or (970) 627-7392.

If you’ve been pursuing your passion for investing in real estate, you may have heard, “Your home or the house you live in is not an investment — it’s a liability.”

While this statement at its core can be true, it doesn’t mean that your primary home can’t be an investment. All it takes is the right plan.

Typically, when buying an investment property with traditional financing, the bank will require a 20% down payment. Which, depending on your market, could be anywhere from $20,000 – $100,000+. This is where purchasing a home as a primary residence can have a huge advantage, especially for those just starting out. You can put as little as 3.5% down on an FHA loan as long as you live in the property for a year. Taking advantage of that opportunity can reduce your capital investment tremendously.

But how do you make that primary residence an investment if you live there with no roommates? You do so with the BLRRRR method.

Now, you’re probably thinking BLRRRR? Doesn’t he mean BRRRR? No, that is not a typo. While the BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat) is tried and true, it requires a hard money loan or a 20% down payment and a higher interest rate.

The BLRRRR method (Buy, Live-in, Rehab, Refinance, Rent, Repeat) is a longer investment (2-3 years), but it can allow you to stretch your capital the furthest while still having ownership rights and taking advantage of a lower interest rate and a significantly lower down payment.

Breaking down the BLRRRR Method

1. Buy

The most important step of the process is buying the right property. Look for the path of progress in your market. Where are the new highways extending to, what businesses or companies are coming to the area, what does future public transportation growth look like? Targeting areas that are along this path of progress will maximize the probability of your home appreciating over the 2-3 year period you plan to live there. Look for a home with good bones and mechanical systems that can be updated with little effort and knowledge or a home that has a flexible layout and lot that would allow for conversion or extension of living space.

2. Live-in

Living in the home, house hacking, and renting out additional rooms right away is a bonus to this strategy but not required. Living in the home provides a few advantages, like a lower interest rate, lower monthly payment, and tax benefits depending on the state you live in. States like Texas, Florida, Iowa, Kansas, Oklahoma, and South Dakota all have a homestead tax exemption, which puts a cap on how much your property tax bill can change year-over-year and reduces the assessed taxable value of your home. This means you’ll pay less property tax vs. a traditional investment property. Additionally, living in the home for 2 of the last 5 years will protect up to $250K (single) and $500k (married) equity from capital gains tax if sold according to the current tax code.

3. Rehab

The rehab portion is at your own pace, as you won’t be under the gun to pay off that hard money loan. While this works best for DIY’ers, it doesn’t mean you can’t succeed if you hire contractors. Your goal during the rehab is to work on projects in phases and not over-renovate. A budget of $5-10K per year in upgrades can go a long way. When renovating, have your future renter in mind. What products are durable, what appliances/ fixtures are energy efficient and low maintenance? What can you add that will attract the best tenants? These are all things that should be considered in step one and executed throughout your occupancy.

4. Refinance

This is where the fun starts. It’s now 2+ years since you bought this home, and you’ve been making cost-effective, functional updates. The house has appreciated 3-10% each year (depending on your market), plus you’ve added value to the home with your renovations — let’s call that 20% and say you got close to dollar for dollar back inequity on the rehab costs (it will be more for DIYers). You are now in a position to either pull a Home Equity Line of Credit (HELOC) or refinance and pull your initial investment out. Both those options allow you to access up to 80% of the appraised equity in the home. For example, let’s say you purchased a home in Austin, Texas for $280,000 with $9,800 down (3.5%), you spent $20,000 in upgrades over two years that increased the value of your home by $40,000, and the path of progress has reached your neighborhood, your house has now appreciated 8% both years. That same house is now worth $370,000. The bank will now allow you to refinance or open HELOC because your equity is around 30% despite only putting 3.5% down. You can draw on up to 80% of the equity, in this case, $72,000, giving you a 20% down payment for your next property

5. Repeat / Rent

After pulling out your initial capital investment of this property with a refinance or a HELOC, you can now use that equity to repeat this process. You can either upgrade to a larger home at essentially the same cost as your first home because of a higher down payment, or you can find another property to repeat the process, allowing you to collect cash flow on the first property while it appreciates. If and when the home value increases, you can continue to use that equity to purchase other investments. This is how you build wealth.

The BLRRRR method is my favorite way for anyone getting started in real estate investing because it allows the investor time to learn, put their team together, and get started with limited capital and risk. If you have any questions about investing in real estate, please contact me at tmcneil@kw.com or (970) 627-7392.