Real Estate Investment and Income Property in Austin 

Gross Rent Multiplier, or GRM, is a quick rule-of-thumb for analyzing small income properties
like single-family homes or duplexes that don't have large, fixed maintenance budgets or overhead. 

Price divided by Total Annual Income gives you Annual GRM.  For example, Alex, a duplex priced at $150,000 with $15,000 total annual income ($1,250 monthly rent x 12) has a GRM of 10 ($150,000 / $15,000).  The same duplex at $135,000 with an annual income of $15,000 has a GRM of 9 ($135,000 / $15,000). 

Until recently in Austin, GRM's of about 9 like the scenario above were pretty typical for solid cash-flowing duplexes, and anything lower is better, indicating higher rent revenue for the purchase price.  With foreclosures on income properties escalating, there are many plexes coming available that are generating $1300-$1500 each month in rents and are being priced between $80,000 and $110,000, creating many great opportunities to own rental property. 

The catch, as there often is one, is that most of these are bank-owned foreclosures or short sale properties that will see heavy competition and often take many months of waiting before the bank decides which offer to accept.  And once the property is foreclosed on the tenants are evicted, so the plex may be empty when you buy it and will likely require some make-ready before leasing it again.  So if you're patient, and have solid credit and 20% to put down and a few thousand for repairs, I can help you find phenomenal income-generating property around Austin.

Many newer duplexes or upscale prestige properties have much lower income to purchase price, though they also have less required or deferred maintenance.  They won't make you as much money, but they will be in better condition.  The greatest return usually goes with the greatest risk, and as any investor will tell you, the "ugliest" properties often generate the most cash flow. 

 
In the Austin area, the pecking order for property quality is single-family residential (SFR) homes first, followed by duplexes, then fourplexes.  Single-family homes usually are in the best condition, better areas, and have longer-term tenants, but get the least relative amount of rent, plus, if it's vacant it's completely vacant.  Fourplexes will have the lowest per-unit revenue, highest turnover, maintenance and upkeep costs, and highest overall cost of ownership, while seeing the least appreciation, but you'll rarely be completely vacant.  They will, however, usually provide the highest monthly cash flow for the purchase price.  Long-term appreciation or short-term cash-flow, everyone has their own investment goals and strategies. 

For example, a single-family residence may cost $160,000, and get $1,100/month ($13,200/year) in rent for a 12 GRM.
A duplex may cost $135,000, but get $1,400/month ($16800/year) in rent ($650 one side, $750 the other) for an 8 GRM.
A fourplex may cost $160,000, but get $2,000/month ($24,000/year) in rent ($500 x4 units) for a 6.7 GRM.
 

 
Texas has higher property taxes than most states.  This is important because if you're coming in from other states, our higher property taxes will mean it will take a little more money down to make an income property break even from what you're used to.  Texas is only one of three states that has no state income tax, so the state gets much of its revenue from property and sales taxes.  Expect annual property taxes in and around Austin to be about 2.5% of the appraised property value, though this varies by county and neighborhood.  Manor, for example, has had the highest property taxes in the area at around 3.2% 

So if a property is valued by the city and county at $140,000, the tax burden will be around $3,500/year on top of your PI. 
($140,000 x 2.5%) / 12 = $292/month in property taxes.