Will Real Estate Ever Be Normal Again?

Then there was a 35-year-old technician in Long Beach, California who bought a house in Round Rock for $ 300,000 last October. In January 2021, it was worth around $ 400,000; in February he bought two more. His winning bids were two of dozen his real estate agent, a former stock trader who now primarily works with retail investors, made unseen, all for at least $ 40,000 above the asking price. “I’m part of the problem,” the buyer conceded to me, even though he wasn’t your stereotypical speculator: even though he was earning six figures, he drove a 2005 Honda Civic and, when I spoke to him, rented a room for $ 900 a month , rather save and invest. (Marked by his graduation in the Great Recession, he joins the popular Reddit movement Financial Independence, Retire Early.) Meant that what he had liked in the first place about real estate investing – its stability and relative slowness – no longer applied . “We gamify real estate investments to the point where it’s almost like throwing money on the stock market,” he told me.

Some Austin real estate agents have positioned themselves to capitalize on all that money outside of town. On a hot 95-degree day in late June, Matt Holm opened the double doors of his Tesla Model X so I could sit in the back seat behind his client Jon, a man who worked in commercial real estate finance in Santa Monica. (Jon asked me to withhold his last name because he didn’t share his moving plans with his friends and family.) During the pandemic, Jon, originally from Madison, Wisconsin, began rethinking what kept him in California. “I’m a little afraid to get involved in LA longer term, just given the political climate, the tax climate and the homeless problem,” he told me.

Jon had traveled to Austin three times in as many months and got a grip on the “Resi” market. He was looking for a house where he could declare his residence in order to take advantage of the lack of income tax in Texas – but he also wanted to live elsewhere for half the year, so he looked for an apartment that he could easily rent and make money from. And he wanted guaranteed appreciation. “I mean, it’s all an investment, isn’t it?” He told me. A friend of his who had just moved to Austin introduced him to Holm, whose filthy blonde hair was pulled back in a straight ponytail. In 2013 he founded the Tesla Owners Club of Austin and proudly described himself as the “Tesla Broker” of the city. When Jon slipped in to look at a short term rental, Matt told me that Jon would like to spend $ 500,000 to $ 700,000, “but he’ll spend 1.3-1.5 when he’s done.”

“Nine million square meters of office space will be built,” said Holm as we drove through the city center. Cranes and glass skyscrapers sparkled above burly buildings of yellow limestone and red granite. (The Austin Chamber of Commerce put a lower but still shocking figure of 6.2 million square feet.) “And it is is built like, it is not occupied. So these jobs are coming. People tell me, oh, you know, we hit the peak. … As for the metrics, the Texodus is not slowing down. We will get a tidal wave. “

“People haven’t even considered the Elon Effect,” he continued, “I can’t tell you how many people say: Oh, Elon is building a factory. No, Elon doesn’t build a factory – this is the headquarters for everything Elon. He didn’t officially announce it, and I don’t know anything behind the scenes, but I can see the people moving here very clearly, and they aren’t factory workers. ”(In fact, Musk made it official in October.)

Holm and Jon spoke the same language. They analyzed each package for profit maximization and gave tips on how to minimize taxes. As Holm walked through a cavernous, tiled, and carpeted two-story building in Travis Heights, Holm suggested that it would make an excellent Airbnb with its many bedrooms. Austin and the state stipulated that the owners could only rent their homestead and only for a maximum of six months a year, “that could be every weekend,” said Holm.

“The investor I know is killing is a system guy,” he continued. “And I told him for four years that he had to get into the Airbnb business and he thought I was going to rip him off with the numbers. And finally he believed me and now has 13 Airbnbs. “