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San Marcos Real Estate Investment

Top among the reasons we love San Marcos is that it has a wonderful and vibrant real estate market and is also very safe. It also stands out because it’s unlike any of its neighbors — Austin to the North and San Antonio to the South– where you must remain cognizant of the areas where you want to invest in rental properties.

Arial view of a downtown San Marcos Texas
Written by Victor Steffen
  / February 8, 2023

Victor Steffen is a seasoned Realtor and real estate investor in central Texas with years of experience and over 130 deals closed in the last 12 months.

Real Estate Investing Performance In San Marcos

As seen above, San Marcos has a pretty good market, which even the most cautious of investors would consider safe for investment purposes. This aside, you probably want to know what an investment in this town can net you. We have provided the table below to guide you on what to expect based on how much and what you invest in.



Avg Purchase Price Avg Cap Rate Avg Cash on Cash Return Avg Cash Needed to close
Commercial 5+ units LTR na na na na
Short Term Rental (SFH) 275k - 350k 6% - 8% 8% - 11% $75,950 (furnished)
STR (2-4 Units) na na na na
Long Term Rental (2-4 Units) 150k - 175k per door 3% - 5% 2% - 5% $45,150 per door
Long Term Rental (SFH) 250k - 325k 2% - 4% 2% - 4% $62,500
Househack (2-4 Units) 150k - 175k per door n/a n/a $12,500 per door
Househack (SFH) 275k - 350k n/a n/a $16,325
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Tips on Where to Buy Investment Property in San Marcos

San Marcos is safe for investment and has a high-quality inventory in almost all its neighborhoods. Over the years, we have learned that the location you settle on for your investment will depend on the type of strategy you intend on executing and not so much on its prevailing street-by-street demographics.

Aside from the congested intersections close to I35, there are no other neighborhoods we would say or recommend avoiding by an interested investor. That’s how safe San Marcos is, making it a potential long-term gold mine for investors who know what they want in a rental property.

Main Activities/ Attractions/ Employers of The San Marcos Area

Top among the reasons we love San Marcos is that it has a wonderful and vibrant real estate market and is also very safe. It also stands out because it’s unlike any of its neighbors — Austin to the North and San Antonio to the South– where you must remain cognizant of the areas where you want to invest in rental properties.

San Marcos is safe for investment and has a high-quality inventory in almost all its neighborhoods. Over the years, we have learned that the location you settle on for your investment will depend on the type of strategy you intend on executing and not so much on its prevailing street-by-street demographics.

Aside from the congested intersections close to I35, there are no other neighborhoods we would say or recommend avoiding by an interested investor. That’s how safe San Marcos is, making it a potential long-term gold mine for investors who know what they want in a rental property.

Success stories investing in this area

“Used Victor in finding and purchasing my first investment property. Victor and his team were knowledgeable in providing help along the way especially toward the end while getting everything squared away.”

Investor

Logan Hicks

Strategy

Long Term Rental

Victor was an awesome realtor! We were first time investors in Texas and he was very responsive, experienced, and pleasant. Every question we had he answered promptly and from start to finish Victor guided us thorough the whole process and made the buying transaction as smooth as possible for us! You will not be disappointed by working with Victor Steffen, thank you Victor!

Investor

Janeth Quintero

Strategy

Long Term Rental

Investment Strategies for the San Marcos Area

Image showing beautiful houses under the beautiful San Marcos skyline

San Marcos is a booming STR market, especially for investors who can grab some river frontage and tip-toe their way through the maze of STR regulation. There are also large tracts of new or like-new construction single-family homes that you can acquire for under 300K and lease to willing tenants within a few days for between $2K to $2,500 per month.

We consider it to be the perfect BEAF (break-even appreciation-focused) market, where an investor can easily record positive cash flow. For this, they would need to find a single-story, single-family, four-bedroom, 1800+ sqft home in a well-maintained subdivision with modern finishes for under 325,000.

San Marcos is actually the first market that Victor and his wife decided to invest in when they first arrived in Austin and has remained a spring they return to whenever possible.

The town has a modest multi-family scene, and it’s not uncommon to find older large quadplex buildings and several duplexes hitting the market from time to time. But truth be told, these happenings are rare at best, with the multis close to Texas State being overpriced due to their perceived high value. Multis are best for investors specializing in student housing.

 

Is San Marcos a Good Real Estate Investment?

San Marcos sits just south of Austin, TX- on the I35 corridor and just north of San Antonio, TX. Besides being sandwiched between two of Texas’ largest metros it also has a thriving economy of its own right. There is a major university with nearly 40,000 undergraduate students (Go Bobcats), a variety of asset types and management strategies to choose from, as well as purchase prices which make it attractive to new investors looking to take down their first deal.

Interstate 35 is the main artery connecting central Texas cities. It runs from the Dallas Fort Worth metroplex in North Texas, south through Austin, and continues into San Antonio. There are 70 miles between Austin and San Antonio. San Marcos is one of two main cities at the epicenter of this burgeoning Austin-San Antonio metroplex.

Since there is a major university, student housing is a viable investment strategy here and still offered at an affordable price relative to the student housing units surrounding The University of Texas’ Austin campus. Another strategy we love in San Marcos is new construction long term rentals. We like to call these BEAF plays. BEAF stands for Breakeven, Appreciation Focused. We look for 0% cash on cash return in these markets. Why? Because as long as we focus on buying high quality inventory, in great neighborhoods, with low vacancy, and we walk into the asset at a 10% – 15% discount we know we’re sitting on a great deal with a lot of upward pressure on rents! Year 1 may be 0% cocr. But we know the area is increasing in value. Year 2 after a rent bump we might be $100/ month positive. And this continues year after year. The home takes care of itself with minimal additional maintenance from the property owner. Most property owners can handle managing these units on their own since there are so few maintenance items which allows them to save that 8-10% management fee. And all the while your asset is appreciating aggressively in value since you bought in a high growth market. We love 0% cocr when done right! San Marcos offers a lot of new construction inventory at affordable prices and in high growth pockets. It’s a great BEAF market.

 

Is it a Good Time to Invest in San Marcos?

It’s a good time to invest in San Marcos because you have record setting growth the cities both to the north and south of this community. Austin’s population has doubled every 25 years since the city was founded and San Marcos continues to benefit from that expansion. At the time of this writing (February, 2023), America has seen an approximately 10% contraction in real estate sale prices and decreased bidding pressure for all asset types. Since the Covid boom began in March, 2020, it has been very difficult for investors to pick up any high quality or recently built inventory. That asset type was flying off the shelves with multiple offers and many sellers were not considering investor offers. That has changed and now we’re seeing investors offered the same incentives to purchase that cash home buyers were offered through 2020 and 2021. It’s a good time to walk into equity on some beautiful inventory and stock up on your long term holds.

 

Best Neighbourhoods to Invest in San Marcos

If you are targeting a student housing strategy you’ll want to stay West of Post Rd and target The Hills (Forest Hills, Ridgeway-Hillcrest, Spring Lake Hills). There are great new development single family home opportunities if you travel south of San Marcos along Texas Highway 123. There are new construction communities expanding throughout the Redwood area and all around the San Marcos High School (Go Rattlers!). Redwood and the new build communities along Staples and Old Basrop Rd are terrific markets for long term buy/ hold opportunities with low vacancy.

Financing Information for San Marcos Real Estate Investors

If you’re looking for financing, you’ll be glad to learn that JJVM can finance owner-occupied loans for single-family or house hackers’ investments. Such a loan will attract a 20% down payment.

 

Positive Cashflow in Appreciating Markets

Ready to invest in central Texas real estate?

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Positive Cashflow in Appreciating Markets

Ready to invest in central San Marcos real estate?

Schedule a call