Why Are Prices Surging At The Railyard Condos?

Why Are Prices Surging At The Railyard Condos?

The Railyard condos are unique.  The two low-rise buildings sit on two of the best sites in downtown Austin, and have usually been more affordable than the newer, sexier high-rises.  Part of the appeal is location: situated across from the Austin Convention Center, 100 feet from the MetroRail, one block from Congress Avenue, three blocks from competing luxury towers, the Austonian and Four Seasons.  The Railyard has enviable proximity to most anything in downtown Austin.

Remember last year’s NIMBY fury over Austin’s Short Term Rental ordinance (pdf)?

You would be in good company if you assumed that all of downtown Austin’s condos and apartments were making money on STRs.

You would be wrong, though.  

Downtown condos have home owners associations (HOAs).  HOAs have rules, and in downtown Austin those rules are usually antagonistic to short term rentals.  Breaking those rules could result in a $1000 per day fine by the HOAs.  Despite the fact that the STR ordinance does not regulate apartments and condominiums, last year’s fight with the City of Austin to regulate STRs wasn’t going to impact most of us living in downtown because of these HOA rules. [UPDATE: rules have been revised to cap STR permits in CBD multi-family buildings at 25%]

The Railyard condos are very, very unique.

This past November, just a month after Austin’s new Short Term Rental ordinance took effect, an enterprising Railyard owner recognized the Railyard’s bylaws did not forbid short term rentals and put together a fund to purchase several units.

The investment rationale is simple: opening up your condo as a vacation-rental-by-owner (aka. VRBO) during SXSW, ACL, F1 (just to name just the big opportunities, not to mention conventions) can yield more rent during those events than the total rent from a typical 12 month lease!  Same for Railyard owner-occupants who can lease their place out for a few nights, take a vacation, and make a couple thousand bucks.

The economics of Railyard ownership shifted overnight. Word quickly spread to the owners and a handful of Austin Realtors.  In the previous year (Nov 2011 – Nov 2012), 1bd/1ba units at the Railyard condos were trading at an average of $285/foot, and units with at least 2bd/2ba units were trading at an average of $275/foot. [UPDATE: one year after posting this article, the last recorded MLS sale at Railyard was a building record $415/foot]

Going forward, expect sale prices at the Railyard condos to be 20-25% more than last year, reflecting the new economics of embracing downtown short term rentals.  Owner-occupants are getting in on the action, too.

Offering the flexibility to lease your condo on a short term basis is a privilege that makes the Railyard unique among downtown condos.   This privilege has significant value.

STRs can be a win-win for owners and associations.  The key is balance and monitoring the impact on residents.

The Railyard HOA is smart to approach STRs with reasonableness and attach fees to the process.  These extra fees will help fund their operations, building improvements, and keep HOA dues low for homeowners.  Homeowners, who are also able to capitalize on their property.

I’ll stop short of advocating that all downtown buildings should permit STRs – I don’t agree with that.  However, there are several buildings that should be paying attention to what the Railyard is doing.  It seems reasonable for more HOAs to experiment with loosening their STR rules, monitor the process, use the money for building improvements, and course correct as needed.


[updated 06/01/2014: It has been discovered that Brazos Place Condos at 8th Street & Brazos Street is doing something similar by permitting one-month minimum lease terms.]

About Jude Galligan

Jude Galligan, REALTOR, Principal of TOWERS Realty and publisher of Downtown Austin Blog (aka. "DAB"), spends his time matching remarkable people with remarkable properties in Austin’s urban core. A resident owner in downtown Austin, Jude has served on the Board of the Downtown Austin Alliance (DAA) and the City of Austin Downtown Commission. Contact Jude.


  1. I live in and own a condo at the Railyard and I used to enjoy it. I had neighbors just like anyone else. People respected the premises and were reasonable about noise. Ever since the short term rentals began it’s now a glorified hotel except without any management. It’s not a good thing unless you are looking at it strictly from a monetary standpoint. The short term rentals have destroyed this place as a community because the people who rent the places have no respect for the fact that people live here. It is one batchelor party or fraternity reunion after another and they don’t care if there are any permanent residents who might have to work in the morning. It has become solely about money. So if that’s all that is important than yeah….it’s great.

  2. I have heard that condos that do this risk losing the ability to get mortgages from Fannie and Freddie and that it adversely affects insurance. I would prefer to see a carrot approach as well but doing it above board and advertising your condo building allows STRs seems dangerous.

    • Rayfes, a person who shall remain nameless fed you misinformation about the affect of allowing STRs on qualifying for Federally-backed mortgages. It’s only if the HOA actively facilitates (e.g. the manager accepts “reservations”) the rentals that it jeopardizes qualifications for those programs.

  3. What is interesting is the funding on those deals fell through, so now others have a chance to jump on what that one enterprising owner saw.

  4. Fred Schmidt says

    Jude – You mention Railyard “attaches fees to the process” of STR’s. Do you know what those fees are and how that assessment works? Most of us condo complexes are struggling with this issue. Part of the problem is really being able to verify that an STR has taken place since those leases do not pass through the HOA. And that’s just to levy the “$1,000 per day fines” (or whatever they may be). That’s obviously the stick approach. Would like to learn more about a carrot solution if some exist or are evolving.

    • Fred, I think they’re evaluating attaching fees as the best way to create a win-win for the HOA and owners. I’m not sure that any specific fees have actually been levied, yet. We’re watching closely, though.

  5. Nice article . When everyone is doing the same thing, it’s time to do something different.

Add New Comment or Leave Reply