BUY A FAMILY HOME or RENT

Salt Lake City, Utah

General Real Estate Investing

BUY A FAMILY HOME or RENT

Austin, TX. · Member since 2022 · 33 posts · 10 votes

Hey all,

My family and I are looking to relocate to Austin Texas from Salt Lake City. I’m wondering, we are really excited to buy a home that we want to live in and hopefully have the potential to house hack given what the market is right now. I’m wondering, and I want advice, do you think it’s wiser to buy a home that we could see ourselves living in for the next 5 to 7 years and doing our investment journey from there or is it more wise to stay liquid and rent and try to work the Real Estate journey from being a renter.. I know that there are sacrifices that need to be made but I’m just tired of moving every year so that we can find the best deal. We have three kids and we are looking for a home to settle into for the next 5 to 7 years , but if it makes more sense to do that and be a renter while we try to grow our portfolio then I’m all for it but I really do want to own every piece of property that I stay in. We just recently visited Austin Texas, and a specific suburb that we love and could see ourselves at for the next 5 to 7 years. The question is, can we also find the same house hack opportunity in this area, I’m not sure, but I would love opinions about the overall, I’m trying to convey.

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Jackie Nyambura Everett

Real Estate Consultant · Austin, TX · Member since 2023 · 30 posts · 8 votes

2y

My husband and I rented for 2 years, explored several surrounding areas, and then settled on a great neighborhood in Austin, and are happy with our decision. Do what's right for you and your family as schools, daycares, getting quality activities for the kids matters and access to the lifestyle you want really depends on where you are in Austin. Traffic can be a pain too as so many people moving here! I am biased to the rent first so try before you buy but really up to you and your family. Good luck!

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Michael Dumler
Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes
2y
@Quinell Dixon, being a real estate agent, I'm biased, but you should highly consider purchasing a primary single-family home. You'd be paying your mortgage while building equity instead of renting and paying for someone else's mortgage. Seems like a no-brainer to me if I'm being honest. Your fear of being illiquid is a bit nonsense. The reality of finding/acquiring cash flow deals to cover your monthly rental expense is going to be very difficult. I'm sure I'm missing some other vital points regarding this, but overall, you should buy a primary residence. If you can house hack, even better!
0 Reply
Ryan KellyBusiness Member
Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes
2y
@Quinell Dixon if your timeline in a property is longer than 3 years, the math will tell you to buy. Austin is also currently in a correction, making it easier to buy than at any point in the past 10 years. Something to consider as well.
[email protected]512-674-5478
Ryan Kelly Group - Keller Williams5112 Reviews
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Tatum Littleton
Real Estate Agent · Austin, TX · Member since 2022 · 121 posts · 67 votes
2y
Hey Quinell, great question and a tough one to answer currently. But I think I would side with the first two replies that buying would be the way to go. I'm sure you've done your research and even visited, you have a feel for what Austin and the surrounding areas are like and see that it is appreciating.
I strongly agree with the desire to own every property that you stay in and build equity and a portfolio. I look at every real estate purchase, even your primary residence as an investment and can be used creatively to grow your knowledge and how you invest.
Looking forward to having you in Texas!
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Quinell Dixon
OP
Austin, TX. · Member since 2022 · 33 posts · 10 votes
2y
@Ryan Kelly

yes, I realized that Austin is in a correction and we want to move there and buy fairly quickly because my wife and I visited a week ago and we fell in love. We are hoping to try and house hack because real estate and property taxes not to mention Hour expenses will definitely put us in a high expense situation, so trying to House hack his ideal for us
0 Reply
Quinell Dixon
OP
Austin, TX. · Member since 2022 · 33 posts · 10 votes
2y
@Tatum Littleton

thank you so much for your insight. I guess I just have so many questions and trying to figure out how to mitigate my risk and exposure to high expenses. I know the Lord will guide our path but we know for a fact we want to move to Austin and we do see the market in Austin, correcting itself a little bit and we are hoping to buy a single-family home with the opportunity to either build an ADU or converter garage or put a trailer on our property so that we could make some income in the process
1 Reply
Tatum Littleton
Real Estate Agent · Austin, TX · Member since 2022 · 121 posts · 67 votes
2y
That's awesome, I love that idea and there are plenty of opportunities for that in Austin to help mitigate your risk and offset some of your expenses. The more questions, the better I think, you can't ever know enough and when you think you've got it, there's something else to learn and explore!
I would love to help in answering questions or helping you find a property that allows you to do just that. I'm glad you're doing whatever you can to make it happen!
0 Reply
Julien J.
Investor · CO · Member since 2016 · 757 posts · 1k+ votes
2y
@Quinell Dixon
I'm biased towards buying and house hacking duplexes/ADU/DADUs, so I would recommend to play out the numbers over that 5 to 7 year period.
Take into account:
- Yearly rent increases
- 3% to 5% expense inflation
- A conservative yearly appreciation in the area
- Principle pay down
- Bonus, if the rates drop to mid 5% or 6% what the refi will do to cash flow.
0 Reply
Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
2y
I see replies stating 3 years or longer to buy. This works in most markets for the last decade, but traditionally is way off and I suspect is off for the near term future for most markets and I will provide my rationale.

There is a yearly study published that compares renting versus initial year of ownership. For years renting has been cheaper than owning but this year the study showed only 3 of the top 100 markets was it cheaper to buy than rent. I do not need to look at the study to state Austin was not one of those 3 markets that it was cheaper to buy than rent.

So when you first buy the cost will be greater than renting (assume study is accurate and it is best study on this so anyone claiming otherwise does not have as good data). So it is cash flow negative (using the term to mean cost to own is greater than cost to rent) the 1st year. Assume each year the cash flow improves. How many years until it has positive cash flow? I will say in my market I am leery of having expected rent appreciation higher than inflation. In the last decade, the only time I showed worse cash flow increase was 2020 when I used 0% for my rent growth. If you use similar underwriting that rent growth is similar to inflation, the cash flow will improve slowly (note even if rent growth equals unfixed cost inflation, the cash flow will still improve if you have a fixed rate loan). My underwriting for my market shows cash flow recovery on the average purchased to be over 5 years (I am different because in my market I do not pay retail). Regardless of the underwriting in Austin the purchase will initially have negative cash flow (assuming MLS (retail) purchase without a value add).

Appreciation: my market has virtually always had great appreciation but like many markets the last 10 years been crazy However in the near term I believe the most likely scenario is between -4% and positive 4% appreciation. I am using -2% in my underwriting because I want it to be conservative but for this exercise let’s use the average and use 0% appreciation in the near term. Realize over time RE will appreciate and in most areas it will appreciate faster than inflation.
Equity pay down is guaranteed.

Cost to sell will likely fall between 6% to 9% (termite inspection, closing costs, repairs, 5 to 6% for RE sale, etc).

My opinion is >10 years buying will virtually always be better than renting. 5 to 10 years can go either way. In the last 10 years, in most markets it would have been better to have purchased for more than 5 year hold but I question if this will hold true going forward. For less than a 5 year hold, I believe it is likely you will be better renting even though in many markets in the past decade it took less than a 5 year hold to be better than the renting option.
Good luck

1 Reply
Jordan MoorheadBusiness Member
Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
2y
I would househack, buy a duplex or a single family that you can make income from!
[email protected]512-888-9122
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1 Reply
Quinell Dixon
OP
Austin, TX. · Member since 2022 · 33 posts · 10 votes
2y
@Julien J. Thank you so much for that. There is a lot to think about. I am hoping to get a good calculator to tell me what I am doing with my life lol.

0 Reply
Jackie Nyambura Everett
Real Estate Consultant · Austin, TX · Member since 2023 · 30 posts · 8 votes
2y
My husband and I rented for 2 years, explored several surrounding areas, and then settled on a great neighborhood in Austin, and are happy with our decision. Do what's right for you and your family as schools, daycares, getting quality activities for the kids matters and access to the lifestyle you want really depends on where you are in Austin. Traffic can be a pain too as so many people moving here! I am biased to the rent first so try before you buy but really up to you and your family. Good luck!
2 Reply
Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
2y
Always buy- it's crazy to rent and buy an investment on the side. House hacking and leaving a trail of rentals behind you has the lowest barrier to entry and it's the easiest way to start. It will also give you higher CoC returns indefinitely. Buy, 100%.
1 Reply
Quinell Dixon
OP
Austin, TX. · Member since 2022 · 33 posts · 10 votes
2y
@Dan H. man, this is powerful analysis. 92% of it went over my head, but I do love that you are so knowledgeable. I wonder, would you be willing to guide me on how I crunch numbers together if I rent my Salt Lake City house and seeing what I can afford to get a house in Austin? I know it is all about numbers and I am so new that computing those numbers are a challenge because I am not sure what to factor in. =)
Thanks Dan!
0 Reply
Quinell Dixon
OP
Austin, TX. · Member since 2022 · 33 posts · 10 votes
2y
@Jackie Nyambura Everett We came and visited and LOVED the area that we were looking in. What area of Austin are you in? Did you buy with the hopes of RE investing or just a family home? Would love to chat more. =)
0 Reply
Quinell Dixon
OP
Austin, TX. · Member since 2022 · 33 posts · 10 votes
2y
@Corby Goade Thanks for the insight my man. We want to buy and we know that this market is in a good place for buyers if you can stomach the interest rates that are out there. I know that there should be a correction in rates but homes will go up more and more.
Appreciate that my man.
- Q
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Mohammad Parwez
Real Estate Broker · Greensboro, NC · Member since 2023 · 81 posts · 45 votes
2y
Just in case if you don't find a duplex, triplex or quadplex, look for a SFH with a decent basement that you can rent out.
That way you can house hack as well as enjoy living with your family in single family house.
1 Reply
Taz Zettergren
Real Estate Agent · Memphis, TN · Member since 2019 · 365 posts · 264 votes
2y
If you were to purchase a property to be your primary residence you would be able to get into the deal with less money down. So a duplex, triplex or quadplex would be a home run but I understand those are tough to come by in areas you want to live in because I'm sure it's a tight market, like it is here. If you can't get one of those then I'd lean towards a single family home you can be comfortable in. Being cognizant of price, if you're wanting to stay liquid, you may want to lean towards something that's a 2-4 year play so you could turn that into a rental after that timeline then get into your longterm home from there.
0 Reply
Ali Nichols
Investor · Member since 2022 · 235 posts · 127 votes
2y
If I were to move to a new city and specifically Austin in this case, here is what I would consider:
1. Long term upside --> given the correction, stagnating rents, rising property taxes, etc. the chance for cash flow on SFH after leaving will take some time or a refinance down the road. So if you decide to buy/house hack make sure there are fundamental reasons why you chose that area.
2. Getting comfortable with the city. Plenty of different pockets in Austin and renting for ~6 months can be nice to get a feel for the city and teh areas you like most.
3. If you can find a small multi-family to house hack that is ideal.
4. if you have to stretch to buy a home where the payments are 2x to own vs rent I would consider the decision carefully.
0 Reply
Mike CossetteBusiness Member
Real Estate Broker · Austin, TX · Member since 2022 · 15 posts · 11 votes
2y
I wouldn't over complicate it, I think you already have the answer. Buy a duplex, you can get great deals right now with instant equity. Refi later, self manage from the other side, you can optimize it for short term rental from Sxsw through Formula 1 through the summer, flip it over to a mid term rental through the holidays until spring break. Or hands off, long term Rent, Write off all household expenses off the income, get lots of experience with multiple strategies. Or if you prefer build out an ADU on a SingleFam. I think all this renting versus buying comparison is nonsense, you don't get Wealthy in real estate renting, you have the advantage for owner occupied rates and you can get supplemental income and get lots of tax benefits, loophole's, force equity, development opportunities, and it's unlimited teaching moments for the kiddos. If you're willing and able, you have the answer house hack with multiple dwellings, don't look back.
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Aaron BreckenridgePro Member
Technology · Dallas, TX · Member since 2022 · 476 posts · 304 votes
2y
Quote from @Mohammad Parwez:

Just in case if you don't find a duplex, triplex or quadplex, look for a SFH with a decent basement that you can rent out.
That way you can house hack as well as enjoy living with your family in single family house.

Very unlikely you're going to find a basement in Austin.
0 Reply
Marcus R.
Real Estate Agent · Denver CO · Member since 2019 · 210 posts · 332 votes
2y
I would only rent with the intention of building wealth so the property would be well below what you can afford so that you can increase your savings rate. While renting and learning the area I would be actively looking for a quality purchase. If you can bump your timeline up to 7-10 years (closer to 10) then I would try to purchase.
I get it, moving sucks but I still think it's the path of least resistance. Flips and BRRRRs are hard, House hacking with a family is hard, but moving into a SFH every 1-2 years might be the most straight forward path. You can hire movers, packers, furniture assembly etc...to make life easier and can be completed in <60 days. Qualifying for the primary residence cap gains can really supercharge your journey as well.
0 Reply
Timothy Howdeshell
Investor · Fresno, CA · Member since 2016 · 222 posts · 237 votes
2y
I do think it's funny that all of the agents in the post are saying buy :-)
House hacking a 4-plex is likely your best bet. You only need to put 5% down and given that it's (seems like) first investment property, you can use this to learn about purchasing, management, etc. I'm not sure I would house-hack a single-family with 3 kids, but it can be done.
What is your barrier to investing currently though? Deals, relationships, money, experience. These are all valuable parts of a real estate investment, but only the deals and money are needed to start. If you're lacking in those, you may want to conserve and build your capital to invest with. There are many factors in this decision that depends on what you want out of real estate, your personal financial situation, timeline, experience, etc.
0 Reply
Taz Zettergren
Real Estate Agent · Memphis, TN · Member since 2019 · 365 posts · 264 votes
2y
@Quinell Dixon ,

You're getting a ton of good responses on here. Good job on the question! When you said grow your portfolio I assumed you mean with rental properties. I gave my advice earlier, but here is exactly why I think that way. I was in your shoes when I moved to Germantown, it's one of the best suburbs in TN. I thought I would buy my forever home, but started out renting. It let me learn about the area. My fiance and I bought a house in Germantown after a couple of years and I house hacked it to start with by renting rooms to good friends. Once we got married, our plans changed and we ended up buying a house on some land in North Mississippi. I was glad I didn’t buy my forever home in Germantown and ended up turning the house hack property into a long-term rental.

By being patient and renting first, I was able to make a couple of good decisions along the way and ended up with a rental property covering a big piece of my primary residence monthly note.

Hope that helps because I was in your situation. Be patient, it might be best to rent first (shorter the lease the better) to learn the area and then use your capital to purchase a home than can produce an income when you leave. When the time is right, that forever home will be there and you may be in a better position with a better understanding of what you really want long term. Let me know if you have any other questions!

Good luck as you get started.
1 Reply
Quinell Dixon
OP
Austin, TX. · Member since 2022 · 33 posts · 10 votes
2y
@Taz Zettergren Thank you my man. We have moved so much that I want a place we can be in for at least 5 years. We will be getting one out in the next 5 so we will have space that way, OR we put an airstream or trailer and rent that out.
1 Reply
Quinell Dixon
OP
Austin, TX. · Member since 2022 · 33 posts · 10 votes
2y
@Ali you make amazing points on this. There are some things about buying that I dont love like the price of the mortgages. I think we would love to buy and suck it up for a little bit while we hold out for a re-finance. Austin is hard to get multi in a place where its safe and where the school systems are good.
Decisions, decisions.
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