I’m currently renting my residence and am splitting rent ($1450) with my girlfriend. As much as I hate to give my money to a land lord and miss out on any equity build up through loan pay down or appreciation, there are a few benefits. No maintenance costs, I get to live in a decent location (78746) and have a much shorter commute to work and central Austin. With the ridiculous pricing in the Austin market, house hacking is almost obsolete. If going the SFH route, I’d have to drop a whopping 25% down on a property around 200-230K just to keep my payments as low as they are now. And to top it off I’d have to sacrifice location and move much further north or south. As the title suggests, does home owning even make sense in the Austin Market? Or am I better off investing my money in properties further out that can actually produce CF and continue renting my primary residence? Thanks! Shawn

You can look at this as a math problem or how you want to live the choice is yours, but keep in mind that your rent will go up over time where a mortgage payment will not.

Yes, imo some (maybe most? haha) places in Austin are almost not worth it to purchase it unless you think of the purchase like a luxury product. 78756, for example, is very expensive and the price to rent ratio doesn’t make sense. Of course, there is the appreciation of the land/property, but then you are playing appreciation roulette. For a $230k house with 25% down, 4.75% interest rate, 30 yr mortgage is going to run you around $1373 per month. This is including taxes & insurance. Not including maintenance. For the first 60 months of the loan, you are gaining about $200-$300 in principle, rest going to taxes, interest, etc. You are probably living in a nicer part of town, so you probably cannot find a house $230k in the neighborhood you are living in. There are properties out there where the rents are pretty low because the landlords do not know the market and you could do some small renovations and bump up the rent by $100/mo or so, but you gotta keep looking. I think a duplex would be a good fit for you since you can have one side pay for your most of your mortgage while living with your gf on the other side and possibly charging your gf rent as well? That is your call haha. However, those run around $330k - $420k for one within central/north area in Austin. A great thing about duplexes is that you can do a 5% down if it is owner-occupied and the banks include 75% of the rent on the other side toward your income when the banks calculate your rent/debt ratio if it is rented with an official lease. If I was in your shoes, I would try to save some cash and try to go for the duplex or a house where you can turn it into a duplex. I have 2 units that cash flow pretty well and I have 1 that is more of an appreciation play. If that appreciation play property goes bad, I can always have the cash flow property pay for it. Also, like you I am renting while renting out properties since I like my commute to be 5-10 min. Hope this helped!

@Shawn Jaffee, if you have to leave Austin, then rent out the unit you occupy and use a good property manager and keep collecting your cash every month. We aren’t necessarily planning on being here forever. But property management is always an option. And like I said before, my current property has appreciated 100% in the last 5 years. We don’t need count on that happening again (we like cash flow) but that’s the way it’s currently going in our neighborhood. We also forced appreciation with a reno on both sides of our duplex (and we have one of the highest rents in neighborhood, consequently). You just have to pick the right neighborhood.

I'd say the biggest factor you need to consider is how long you expect to live there. If you move every few years, yeah, just rent. If you're going to stay in one place for 10+ years you're going to feel like a dumbass in 10 years after paying all that rent and having nothing to show for it.

House hacking as you describe is super doable in Austin! My husband and I are doing it currently in our first duplex and looking to buy our second that we will also house hack. Happy to go over some numbers with you if you want to PM me. We pay very little to live in our house (MUCH less than your rent) and are building a significant amount of equity (the home we own has doubled in value over the last 5 years). When we move out of our current duplex, it will cash flow quite nicely (right now around $800 a month cash flow after expenses).

In most cases it is not the mathematical comparison of life time mortgage payment vs rent. One does better being a tenant if he knows where to park his savings wisely.

Does home owning even make sense in Austin?

Shawn Jaffee

OP

Austin, TX · Member since 2018 · 13 posts · 4 votes

8y

@Jordan Moorhead I'm primarily looking in the south Austin area. Mainly 78745 and 78748. Though I'm trying to stick closer to William Cannon rather than Slaughter..

There are plenty under 400K, but I'm trying to stick much closer to 250K. That narrows the options down quite a bit.

As for an STR license, I have not entertained that much. But have heard of others having success doing airbnb in the area

Does home owning even make sense in Austin?

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