Austin 78705 Worth it to buy non cash flowing condo for UT Son?
My son is just about to start his sophomore year at UT Austin and plans to stay for Masters but may end up transferring elsewhere for Masters. Seems this area is an equity play vs cashflow. With taxes and HOA fees that equity would need to keep pace with these fee increases. In my research it seems that this area may be top of market now and therefore not worth buying at this time but I wanted to hear from those of you that know the market if my assumptions seem correct.
In my humble opinion, suggest you approach from a total expense point of view using conservative estimates to compare your two options; paying his rent or owning and possibly selling when he vacates. Transaction costs are there so it may very well depend on price point and time expected to inhabit. In this case, you are forced to either rent for him or buy something for him to live in. Have you also discussed with him the possibility to have roommates? Also, the intangible impact of purchase that may sway the decision to NOT go elsewhere as desired due to the impact of you having to sell. I have always thought that if I have a kid that goes to university I will surely have the purchase a property day one because at 18 you should have established a Roth IRA and can make 100% tax free penalty free withdrawal to purchase first home and this will likely make the math for you.
@Stephen Stokes That is interesting that you mention the IRA. He does have one that he opened on his 18th birthday but he doesn't currently work so only has a few thousand in it - definitely not enough for an Austin down payment even FHA
Would an FHA allow me to loan him the additional funds?
Best to consult a mortgage broker on source of funds requirements for FHA as I am not an expert there. Send me a direct message if you would like a referral.
Originally posted by @Cristin Andrews:
My son is just about to start his sophomore year at UT Austin and plans to stay for Masters but may end up transferring elsewhere for Masters. Seems this area is an equity play vs cashflow. With taxes and HOA fees that equity would need to keep pace with these fee increases. In my research it seems that this area may be top of market now and therefore not worth buying at this time but I wanted to hear from those of you that know the market if my assumptions seem correct.
As a parent of a son who is starting his sophmore year at Indiana University Bloomington this year, I thought about doing this for him. What I took into account was how much I was going to pay for his housing whether it was in a dorm or in an apartment compared to what the house payment was going to be. In Bloomington I was able to find homes that would cost the same as what I was going to be paying in rent for him anyways so from that point of view it made perfect sense.
The reason I did not go through with it is because he is locked into staying in the FRAT house for the next two years, so buying a house does not make sense anymore. Regardless I am still going to be spending money on his living expenses its just not going to be on a mortgage.
So for you I would compare what you are going to pay in housing for him anyway as opposed to what it cost to buy the condo. If its is the same amount of money then I would go for the condo. If it is going to be way more then I would not.
Just my thoughts.
Thanks all for the input. I think I probably won’t buy the condo.
@Cristin Andrews @Stephen Stokes I am with Stephen on this one. I think it makes sense to look at the entire expense. Renting for 3 years and paying a landlord vs buying. One has to consider the entire equation. That might require a conversation with your cpa to get a better idea of the tax implications as well. Yes, the hoa and property taxes are high. But what if you were to buy a 2 bedroom unit, rent it out during the summer time airbnb, get a room mate for the other bedroom and the value stays the same for 3 years. How about if they go up 5.6% as they are doing year to date according to the austin board of realtors for that zip code? Given the 5.6% appreciation for that zip code scenario I might be tempted to buy but its really a math equation, imo.
@Cristin Andrews I would advise to purchase a small 3 or 4 beds condo for about 350-380k and rent out other beds to his friends. You could pull out about 3200 for 4 beds. The HOA fee is VERY low in the area. Property tax is a concern but possibly not a major one. I would say: go for it. It maybe at the top of the market but when your son graduates it will likely be more expensive than now.
@Stephen Stokes could you elaborate on Roth IRA. Should it be on his name?
@Sophie Maisel yes it would need to be in his name and you should consult your financial advisor or tax attorney for structure of augmenting the down payment if you need to make a gift to cover the full down payment in lieu of full amount coming from his Roth IRA.
@Account Closed the HOA fees I have been seeing are 300-400 per month
@Cristin Andrews for 1 bed you can find about 160 fee and 4 beds can be 250-350, which is a very little comparing with what other states do. Also you need to wait for a property investment, a good one will be snatched fast.
@Account Closed I'm keeping my eyes open
