Austin Investors: Need your Opinion

5 Replies | Austin, Texas

Hi all,

I’m new to real estate and read a few Biggerpockets books. Thought I’d get your opinion on the Austin market.

Main Goal: House hack and live for free

Ideal situation: I'd like to get a triplex, Possibly use FHA or pay down 20% if I have it. BRRRR it and live in the 3rd unit for free.

I’d like to live in a B or B- neighborhood and be within a 30-40 radius of the city.

Is any of this possible? I heard house property prices to rent ratios have a large disparity. Am I pipe dreaming?


Thanks!

@Nicholas Dyer not pipe dreaming. It will be tough but you can do it. Find a 4-5 bedroom house. Most likely outside of Austin in Pflugerville or SE Austin. Purchase prices are still under 350k in some pockets. Couple it with a TSAHC grant or down payment assistance and you could have relatively little money into the deal. Lease out all additional bedrooms at 800/ room/ month. Plenty of people still doing it.

The more you put down the easier it will be to live for free, no matter how expensive the property. But you have to compare it to the potential lost opportunity cost of those funds and ROI (particularly once you move out). Personally, I would be alright not entirely covering my living costs as long as they are lower (compared to not house hacking) and it will be cash flow positive when you move out. If you would normally pay $1000 for rent and with the house hack you still pay $500, you are still saving $6k/year. Plus you can be gaining equity. You will still pay $6k/year in housing expenses but it is just for 1 year and then you move out and turn it into positive csh flow.

The " for free" part might not come in year 1, but you'll be controlling your cost of living in ways that few people can.

@Nicholas Dyer welcome to BP.  Like others have said, living for "free" isn't impossible; it will be challenging, and a lot of that will depend on your leverage.  If you do a smaller 5%, maybe even 3.5% down payment, it is much easier to get into financially, but then you're just playing catch up longer in terms of monthly payments as opposed to doing a larger down payment. (That's not even including how difficult it might be to get a property under contract with a down payment that small - it's possible, sure, just challenging). Triplexes specifically are harder to come by, but your same idea can apply to a duplex or quadplex.

To echo a great point though: even if you are not positively cash flowing in year 1 (maybe even 2), you are still DRASTICALLY reducing your monthly payments and saving lots of money a year. Plus your property will likely increase in value, likely over what you pay on your negative cash flow.  Then, once you are ready to move out, you can then rent out that last room/unit, and hopefully be positively cash flowing by then.