Rent vs Buy in Austin>Question Details

Charlie, Other/Just Looking in Austin, TX

rent or buy in Austin, texas

Asked by Charlie, Austin, TX Mon Oct 11, 2010

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Charlie,

Hello. Decisions, decisions.... Well of course there are some obvious adnamtages to buying. 1. Protection against rent increases. 2. Tax benefits. 3. Equity. 4. Your not helping someone else increase their wealth. That being said, sometimes it is better to lease if you are not ready to buy. You DO NOT want to buy the wrong home. Rents in Austin are increasing and depending on the area your rent could be competitive with what you can get a mortgage for. Ultimately, I would recommend you consulting with a mortgage pro to determine if it is more financially feasible for you to buy.

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Happy House Hunting,

Gavin St.Louis
Managing Broker/Owner
BuyersHouseRealty
877.77.BUY75
"The Real Deal"
Web Reference: http://www.Buy75.com
0 votes Thank Flag Link Tue Oct 19, 2010
Nancy,

If you put enough money down, OF COURSE you will get the total costs low enough that a property will cash flow. But you should get a good return on that "down money" or it's a crappy investment. If a home purchase requires 30 or 40% or even more down just to break even on costs, then it is silly unless you expect huge price or rental appreciation in the near future. I wouldn't dream of making that bet at today's home prices.

I hope not to offend you, but your training involves listing homes, showing buyers around, guiding buyers and sellers through home transactions, that sort of thing. In those areas I am sure you know things that most people like me don't. However I do not believe a real estate license qualifies you to give advice on rental economics and certainly not in making comparisons to the stock market. That is a line that too many realtors cross these days.
0 votes Thank Flag Link Wed Oct 13, 2010
Nancy I like your thinking although personally I would not buy if there is any reasonable chance of moving away or losing your job within 5 years. The costs of buying and selling a home are at least 11% of the purchase price, and it will be a miracle if Austin homes go up that much in the next 5 years. Plus, what is not factored into this equation is the heavy costs from poor decisions people make in a hurry (buy high, sell low). Besides, do you really want to be an out of town landlord for the next 30 years, or hire a property management company at an additional 10% cost every year?

Also it is generally not true anymore that renters pay the mortgage of a landlord. It worked in the old days when rents were high enough to cover the landlord's mortgage, taxes, insurance, maintenance and depreciation. The landlord could sit back and get rich off home price appreciation. With the prices people paid for homes during this bubble, they are mostly subsidizing their renters' lifestyles. They are in a very difficult position and there is no easy way out.
0 votes Thank Flag Link Tue Oct 12, 2010
It is hard to pass up on these interest rates and the tax benefits. Plus, I have seen some incredible deals as the prime selling season has come and gone.

Please feel free to contact me with any additional questions

Steve Nusinow
(512)922-7588
0 votes Thank Flag Link Mon Oct 11, 2010
Austin is a great long term bet but if you need a little more certainty in the near term, here are some things to consider:

1) Austin peaked a lot later than most markets so it is in the earlier stages of decline. Not saying it is going to keep falling for the next 2-3 years or even longer, but it is very possible.
2) Unemployment will rise with the upcoming state and municipal government cutbacks (they are big employers).
3) Austin has seen three very bad months of sales in a row, following the tax credit expiry. Inventories are at record levels. You would think the very high number of withdrawn listings would keep inventory down but there are obviously a lot of sellers out there. Unless a wave of buyers shows up in the next six months, prices are going to have to ajust down.
4) Be wary of folks who sell you on the tax benefits of home ownership unless you're talking about a big mortgage. If you're buying below $200k then your standard deductible (the deduction you get automatically if you take no other deductions to your income) is probably going to be higher than your mortgage interest anyway. In other words, it won't do you any good. Check with your accountant on this.

Good luck in your decision.
0 votes Thank Flag Link Mon Oct 11, 2010
Hi Charlie -

It's a matter of what best works for you. If you have the credit along with the down payment, & you are waiting for the rates to go down further, or pricing to go lower I don't think that is the best course of action. In the latest market statistics, Austin homes values are trending up, though the volume sold is lower than compared to last year.

It is really a great time to buy a home.
Web Reference: http://www.cyndibell.com
0 votes Thank Flag Link Mon Oct 11, 2010
Hi Charlie,
Rates are the lowest we'll ever see, sellers in all price ranges are motivated to sell, your mortgage interest is still tax deductable... I'm curious about what's behind your answer so let me know if you'd like to discuss!
Heather Kight
Keller Williams Realty
512.789.1871
Web Reference: http://www.heatherkight.net
0 votes Thank Flag Link Mon Oct 11, 2010
Hi charlie, I am a certified affordable housing specialist, and we have several programs that we could possibly utilize to help you get into a home for little to nothing down. One is the USDA loan, but for rural areas only. Buda, Kyle, some Leander, Liberty Hill, Manor, Bastrop, Elgin, etc. are all in qualifying areas, if you weren't opposed to living in one of those areas. I have alot of experience with the USDA loan, and it can save you alot of money per month if you qualify. It is a 100% financed loan, 0 down, and no property mortgage insurance, and the seller can contribute up to 6% sellers concessions to go towards your closing costs, and prepaids. So, if this was the route you were able to take, it would most definately benefit you to purchase rather than lease! Please feel free to call me anytime if you have any further questions, or if you just want to talk Real Estate! Tamra Duarte @ Keller Williams 512.294.9583
0 votes Thank Flag Link Mon Oct 11, 2010
Unfortunately a decision only you can make based on your finances, wants, needs, lifestyle, etc.--it’s all about costs and lifestyle. Costs—financing v. moving-in, mortgage v. rent, repairs v. upkeep. Lifestyle—stability v. mobility, predictability v. flexibility, equity v. freedom from debt. It used to be all about equity. Now, there are other variables to consider in the balancing of the buy/rent equation--in order to make an informed decision, also consider consulting with any qualified loan officer(s) regarding mortgage qualification, type of loan, etc.; then go from there.
0 votes Thank Flag Link Mon Oct 11, 2010
It depends on your situation, however it's going to be better long term to buy if you plan on staying in Austin for an extended period of time. Here's my suggestion on buying. Start identifying the area and neighborhoods you want to live in and put together you wish list for a perfect home.
We're headed to slower sales months in Nov-Jan. Keep an eye on the market in the areas you like then jump on one that fits and has value in those months and negotiate a good deal.
Not sure what area you're looking but if it's in Western Travis County, ie:360 west to the lakes, I can help most in those areas. 512 751 5996.

All the best,
0 votes Thank Flag Link Mon Oct 11, 2010
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