First time home buyer looking for an investment property.

Asked by 1sthomebuyer, 78701 Tue Dec 29, 2009

I currently live in an apt in Austin. My job may require me to relocate outside of Austin in 2011.I am primarily looking for a property (2 Bedroom minimum) where I can live for until 2011 and rent it out.
Considering my situation:
1. Should I buy a home in the first place?
2. I have been approved for 215K, looked at few homes in Millwood. Is that area rentable?
3. Are there any other areas that I need to focus on for my investment property within my budget?
4. I am also open to living in a condo (2 BR). But it seems very expensive closer to downtown. Any suggestions would help.

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1st Zero-Emi…, , Austin, TX
Tue Dec 29, 2009
On the same note that Rhonda was describing "managing a property from afar" is more work than you think, so is "fixing and flipping" and so is "living and fixing".

It sounds so easy to buy a home you can "live in while you fix up", but if you are not a handyman who appreciates the work... forgetta bout it!

It sounds like you have a stable career that requires your full attention, and unless Caprentry/Remodeling is your hobby after work, trust me when I tell you that "fixing up a home as you live in it" will take up every bit of your down time and it will change your quality of life as well as possibly effect your performance in your career as you add an incredible amount of stress to your schedule and life-style.

So, I recommend you continue to do what you do well in your career, and use your hard earned money to buy a home you can enjoy, not try to learn a new trade with.

In regards to your vision for an "investment" home...
The word "investment: in real estate is used so many different ways, most often incorrectly, as the general public believes the word "investment" directly relates to the fact that the home value will INFLATE over the years and you will "sell" for an incredible profit.

The truth is, that's not an investment, that's more of a Lottery ticket, because it was luck that the market INFLATED.

Aside from "luck" and "general market appreciation", the true real estate investments are sought out based on what they will rent for in relation to their sales price. Also known as a "cap rate", investors look for real estate that will cash flow immediately while also having the tenant pay the mortgage note.

But again, these are "investors", so they don't need to live in the home.
You want to live their. You are a Home Owner.

If you want to set aside your personal desires as a Home Owner, and become an Investor, then you should certainly be aware of what that constitutes in relation to your standards of living.

How do you combine both your "Home Owner desires" and the "Investor Vision"? With a significant down payment!

Your $200,000 home will probably only rent for $1,200-$1,500 (depending on where you buy).
In order for that $1,200-$1,500 rent money to cover your mortgage note, you'll need to get that mortgage note down to $1,200-$1,500!

On a $200,000 home, this is achieved by putting about 20% down ($40,000 on a $200K home).

A few (initial) key factors to look at:
- Do you have money to put down as a down payment?
- What are your current standards of living (sq.ftg./space/storage/garages, quality, condition, location/amenities)
- Do you currently enjoy carpentry/handyman work?

As far as the $8K tax credit. I'll give you a bit more advice on that.
And, for the "eye of an investment", I can share more info there too. Even Condos with HOA fees!

I'll also share a secret with you on how to get 20% more than market value for your rental property when you decide to rent it, and why a Condo can possibly be a better investment for your goals. Either way, you'll learn quite a bit.

The first thing to keep in mind as a Home Owner as to "why you should buy", ever:
Your rent money you currently pay will now go towards ownership! And when you rent it out, your tenants rent money will also go towards your ownership!

Keeping that in mind, just make sure to "Buy Right". Buying Right is easyily achievable with the Right help. Buying Wrong is also easily achievable with the Wrong help.

That's where a Great Realtor can help. Do not overlook the difference that separates "good from great". Consult a Great Realtor. Not only does it NOT cost you money, but it returns a great deal of money for you on the front end and the back end.
1 vote
x, , Austin, TX
Thu Jan 17, 2013
Hi First-Timer,

You have a solid plan! Staying near students is ideal if you anticipate renting in a couple of years so I agree with Betina that getting as close to campus (or UT shuttle route) is wise. I live and work in Hyde Park and know the Central Austin market very well. I'm holding a First Time Homebuyer Q&A session with a rep from University Federal Credit Union (specifically to answer investor questions) on Feb 13th at 6pm - please come ask questions of us! It's a no-pressure or obligation way to investigate buying here in Central Austin. Q & A will be at Juice Homes on 53rd and Duval in Hyde Park.

I'd also be happy to talk specifics any time.

-Jayne Garmaty | Realtor | Juice Homes
512 571 6020
Web Reference:
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Betina Forem…, Agent, Austin, TX
Fri Jan 8, 2010
Dear 1sthomebuyer,

If you want to make sure the property stays rented easily, I would buy a condo close to UT. There are thousands of stundents attending UT and they need to live somewhere. Most students rent, instead of buying so this seems like a safe bet for you. Also property values continue to go up in this area. For example the average price per square foot for a 1-1 condo four years ago was about $180PSF, now it is $200PSF. If there is something I can do to further assist you please give me a call.

Keller Williams Real Estate
1801 S. MOPAC, Suite 100
Austin, TX 78746
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Elaine Garner, , 78734
Thu Dec 31, 2009
My focus is on the Lakeway area market out by Lake Travis. There are 3/2 condos here for $129,500 to $149,900. Homes from $200,000 up. Personally I do not think it is time to buy....yet. Watch the market and look again at the end of January. I would buy only if you think you will be coming back and not for just an investment. Hope this helps you.
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., , Des Moines, IA
Tue Dec 29, 2009
I am a Realtor here in Austin, and also a fairly recent UT grad. I was in this same position in 2008. I was not sure where I wanted to work and live for the long haul as my family, and long time boyfriend were both in different cities.

I ended up purchasing a 2 bedroom/2 bathroom condo in 78745 (south Austin), put 20% down, and will be able to rent it out at almost twice my mortgage payment when I upgrade (which will be to a duplex, because I think that's one of the best investments you can make).

I decided to buy to take advantage of that tax credit, and also, it was smart to do since I knew I'd be here at least a few years.

My point here, is that you should definitely buy. I work with mostly first time buyers so if you need a Realtor, email me. I'd be happy to help!

As far as area, Central and South are your way to go. Central will always hold value because of it's location to downtown. 78745, South Austin, your South Congress and S 1st streets that run from downtown just to the other side of 290/71 are going to be your second best areas because they are a straight 10 minute shot to downtown. Plus, South Austin offers a lot of charm that is still lacking in North. Also East Austin, close to the I-35 is coming up fast as well.

Keep your mortgage payments as low as possible for a more successful rental and have your Realtor target pre-foreclosures and short sales, you can get some deals that way.

Good luck!

Taylor Shults, Realtor, GRI
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Craig, Both Buyer And Seller, Austin, TX
Tue Dec 29, 2009
good point about hiring a great realtor. I made the mistake of hiring a friend who was a realtor when I bought my first home, and I found out later that I got screwed! My friend gave me money back at closing, sure, but it was nowhere near what I lost in the purchase.

anyway, it looks like you have a realtor since you mentioned you have already looked at a few homes in Milwood. But, it also looks like your realtor may not be worth a flip since you are on Trulia asking easy questions that your realtor should have already discussed with you.

that's risky business. don't do like I did!
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Mylendingpla…, , Austin, TX
Tue Dec 29, 2009
Hi, since you are buying this home as an investment property here are some things to consider.

1) What is the true cost of ownership on a monthly basis? Sometimes new investors look only at the mortgage or principal and interest and forget other costs. So consider insurance, taxes, even HOA. If your goal is to make a monthly return (the difference between PITI and rent) look at the entire payment, PITI + HOA to see if a property meets your goals.

2) Make sure you consider the improved taxes on a property. When a property doesn’t work out for an investor is because of two reasons: They over-paid at the beginning or They didn’t look at the Tax liability.

3) Look at the area—not just your home. While you may love a home and it makes great $ense, if the property is in a declining area or has a hint of foreclosure activity you might not be able to sell it for what think it’s worth.

Good luck and if you have any further questions please let us know,
Jon Spears
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George Kiefer, Agent, Austin, TX
Tue Dec 29, 2009
I would consider a foreclosure property given your goals of renting. Your entry price will be important in relation to your rents. You will want a strong Gross Rent Multiplier so your investment has limited downside.

If you would like a free online list of available Foreclosure properties (with color photos); visit my website below. My Foreclosure lists include all types of Foreclosures including Bank Foreclosures and HUD/Government Foreclosures. My lists are always up-to-date and include full address and multiple photos.
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Betina Forem…, Agent, Austin, TX
Tue Dec 29, 2009
Dear Homebuyer,
1. Now is still a great time to buy a home.

2. I would probably not buy something for the entire amount I was approved for, as you want to have money for extras like decorating furnishing the house, travel etc. If you take the whole approval amount you may not have money for extras, as your entire budget goes to the house. I would suggest shooting for a little less house say $175-200K You don't want to be simply living/working to make the house payments. Millwood is definately rentable area with affordable homes.

3. You might also try Maple Run or Cherrywood.

4. Condos offer a no maintenace lifestyle which is very appealing to some buyers. A condo would allow you to be closer in for the money. Just remember most/all condos with have monthly fees for that maintenance. Also you want to make sure they have a healthy "Reserve Fund" to take care of any big issues like new roofs or plumbing issues that may occur in the property.

Feel free to contact me if you would like to see a list of whats available in your target areas. I would be happy to assist you.

Betina Foreman Realtor
Keller Williams Realty
1801 S. MOPAC, Suite 100
Austin Texas 78746
0 votes
Ronda Allen, Agent, Plano, TX
Tue Dec 29, 2009
First of all, you live in a great town! Austin is one of my favorite Texas cities. Many of us in DFW have cars that could practically drive themselves to Austin, as we've visited so often. Great music, great food, great people!

You have the advantage of foresight. You KNOW you have a possible job change sometime in 2011. There are lots of people who will buy a home in 2010 and then find out next year that they are going to have a job change in 2011. If you buy, you can buy with the knowledge that you may turn your home into an investment property sometime in the next year. That's good knowledge for you and your agent, so you pick the right house if you do decide to buy.

Austin, although not blown away by the Recession of 2008 and the economic downturn that blasted most of the country, was not oblivious to the downturn. There could be a great buy in your area that would be perfect for you to buy now, use the next year to fix it up, and then flip it or turn it into a rental property in 2011. Knowing this home may not be your 'forever home' will change the way you look at it.

A concern I have for you is that you are a first-time home buyer. You aren't even sure yet that home ownership is really for you because you haven't yet experienced it, but you may become an out-of-area property owner sometime in the next year. It's one thing if you are going to stay in the area. It's quite another if you may be living in another state and relying on someone else to manage the property in Austin.

Also, if you move outside of Texas, you will be blown away by what homes cost in other parts of the country - even after the bubbles burst. Texas has very affordable real estate. You may need every bit of your purchasing power if you plan to buy a home in your new area.

These are just thinking points for you. I counsel young first-time investors from time to time. Becoming a property investor sounds like a great plan, and the goals are usually more abitious than the reality. The profit margins are tighter than you think, and the work involved in managing the property will be more than you expect. If you haven't yet, I strongly suggest you go to the local real estate school (or take a class online) in Property Management. I really suggest you do it in the real estate school, as the dialogue that occurs in the classroom environment with 30-50 other people is eye-opening. You'll meet slum-lords, normal folks, wide-eyed newbies, and some who think they're going to be the next Donald Trump.

If you were my client, I would very likely suggest that you buy your first home with the intent to use it as a flip in the next 12-24 months. Go month-to-month in your apartment, buy low in a great location (short sales and foreclosures are for those folks who have time on their side - as they can take longer), and do minor cosmetic modifications. Move and take your equity and appreciation with you if you do move, and always buy with resale in mind, no matter where you live. Real estate is an investment. Treat it as one.

Have a blessed day.

Ronda Allen, Realtor and Certified Purchasing Manager
CEO of of Dallas/Fort Worth
RE/MAX Dallas Suburbs - Keith Dobbs Team
#1 Office and #3 Team for RE/MAX in the North Texas region at mid-year 2009!
0 votes
Donna L. Wa…, Agent, Austin, TX
Tue Dec 29, 2009
Hi In my opinion, one thing to look at is the maintenance on the home, once you are no longer living there, compared to the rental fee you will receive. A townhome near downtown may be the better investment. Rents are higher. In area 7 which is within walking distance to Zilker Park and Barton Springs restaurants and a 5 minute bus ride to downtown, even with stops, is a great rental location. I have a listing of two townhomes with no HOA fees, just the insurance on the duplex converted to townhomes that would be split between the two owners. This type arrangement might be the best rental and it is a great place to live and play while you are in Austin. You could even use it for vacation home at any point. Owner finance on some properties might also give you the edge to buy a property that will increase in value over the next two years. The close-in to the downtown area is a great possibility for value increase. The Milwood area is a family area and depends on the computer industry economy. It is a good rental area as long as the computer industry is hiring. Hope this helps.
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Robert H. Ne…, , Austin, TX
Tue Dec 29, 2009
Good day to you. I have a few thoughts and answers to your questions. I am a real estate investor as well as a local broker.
Regarding buying a house: I would say is a great time to buy. The tax credit is amazing and interest rates are very low. Millwood is a rentable area however, I would look at some other areas as well, especially if you believe that you will be relocating in 2011. I am a huge fan of central and south Austin for investment opportunities. I can show you some great houses that are definetly in your budget and will be easy to rent in the future. I am not a huge fan of my first time buyers purchasing condos. Particularly if you will be renting the unit out later. The Condo association fees almost always wipe out any potential profit on the rental side. It is a great time to be make offers, sellers are at peak motivation right now.....

If you have more detailed questions, drop me a line or give me a call anytime.

Robert H. Nelson
The Associates Austin
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Bill Austin, Agent, Austin, TX
Tue Dec 29, 2009
You have listed a series of great questions. I could shoot you a series of short answers, but that would be a disservice to you. What you need to do is meet with a Realtor to discuss your concerns and wants. I would be glad to meet with you for a no obligation discussion. I believe strongly that once we meet for an interview you will see how we will make a good team.

Bill Ausin ~ 512-709-6343 ~ baustin,
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Rob Albertson, Agent, Austin, TX
Tue Dec 29, 2009
If you are looking for cash-flow positive properties, you're probably going to find that duplexes make the most sense. The question is, do you want to live in a duplex? There are plenty of single-family homes close to downtown for your price range (I'm thinking 78745 in south Austin or the east side, mostly), but the problem comes that you can't rent them high enough to cover the note. Now if you're more concerned with a buy & hold strategy, you can build a good amount of equity in these areas as the home prices appreciate.

I work with a lot of clients with different investment goals, so I'm happy to explain all pros & cons of each strategy. Being a first time homebuyer you will receive a substantial tax credit, but you need to be more concerned with the long-term strategy instead of short-term gains.

I hope this information is helpful. Feel free to contact me directly to discuss your situation more in depth, and I can help you in any direction you choose.

Best regards,
Rob Albertson
Austin Fine Properties
512.653.8939 c
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Tommy Xintar…, Mortgage Broker Or Lender, Dallas, TX
Tue Dec 29, 2009
I would lean towards getting something in or around commutable distance to campus. This way, tenants shouldn't be an issue and it will be a relatively safe investment when you decide to move out.

I went to UT and regret NOT doing that.

Also, if you are a first time homebuyer, you should qualify for your tax credit, so by taking advantage of that, you have even more options (savings, upgrades, etc).

In terms of a duplex, not sure if you can find something DECENT for 215K, or else I would say to go and buy one. I have an investor that has 4 of them in Austin and they are all doing very well (cash flowing), but a little above the amount you are wanting to spend.

A knowledgeable Realtor should be able to guide you in the right "area" to buy.

Best of luck!
0 votes
Ryan Saul, , Bozeman, MT
Tue Dec 29, 2009
First off to utilize the First Time Homebuyer Tax Credit for $8K the home must be your principal residence for three years after the initial purchase. So because you may relocate in 2011 the tax credit would need to be repaid.

In your favor are historically low interest rates- which offers great investment opportunity. I'd love to provide you with more information personally, email me at the address below. Thanks-

Ryan Saul
(512) 284-2204
Web Reference:
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Cody, , Austin, TX
Tue Dec 29, 2009
Hi there.

1. Of course no one can promise any outcome as far as market conditions are concerned but we are expecting to see a gradual upswing over the coming months and hopefully - years. Current trends support that the central Texas market as a whole has been steadily improving over the last few months. If you found the right property at the right price, buying now is a good idea.

2. Most areas are "rentable" but some fare better than others. The good thing about Millwood is the proximity to major roads and freeways. This always seems to be key to renters.

3. There are lots of desirable areas where $215k can get you a nice place. Windsor Park, Delwood, Crestview, parts of Allandale, most of Round Rock, etc.

4. There are many good condo communities all over Austin. I specialize in North and West Austin and can name several communities off the top of my head that would be within your budget.

I hope this information helps. If you are not already working with an agent and you need more info such as neighborhood lease comps or if you desire to go view some properties, feel free to contact me.

Cody B. Julian, Realtor®
"You have a friend in Austin!"
Proudly affiliated with Team Joe Williams
cell 512.318.0075
fax 512.343.8013
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