It makes more sense to buy in Austin, presently. The only time it really makes sense to not buy is when house prices are decreasing more than the mortgage principal paydown. Austin has been blowing up for a very long time so it most certainly makes sense to buy and hold forever.
With mortgage rates in the 4’s its considerably cheaper to own a home than rent.
Lets use some real examples to demonstrate that point. There are 57 houses in Austin city limits below $180k. For condos there are 54 condos below $180k.
We will use a 3 bedroom 2 bath house located at 2306 Klattenhoff Drive as an example. Its currently on the market for $161k. The taxes are $3469. The insurance is approximately 70$ monthly. We will use the current interest rates of 4.25%. Now the interest rates will vary depending upon your credit, income and other relevant things. Lets say that you are a first time home buyer and are wanting to use the fha loan and a grant from an organization or state agency that will cover the difference of the down payment.
Mortgage and interest on $161k: $792.02
Total Payment $1151
There are ways to reduce your payments further by filing for homestead exemption to reduce your taxes.
Lets look at a 3 bedroom 2 bath apartment. There are approximately 29 apartments that are at least 3 bedroom 2 bath that are roughly around the same price. Its interesting that one has more living choices for houses and condos than apartments. Most of those are for “affordable housing”.
If you are in an apartment then you are giving your money away. If you are living in an house then you are paying down the balance of the house with a 30 year mortgage, you get tax advantages because you can deduct for mortgage interest and you get house appreciation, generally. In Austin, the house market has been doing very well for a very long time so I wouldn’t expect the house prices to depreciate. It has a very good track record.
Appreciation rates over the last year was 8%. So, if in the above example that $161k house goes up by 8% then you have made $12880. If you have secured the typical 30 year loan on the house then you have probably paid off about $1000 the first year. So you have made $13,880 if you were to sell it a year later. But keep in mind that selling costs can eat a good portion of the profit, if you keep it for a year. Nevertheless, you will make a little money which will be tremendously better than throwing away your money to the landlord. Just saying!
If you keep it for the typical average of 7 years then you are going to have a bunch of money at the end of the day.
If you consider the rates of return on little down then you will blow away the rates that the banks offer. You can even beat the stock markets and the bond markets too. Real Estate can be very lucrative.
The tax incentives are huge too. But one will need to consult with a cpa to get the exact amount and ways to reduce your taxes. Each person’s situation is different and I am just a real estate broker not a cpa.
If you have any questions or concerns please by all means I would love to hear from you.