Austinist: Hot Real Estate Listings: Life Beyond the '04

Clueless Flippers

Fri, 05 Jan 2007 12:17:01 -0600

IMHO, we are clue to a mid-term top in these central austin properties rather than in the middle preparing for a new leg up. This boom has run its course, and now even crappy 700 sq ft shacks cost $200k (with a nice 5k-6k in property taxes). Meanwhile, the same shack probably rents for $900. Is the job market better here now than in 2000? No, it isn't. Yet, these houses cost 50%-100% more just based on pure speculation.

M1EK

Fri, 05 Jan 2007 11:22:00 -0600

Bob, If your mortgage payment is $1500 a month, and only $100 is principal today, the remainder being property taxes and interest; even with the tax deductions, you're still out a minimum of $1400 a month (shrinking gradually over time as the principal portion of your payment rises). If you can rent a similar house for $1400 or even $1600 a month, you're coming out ahead in the short-term. Remember you don't need to pay to maintain your rental house. No A/C repair bills. No roof repairs. Etc. Things to remember are that as shilli notes, it's a tax DEDUCTION, not a credit; so you only really get back whatever your marginal tax rate is (28%, 15%, etc.) _AND_ the real benefit is only that marginal rate times (total deductions minus standard deduction) since you could have claimed the standard deduction anyways.

Shilli

Fri, 05 Jan 2007 10:34:01 -0600

Personally, I think whether to buy or rent depends a lot on what tax bracket you are in - if the government is effectively paying 28-35% of your mortgage interest and property tax, buying probably makes sense. If it is only 10-15%, renting is probably a better option. The market seems rent-friendly in Austin, but I think that reflects a realistic expectation of appreciation, so the renting/buying decision should be based on personal circumstances, not the belief that you are more intelligent than everyone else in the market. Austinist focuses on close-in neighborhoods because those are the neighborhoods/lifestyle I am interested in. Erika has added diversity to the column and I think she is doing a great job expanding my otherwise narrow horizons. I think the majority of the houses I have posted have actually been in '02, not '04, but I like '04 and think there are a lot of opportunities there, despite massive recent appreciation. That said, I'm happy to look at any neighborhoods that people suggest.

CV1A

Fri, 05 Jan 2007 09:30:35 -0600

As some one who recently bought a very nicely remodled home in 78704 (albeit South of Oltorf) for $182/sf, I can definitively say that if you look around for a good deal you can buy for less than you can rent. Also, keep in mind that you can deduct your mortgage interest payments for tax purposes (meaning that you effectively get back a percentage of what you pay in interest -- which is nearly everything you pay during the first few years -- equal to your top tax bracket), and you are gaining equity in something that you can hopefully sell for more than you bought in a few years. If you think you're going to get rich by flipping a house fast, you're probably going to be disappointed, but if you want to live in the house and hold it for a few years you should buy if you can afford a down payment.

Bob Dobbs

Fri, 05 Jan 2007 09:02:14 -0600

M1EK, could you give an example?

M1EK

Fri, 05 Jan 2007 08:57:49 -0600

Renting is a better deal than buying whenever the monthly price of a house dramatically exceeds the cost on the market to rent a similar house. In many parts of the country, this scenario has been in effect for quite a while. Arguably true in certain neighborhoods here, too. (Note: I said "dramatically" exceeds; i.e., the rent should be no more than a bit more than what it would take to cover the interest/taxes part of the mortgage payment).

some guy who's not so bitter

Fri, 05 Jan 2007 08:41:18 -0600

amusing how austinist only seems to have recently discovered that there is a world outside the "'04", what with mentions of crestview and the occasion note of what those crazy east siders are up to. maybe they'll discover the other 90% of the city one day...I believe there was a hint of sarcasm under the author's lines that 78704 was the 'it' zip code. She chose to focus on another area of town (Crestview, yes, and Highland), as that's likely what she's aware of. As you have lived all over the city, you could choose to add to the conversation by mentioning other areas that have nice neighborhoods and are also affordable. And I would like to understand how renting is a better deal than buying.

josh

Fri, 05 Jan 2007 08:24:23 -0600

following current market trends in austin, you will make money off that 195k crestview house, including covering closing costs, but it won't be a ton and it won't be right away. Housing prices are still appreciating, and close-in real estate is leading the pack. But it won't be like the last 4 years were. If you're flipping houses, no, that small place isn't worth it. but if you're looking to stay in a place for a few years, and you factor in the deductible mortgage interest, buying is still a better bet than renting, even with cost of repairs factored in.

some guy who's lived all over austin

Thu, 04 Jan 2007 23:48:20 -0600

Who said anything about 195k being expensive for a house in austin? The point of the main post is that renting is a better deal than buying (at least if live in the "'04", if you're one of those people who defines themself by a zipcode...whatever makes you feel special i guess...). But once you fully price out these so-called "affordable" tiny fix-me-ups, turns out that renting is still a better deal. And then you've got a landlord to fix your leaky roof instead of you. I suppose you could hope that your house would appreciate in value, but how much more valuable will a 50 year old 776 sq ft crestview house really get? amusing how austinist only seems to have recently discovered that there is a world outside the "'04", what with mentions of crestview and the occasion note of what those crazy east siders are up to. maybe they'll discover the other 90% of the city one day...

Anon

Thu, 04 Jan 2007 21:09:19 -0600

LOL - thinking $195K is expensive for a house in Austin is hilarious. Get out of the city - Cedar Park sounds like the place for you.

still pricey

Thu, 04 Jan 2007 18:01:26 -0600

195,000 for a 776 sq ft house? After closing costs and property taxes you're still looking at $1000+ a month mortgage w/ property taxes, not including the high energy bills from a not-so-insulated old house... and of course the maintenance costs of an aging house... home ownership's fun and all...but it costs way more than ya think it will...

M1EK

Thu, 04 Jan 2007 16:18:03 -0600

From this commuter rail station, you can ride twice an hour (as long as it's rush hour) to the Convention Center, and then switch to a shuttle bus to actually get to your office. Hooray!