Buy | Rent | Resources

Does it cost more to Rent or Buy in Austin, TX?

The rent vs buy debate is common in Austin, TX. With almost 52% of Austin residents renting, it’s easy to see why. The truth is, there’s a fair argument for both renting and buying, and the answer varies depending on how long you plan to do either. 

Let’s take a look at a cost breakdown for rent vs buy over 5 years for an Austinite. We’re going to assume ‘Robert Resident’ wants to live in a modest 2 bedroom apartment if renting, or a 3 bedroom single family home if buying.

First, let’s keep it simple and just look at the dollar for dollar costs over 5 years. The average rent increase in Austin is 4% each year, which is what the ‘rent payment’ column is based on. For the ‘mortgage payment’ column, let’s assume Robert buys a $250,000 home and puts 5% as a down payment. His all-in monthly payment would be around $1913 every month on a 30-year mortgage.

As you can see, for years 1-4, Robert does save some money by renting (though the savings is negligible by year 4). On years 5 – 30 however, Robert saves more money by owning his home because he avoids any rent increases.

Next let’s take a look at all the other costs involved in a home purchase, along with tax and equity savings over 5 years.

After looking at this chart, you’ll see that over 5 years, though the costs aren’t too far off, they do slightly favor the renter up until the last two rows, time and equity. Let’s take a look at the two biggest factors that tilt the scales towards buying.

1. Equity buildup. Austin has been appreciating an average of 7% over the last 5 years. I used a 5% appreciation number for this example to more closely reflect the national average in case of market changes. After 5 years of owning his home, Robert will have ‘earned’ roughly $62,000, while he’ll have $0 if he chooses to rent. This is one of the biggest upsides to homeownership.

2. PMI Dropoff. If Robert chooses to buy, he’s only planning to put 5% as a down payment. The downside to this is he’ll carry a fee called ‘private mortgage insurance (PMI)’ for the first few years of his loan. This fee is factored into the $1913 monthly payment. Once Robert reaches 20% equity in his home, the PMI charge will fall off and his monthly payment will decrease by about $100 a month for the rest of the 30 years. in this example, Robert already has over 20% equity in his home by year 5. The remaining years of his mortgage will have a payment closer to $1,800, which is only $100 more per month than the initial rent payment.

The Bottom Line
Renting or buying is a personal decision and there are certainly other factors that play into it besides money. If you’re planning to stay in the Austin area for a while and are still renting, let’s grab a coffee and see if it makes sense for you to continue to rent, or think about taking the leap to home ownership.

I’d love to be your resource for all things real estate, so please reach out any time!

May 17, 2019

Buy | Invest | Resources | Sell

Flood Changes in Austin, TX

Ever heard of Atlas 14? Probably not, but you might this fall.

Due to the increased frequency of heavy rains, storms, and flooding in the Austin area, a study called Atlas 14 was conducted by the National Oceanic and Atmospheric Administration (NOAA).

Atlas-14 shows a roughly 33% increase in the amount of rain that could fall in Austin within a 24-hour period. As a result, properties in close proximity to the city’s creeks are exposed to greater flood risks.

What does this mean for Austin residents?

In October, the City Council will vote on whether to implement Atlas 14’s recommendation to redraw the flood maps for Austin.

If approved, homeowners who currently own property located in a 500-year floodplain may be re-zoned to a 100-year floodplain, those in a 100-year may be re-zoned to a 25-year, and those not in a floodplain could enter one.

Flood plains are determined by the likelihood that a storm with high rainfall intensity could happen in any given year. A 25-year storm has a 4% chance of occurring each year; a 100-year storm has a 1% chance of occurring, and a 500-year storm has a 0.2% chance.

If your home is rezoned to fall in a 100-year or 25-year floodplain, your insurance provider will likely be contacting you to require that you add flood insurance to your home insurance policy. If your home is not currently in a floodplain but is rezoned to fall in one, you may want to consider purchasing flood insurance voluntarily, just to be on the safe side.

How to check if your home could be affected by rezoning:

  1. Visit this website and click the “I want to” button, followed by “explore Atlas 14 changes”
  2. Learn more by reading this article by Austin’s Community Impact magazine
  3. Read more here on austintexas.gov

 

I’d love to be your resource for all things real estate, so please contact me any time!

April 29, 2019

Buy | Invest | Resources

New Community Alert: Manor, TX

Every now and then I preview a home for a client and think, ‘wow, this place is amazing’.

With investors large and small pouring capital into Austin’s real estate market, homebuyers are getting an increasing number of unique neighborhoods to choose from when buying a home. However, the number of affordable homes is decreasing within the city limits as Austin adds more jobs and attracts more newcomers.

The most common request I receive for housing is to find something updated, with a yard, and within a 20-minute commute to work.

While I can provide options within Austin that fit the bill, many of them carry a high price tag. Cue Manor, TX, a new site for home ownership that I like to call the “20-minute city”.

On a map Manor doesn’t look close to much, but the drive time (during peak and off time traffic) is around 20 minutes to or from almost anywhere in Austin.

A few key considerations to put Manor on your home buying and investment radar:

• Single-family homes from the mid $200’s to the mid $400’s
• Convenient access to Parmer Ln, 290, and 130
Average commute to most employers is 20 minutes
• Brand new elementary, middle and high schools
Proposed metro line heading directly to downtown Austin
• Home values have increased 11% year over year since 2016
• New home build timelines allow for equity to grow before you move in

I’d love to be your resource on all things real estate, so please contact me if you have questions or would like a tour!

March 17, 2019

Buy | Invest | Resources

Home Insurance vs Home Warranty: Do You Need Both?

Owning a home is one of the greatest investments you can make, so protecting your investment should be a top priority. A great way to do this is to get home insurance and a home warranty. Understanding the difference between the two can be tricky, so here’s a quick breakdown.

Home Insurance

Home insurance is almost always required by whichever lender or mortgage company works on your loan. Home insurance policies renew yearly, and the average annual cost in Austin is around $750-1300. Buyers usually pay this cost with the rest of their mortgage payment on a monthly basis.

The big things that home insurance covers are accidental damage to your home due to theft, fire, storms, and some natural disasters. Flood protection is a separate insurance policy, so be sure to look into that if you live in a flood-prone area.

If one of the above scenarios were to occur, you could call your home insurance company, file a claim, and once the claim is approved they’d cover all repair expenses after your deductible. When shopping for policies keep in mind that the higher your deductible is, the lower your monthly policy cost will be and vice versa.

Home Warranty

While home insurance insures your home in the event of an accidental event, a home warranty will insure the systems and appliances in your home from age and general wear/tear. 

Home warranties are completely optional, and generally start around $500 per year. If something goes wrong with your HVAC, plumbing, electrical, dishwasher, washer/dryer, etc. you can call your home warranty company to come repair it or replace it for a flat service fee.

Home warranty plans are highly customizable, so you can pick and choose what you’d like to have covered. Having a home warranty helps twofold; it can save you a ton of money if something breaks unexpectedly, and can take the hassle out of having to find a contractor to make repairs.

As you can see, home insurance and home warranties are both important and serve different purposes. When you’re making an investment as big as a home purchase, it just makes sense to protect it. For more information on buying a home in the Austin area, click here.

February 18, 2019

Buy | Resources

How to Save Money on Taxes with a Homestead Exemption

As we get closer to tax season, Homestead exemptions are a great way to reduce your taxable income, and provide limits to how much your property taxes can increase each year.

If you bought a house in 2018, make sure to file a homestead exemption by April 30th. 

A homestead exemption removes a portion of your home’s value from taxation and limits the increase of your property taxes. It only has to be filed one time. You are eligible to file if you bought a home in 2018 or prior, and it is your primary residence.

Before you file, your driver’s license must be up to date with your new home’s address.

For homes purchased in TRAVIS COUNTY:

  • E-file online here
  • You will need an Owner ID and PIN, which you can get by emailing CSinfo@tcadcentral.org or calling 512-834-9317.
For homes purchased in WILLIAMSON COUNTY:

  • E-file online here
  • Call 512.930.3787 with questions or use the chatbox on their site

**There is no fee to file a Homestead Exemption** 


Congrats to all the new homeowners last year! If you have upcoming lease expiration, please give me a call or email to talk about your buying options. I’d lvoe to be your resource for all things real estate, so please reach out with questions any time!

January 10, 2019

Buy | Resources | Sell

Interest Rates are Rising – What it Means for You

If you’re someone who reads the paper or watches the news, you’ve probably heard about Fed hikes and interest rates. If those terms don’t ring a bell, no worries! Here’s what you need to know:

1. The Federal Reserve raised interest rates at the end of September for the third time this year.

2. As a result of the rate hike, the 30-year fixed mortgage rate jumped to 4.88%, the highest it’s been since 2011.

3. Interest rates are still historically low, but those looking to buy should think about locking in a rate soon. Financial institutions are predicting rates of 5% or higher by the end of 2019.

4. Rising interest rates means sellers may need to adjust their expectations on sale prices as buyer’s budgets decrease to compensate.

If you have questions on buying or selling a home, how interest rates affect you, or want to learn more about housing in Austin, please reach out!

October 18, 2018

Buy | Rent | Resources

How Much House Can You Afford?

If you’re paying more than $1,600 for rent in Austin, you can probably afford a mortgage on a house. The question then is; exactly how much house can you afford?

If you’re buying a home in cash, the answer to this question is simple: how much cash do you have? That’s how much house you can afford. However, if you’re like most American homeowners who get a home mortgage, your affordability is largely based on your DTI, or debt to income ratio.

Lenders use the formula below to make sure that the loan you say you want is a loan you can actually pay back every month.

All monthly debt payments ÷  gross monthly income = DTI ratio

Here’s how to calculate your own DTI to find out how much home you can afford:

Step 1: Add up your monthly expenses, including:

• Your monthly rent or mortgage payment
• Monthly student loan and auto loan payments
• Any other monthly loan or financed payments
• Minimum monthly credit card payment
• Alimony or child support

There may be additional debts that your lender will include, but these are the basics.

For example: Let’s say Bob Buyer rents a place for $1,500 per month, pays $250 towards his student loans each month, owns his car outright ($0) and has two credit cards that he pays off each month, but both have a $25 minimum payment. His total monthly debt equals $1,800.

Step 2: Divide your total monthly debt by your total gross monthly income (income before taxes).

The result should be a decimal or percentage, which represents your debt to income ratio.

In our example, pretend that Bob Buyer brings in $5,500 per month in pre-tax income. When we divide his monthly debt of $1,800 by his monthly income of $5,500, we get a debt to income ratio of 0.32, or 32%.

Generally, the max DTI allowed is ~45% 

Once you have your current DTI figured out, you can plug in different numbers for your hypothetical monthly mortgage amount to see the max you could pay each month while staying under 45% DTI. From there use an app like this one to see how that monthly payment translates to a purchase price.

To learn more about buying a home, contact us!

September 8, 2018

Buy | Resources

Buying New Construction vs Resale

A commonly asked question when house hunting is what the differences are between new and resale properties. “New” means exactly that: a brand new property that has never been lived in or will be built from the ground up. A resale or existing property has been pre-owned.

When it comes time to purchase, there are quite a few differences between the two. Here are a few key points you should be aware of:

New Construction Pros:

  1. Warranties. Most new home builders will issue warranties with each of their properties. These warranties are typically in three tiers; a one year warranty, two-year warranty, and 10-year warranty. The one year warranty will cover everything that the house came with. The two-year warranty covers major systems like plumbing, electrical, and HVAC. The 10-year warranty usually covers anything structural, like the foundation of your house.
  2. Updated and Customized. New construction properties are typically built with a more modern aesthetic. This can be a pro or a con depending on your style. Most builders offer a degree of customization, especially if you’re building from the ground up. Some may offer tiers with different floor/paint/counter packages, while other builders have design centers for you to pick out each and every item.
  3. Energy Efficient. New homes almost always come with energy efficient appliances, and all builders have to build to the city code, which usually leans towards energy efficiency. Things like quality insulation and energy efficient appliances can save you money each month on utilities.

New Construction Cons:

  1. Builder Contract. New construction properties use a builder contract for sales, which is very different than a resale contract. The builder contract is written to give every advantage to the builder, and no “outs” for the buyer. Give Homespace a call before touring a new home community so you can understand the contract before getting locked in!
  2. Location. In order to build a new home community, builders first have to acquire the land. Especially in densely developed cities, this usually means that new homes are further out from the center of town. If a commute is a big concern, it may be better to find a resale house in your perfect location and renovate it over time.
  3. Build Quality and Delays. Newer doesn’t always mean better, and that stands true for build quality. The best thing you can do before buying a new build is to check out the builder’s reputation. Read online reviews and ask neighbors who live in the community how their experience was. Some builders take a lot of pride in their quality and hire talented, thorough contractors. Others just want the house built so they can profit from the sale, and the cut corners can hurt you down the line.

Resale Properties Pros:

  1. Resale Contract. The contract used for existing homes has multiple places to build in protection periods for buyers. Having this time to get a property inspection, re-tour the house, and make sure that your loan finalizes is a huge plus to buying resale.
  2. Location. Location, location, location. A perk of buying an existing home is that you can choose wherever you want to live. If location is highly important to you, an existing home may be the way to go.
  3. Aging. Buying an older home has benefits. One major perk is that the home will likely have already done most of its settling. Settling is a natural process that happens as homes age. The weight of the home moves some of the structures in the house and can cause hairline cracks, shifting frames, and some creaks. In most cases, this is nothing to be concerned about, but sometimes settling can cause large cracks, broken plumbing, etc which can point to a larger issue. All of these issues tend to happen in the first few years, so if you’re looking at older homes, what you see is what you get.

Resale Properties Cons:

  1. Maintenance. While a brand new home comes with warranties, an existing home does not. Any upfront issues with the house will be your responsibility to take care of. Order an inspection to make sure the house doesn’t have any major issues!
  2. Upgrades. Existing homes will have more quirks and character than a brand new home. Sometimes the quirks and character may not be your taste. You can always change things later, but major updates can be expensive.

As you can see, there are pros and cons to both new construction houses and resale homes. Ultimately it’s up to you and what your preferences are in a new place. If you’re thinking about buying, contact us with any questions!

August 27, 2018

Resources | Uncategorized

Top Areas to Buy in Austin

There’s no denying it; Austin is still growing. A few months ago I posted about the new developments in East Austin (read here). Lately, it feels like cranes and cones are everywhere.

The Austin area nets over 100 new people every day, which continues to drive the need for better infrastructure, more housing, and more retail spaces.

If you’re thinking about buying or investing, here’s a few areas to keep an eye on to boost your return.

1. Wells Branch

An older neighborhood situated in North Austin, Wells Branch is poised to appreciate well in the next few years. As the Domain area grows more expensive, north austinites are turning to Wells Branch to save money.

What’s truly unique about Wells Branch’s location is that a new development in Round Rock called “The District” was just approved. The District will become a Domain-style mixed-use development. Upon its completion, Wells Branch will be smack dab in the middle of The Domain and The District, with a 7-8 minute drive in either direction.

2. Riverside

If living close to downtown is more your speed, consider the fast developing Riverside area. Commonly known as “Project Catalyst”, the now unnamed project funded by Nimes Capital aims to build hundreds of homes, a hotel and multiple office spaces near the new Oracle campus.

Riverside has room to grow price-wise compared to downtown Austin and is quickly becoming a hub for new home builders.

3. Ben White

Just south of Ben White and South Congress, construction has started on a new 40,000 sq foot public market. St. Elmo Public Market will be similar to Pike’s Place in Seattle and expects to draw in large weekend crowds.

With St. Edwards University just on the other side of Ben White, plus the new Austin ISD Headquarters relocating to Ben White and I-35, the area should be a strong south Austin investment spot.

4. Destination Bell Blvd

One of the perks of living “far north” is more space and highly rated schools. In the next few years, more retail and office developments will be built to lessen the need for a downtown commute. The mixed-use project, called “Destination: Bell Blvd” will be 52 acres in total area. 12 acres are zoned for parkland and 40 acres are zoned for retail, residential and office uses.

There is a full website dedicated to this project (click here) if you’d like to learn more.

Choosing where to buy a house or condo is a big decision. We’re lucky to live in a city that has multiple options for smart investments, and unique styles to cater to whatever your preferences may be.

I’d love to be your resource for all things real estate, and would welcome a call or email any time to talk more about your housing options!

July 12, 2018

Resources | Sell

Home Renovations that Pay Off

Whether selling a home, planning renovations or looking to buy, it’s smart to know which upgrades are worthwhile.

If selling, smart upgrades can be the difference between boosting the sales price a few extra thousand dollars or wasting precious pennies that could go into a new home. When house hunting, being able to spot a hidden gem that just needs some TLC can save you money while also giving you an opportunity to earn equity after closing.

If you’re in the market, here are some ways to get a higher return on your property investment.

1. Front Door Replacement

Replacing a builder grade door with a steel door not only boosts the curb appeal of your home, but also offers financial rewards. A steel door can reduce draftiness and cold spots, saving you money on electricity every month. Depending on the door you choose, it’s possible to also increase your home’s security with multi-point locking and other protection features.

2. Minor Kitchen and Bathroom Remodels

For kitchens and bathrooms that lean towards the “dated” side, a minor makeover is worthwhile. New counters and flooring, stainless steel energy efficient appliances, and a mid-priced sink and faucet can go a long way.

3. Deck Addition

One of the top perks of home ownership is having private outdoor space. Adding a deck is a smart addition to gain extra living square footage. When it comes time to sell, it also helps prospective buyers visualize living in their new space.

4. Landscaping

First impressions are important, and the outside of your home is the first thing a buyer sees. Tasteful landscaping, power washing siding, and fresh paint can all help a house look more inviting.

Whether you’re selling a home or renovating for personal use, consider which improvements are necessary, and which will give you the highest return. Consult a real estate professional to find out what most buyers are looking for, and to see how your home measures up to the rest of the neighborhood.

I’d love to be your resource for all things real estate and would be happy to provide a free price estimate for your current home.

May 25, 2018