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

Buy | Resources

Debunking Down Payments

The homebuying process can seem maddeningly vague, but it doesn’t have to be. One of the biggest misconceptions I run into as a Realtor is how much money one needs to buy property. If you’ve ever been curious about how down payments work, read on!

The Myth

Let’s say you want to buy a house, but don’t have a ton of savings in the bank. A 20% down payment seems impossible so you resign to renting for another year…and then another…and another. The problem here is that you’re constantly spending money without gaining anything back in the form of equity. Austin is one of the fastest growing markets in the country and waiting just one year to save that 20% can literally push buyers out of a price range.

The Reality

Here’s a secret that every single prospective homebuyer should know: the 20% downpayment rule is not, in fact, a rule at all.

For example: Say you want to buy a $300,000 house. Let’s assume a mortgage rate of 4.5% and a property tax rate of 2.5% with no HOA fees. At 20% down ($60,000) you’d pay roughly $1,940 per month.

Now let’s assume you don’t have $60,000 to invest in a house. Mortgage lenders will often approve down payments as low as 5%, and in some cases even 0%. They are able to do this by adding what’s called private mortgage insurance (PMI) to your loan.

PMI is an extra monthly insurance fee wrapped into your mortgage payment. It protects the lender in case you default on your loan, and it can be removed from your payments once you reach 20% equity in your property. In Austin, real estate is appreciating so quickly that this level of equity can be obtained in a few years.

If we take the same $300,000 house and apply a lower down payment of 5% ($15,000), the new monthly payment is only slightly higher at $2,175. Add roughly $100 per month for PMI for a total monthly payment of $2,275. Again, once you reach 20% equity the house can be re-appraised, removing PMI for the remainder of your loan term.

The Point

To recap, for a slightly higher monthly payment at the start of your loan, you can save tens of thousands of dollars on a down payment. Additionally, if you’re a first-time homebuyer there are many lender incentives and down payment assistance programs available. Property in Austin appreciated an average of 8% last year, with the national average at 3-5%. If trends stay the same, buying a home is not only a personal achievement but a sound financial investment.

Saving for a down payment doesn’t have to be stressful, and there are many different ways to finance a home. I’d love to be your real estate resource and would be happy to grab coffee and talk about housing options. Please contact me with questions any time!

April 16, 2018

Buy | Rent | Resources

North Austin Neighborhoods You Can’t Miss

The Austin housing hype is usually focused around South Austin and East Austin. Known best for their proximity to downtown and “Keep Austin Weird” vibe, both areas are highly desirable locations for renting, purchasing, and investing. While real estate in these areas certainly has its perks, prospective homebuyers should consider the benefits that North Austin offers before making a final decision. Here are four North Austin neighborhoods to keep an eye on as our city continues to top the charts on best places to move to.

1. Gracywoods/Walnut Creek

2017 Median Home Price: $235,000

What was once a quiet residential area is now one of the hottest areas to live in North Austin. The Domain put these neighborhoods on the map, and its office space brought hundreds of tech workers to the area. The Gracywoods and Walnut Creek neighborhoods also have unique access to green space in Austin. Residential streets weave in and out of the Walnut Creek Metropolitan Park and the Northstar Greenbelt. Both green spaces offer a plethora of hiking and walking trails, dog parks, and play areas.

2.  Milwood/Riata Crossing

2017 Median Home Price: $310,000

Employers like Apple and Oracle have situated themselves in northwest Austin. Consequently, the Milwood and Riata Crossing neighborhoods have become a great landing spot for corporate relocations. Much of the Milwood neighborhood is zoned for Round Rock ISD, giving access to highly rated schools while still having an Austin zip code. Several neighborhood parks are scattered throughout the area providing plenty of opportunities to enjoy Austin’s outdoor scene. The commute to downtown is 20-35 minutes depending on traffic; a modest drive compared to many other major cities.

3. Great Hills

2017 Median Home Price: $530,800

When it comes to home buying, there may be some sticker shock compared to other neighborhoods in North Austin. However, houses in the Great Hills neighborhood can be purchased for a fraction of what they cost in West Lake Hills, Great Hills southern sister. Hilly treetop views are not uncommon in the Great Hills area, a perk residents can enjoy while still being minutes away from grocery stores, shopping, and dining. Easy access to 183 and Mopac makes commuting anywhere in the city relatively convenient.

4. Avery Ranch

2017 Median Home Price: $345,000

The 78717 zip code stretches the length of Avery Ranch, which sits at Austin’s northernmost boundary point before Cedar Park. The Avery Ranch HOA has a multitude of parks, pools, workout facilities, clubhouses, and play areas. Lakeline Mall is just minutes to the west, while mixed-use retail and shopping areas are placed at each end of the neighborhood. Avery Ranch residents will be zoned for either Round Rock or Leander school districts, both of which are rated highly.

The Verdict

The North Austin vs South Austin debate will likely continue for many years to come, and there are definite advantages to both parts of the city. Before staking roots in one spot vs the other, send Homespace Realty an email for a personalized tour of both areas. Wherever you decide to live, it’s best to know all of your options. Sound off in the comments which part of Austin you’d love to live in and why!

March 19, 2018