Should I Buy a House in Austin, Texas?

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Full Speed Ahead

Full Speed Ahead

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My daughter will be going to a three-year graduate program at Texas in Austin. The thought process is buying a house and having her pay me the rent, versus her renting a place and paying it to the landlord, and at the end of the three years selling it. If you've done this for your kid(s) has it worked out? And if you live in Austin or are familiar with what's happening there with home prices (which are really high) do let me know. Thanks.
 

Worked well for my wifes family in MPLS when their kids were going to the U. Just make sure she is capable of renting the rooms. They always had all the rooms rented.

I am not sure their exact terms, but knowing her dad he didn't let them live there at a loss. He always gets his on every deal, no matter who its with.🤑
 

Wally said:
Worked well for my wifes family in MPLS when their kids were going to the U. Just make sure she is capable of renting the rooms. They always had all the rooms rented.

I am not sure their exact terms, but knowing her dad he didn't let them live there at a loss. He always gets his on every deal, no matter who its with.🤑
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Does he also give crappy X-Mas presents?
 

Even assuming nothing major breaks ... and you somehow get away with putting exactly zero into the place .... it still feels like you're going to lose some money?

The cost of selling a home, is not nothing. Could the value rise enough in three years, again even with putting nothing into it, that you could still come out whole? Sure, I guess that's possible.
 

MplsGopher said:
Even assuming nothing major breaks ... and you somehow get away with putting exactly zero into the place .... it still feels like you're going to lose some money?

The cost of selling a home, is not nothing. Could the value rise enough in three years, again even with putting nothing into it, that you could still come out whole? Sure, I guess that's possible.
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I would assume the point is that anything you pay in rent is effectively “lost”. So if you’re paying $800/month on rent (no idea what Austin rents are) x 36 months = $28,800. So essentially, if you lose less than $28k, you’re coming out ahead.
 


forever a gopher said:
I would assume the point is that anything you pay in rent is effectively “lost”. So if you’re paying $800/month on rent (no idea what Austin rents are) x 36 months = $28,800. So essentially, if you lose less than $28k, you’re coming out ahead.
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Oh, if he’s paying his daughter’s rent himself.

I thought the point is just that he didn’t want it going to a landlord, but she was paying.

IE, she "pays the mortgage" of the house he buys. But if she rents, he pays none of that (it just goes to some Joe Schmoe landlord).
 
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Don't know what real estate in Austin is like.....but if it's anything like here.....you're likely going to have to overpay for anything. Both of my siblings are currently trying to buy and even with the inflated house prices....they are selling for OVER asking.

Take into account that closing costs and selling fees will cost a chunk....you'll have to deal with anything that goes wrong or needs to be replaced over that three years period....and the general hassel of not only buying something.....but also having to then sell it.....you'll probably want to consider whether all this is actually worth it.
 

Thanks for the thoughts. To answer some of your questions:
  • We'd be buying a single-family home where she'll live, no other renters.
  • She'd be paying us (Mom and Dad) the monthly rent of $2K versus paying a landlord. So $72K over three years. Funding comes from her grad school stipend (they're paying her a pretty decent salary to go to school).
  • Mortgage payments will run about $2.5K/month.
  • Property taxes will run about $5K/year, so $15K total.
  • Austin real estate is very "hot" -- homes stay on the market for about 3 to 5 days before they're sold. There's a massive influx into Austin from California.
  • Daughter would be doing some "sweat equity" such as new paint on the walls.
 

Full Speed Ahead said:
Thanks for the thoughts. To answer some of your questions:
  • We'd be buying a single-family home where she'll live, no other renters.
  • She'd be paying us (Mom and Dad) the monthly rent of $2K versus paying a landlord. So $72K over three years. Funding comes from her grad school stipend (they're paying her a pretty decent salary to go to school).
  • Mortgage payments will run about $2.5K/month.
  • Property taxes will run about $5K/year, so $15K total.
  • Austin real estate is very "hot" -- homes stay on the market for about 3 to 5 days before they're sold. There's a massive influx into Austin from California.
  • Daughter would be doing some "sweat equity" such as new paint on the walls.
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What does "work out" mean in your eyes, per the OP?

With these numbers, my guess is that -- unless somehow the price of this home will jump hugely in three years -- you'll lose some thousands of dollars.

The price would have to increase enough to make up the difference in the "extra" costs you're going to pay over the three years that she's not covering, plus all the costs of selling the place (not insignificant).

The mortgage will introduce interest that you'll have to pay in full when you sell the house.


I don't know anything about the housing market there to know if there's a decent chance that the price could go up that much.


If it was 10 years from now, maybe then.


Thought: why not just plan to keep it for 10 years? Rent it to other college students when she's done? You worried they'll trash the place? Fair worry ... but if you can target grad students, especially older and/or international, I think that risk would be lower (wild guess).
 



If I could afford it, I would do it. Austin seems like the fastest growing city in America for the last two decades. Buying a house will be difficult (& expensive!). Good luck!
 

I just "moved" to Austin. I live here part of the time. The city is growing like no city I have ever seen. I definitely think it would pay off.

I did quite a bit of research and had the help of one of my buddies (long time Austinite who owns several properties here). So if you have questions, feel free to ask.
 

My niece and her bf moved to Austin a few months ago and they love it. The area is booming. Even with transaction costs on the other end, I doubt you will lose money. Just make sure the house is thoroughly inspected during the contingency period to avoid ticking time bombs that will suck capital.
 

Thanks everyone for chiming in. Just putting a wrap on this thread. We're now property owners in Austin. Small house, big lot, great location. And starting next year I'll do the "six months and day" deal to keep from paying the Minnesota income tax. Austin is definitely in growth mode. We'll see how it all works out.
 



Full Speed Ahead said:
Thanks everyone for chiming in. Just putting a wrap on this thread. We're now property owners in Austin. Small house, big lot, great location. And starting next year I'll do the "six months and day" deal to keep from paying the Minnesota income tax. Austin is definitely in growth mode. We'll see how it all works out.
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Just an update. Our property is now up about 25% in 2+ years, it helps that houses on two of the neighboring lots were torn down and replaced with around $3M homes. We also got the timing right on the mortgage rates, and we have an assumable loan (so when we sell it, the new buyers can get our 3% interest rate on whatever the balance of the loan is at that time). Unless it's a total cash deal, it'd be hard buying a home in today's market...

... and if you're thinking of buying a house in Texas, send me a PM and I can fill you in on some lessons learned, especially about TX property taxes and the deals they offer if you know about them.

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Well, the topic wasn’t going to come up organically so there is that. One of kind.
 

Didn’t know there was such a thing as an assumable loan. Would think banks would like to disallow such a thing. Why wouldn’t everyone do that, now??
 

MplsGopher said:
Didn’t know there was such a thing as an assumable loan. Would think banks would like to disallow such a thing. Why wouldn’t everyone do that, now??
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I believe assumable mortgages are limited to those backed by a federal agency like FHA or the VA. Conventional mortgages are not assumable.
 

Should be every mortgage, if the buyer wants it! But banks would hate that.
 


Well also I meant banks, now, want new loans so that they can get the higher rates.

Obviously when it was the other way around, the new buyer would always elect to get a new loan to get the lower rate.

Anyway, I’ll assume OP was in the service and so was able to get a VA backed loan. That’s a great benefit for service folks (y)
 

I am curious though …. What would’ve made the OP say no?

Now, with rates so much higher, that’s one thing.

But what else??
 

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