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We (wife, toddler, and me) are looking for a home to buy and our agent is really hip on East Austin. We love the look of some of the houses and the more diverse population (we're a "mixed" couple, FWIW) and how close it is to downtown. But we're also wanting a house that might offer a decent appreciation in value over time.
Our agent has shown us a few properties south of 12th and around the Chestnut area, and she seems to think that putting $40k of renovations into them will increase the value instantly by $75K. I'm not so sure. I've also seen some comparable houses that are the same price (+ $40K) as the ones we looked at and they're already updated. It sends up red flags that she may not know the area as well as she says. Is there any truth to what she's saying? What about 5 years from now?
I just read on here a long thread about someone else looking for something that would increase in value, and the consensus seemed to be Allendale and Brentwood/Crestview. I hadn't even considered those, because I thought they'd be out of our price range... but a quick search found quite a few mid-200s properties that would be nice. Is that still the consensus 6 months later?
One more area we looked at was south of Ben White, by S 1st. The St. Elmo Elementary seems to be top notch, and the area is okay. I don't get the feeling that home values are changing too much in that area, but the price is bit better than the north of downtown. Is that a fair assessment?
One thing to keep in mind is that the school in downtown east Austin are generally considered very poor. If you have a toddler, you'd either have to pay for private school (money that could instead go into an appreciating asset like a home elsewhere) or resign yourself to your child going to a school that is considered substandard.
If your main concern is price appreciation, I would think east Austin would be the best place in the city for that, as it is poor and crime-ridden yet rapidly gentrifying. The increased home values become a self-fulfilling prophecy as they push out the poor, thus making it a more desirable area to live to most, thus raising prices further. However, the poor schools will still be a limiting factor, which would not be true in Rosedale, Crestview, etc. You're essentially limiting your future buyers to young professionals or rich empty nesters and excluding upper income familes.
The deals are certainly there...you can still buy a home with a view of the capitol form your backyard for a relatively low price, and it's sure to appreciate over the life of your 30-year mortgage. Also, by the river there is an extremely ugly, decommissioned power plant that after sitting idle for many years is just now being dismantled. What was a several stories tall eyesore is now going to be a beautiful park right on the river. That should help property values!
NP. I'm very skeptical of your agent's claims of $40k in renovations immediately returning $75k in equity. I've put roughly that much into a fixer upper in 78704 over the last year and would be happy with $75k in newfound equity, and that's in a neighborhood where renovated homes sell for more than $300 per square foot. I wouldn't expect returns so dramatic in an east Austin home off of 12th street in the short term, but then I am not a realtor. However, if you're seeing homes already renovated for the same price as an unrenovated home, I'd say that's the clearest red flag you can have.
Without knowing your situation, if you're realtor is recommending homes in east Austin and doesn't even know about the Holly power plant being dismantled, which has been a very contentious issue in the news over the last year, I'd say it is time to find a new realtor (especially considering the other issues you mentioned). Something like that can dramatically alter the landscape in your neighborhood and have a significant impact on values.
It sounds to me like schools should be a significant component to your decision unless you're planning to go private. I looked at houses in east Austin and very much wanted to go that route because of the investment potential due to gentrification, but ultimately decided against it because I plan to have children and did not want to pay for private schools or religious schools when there are great public school options available by selecting the right neighborhood. There are fixer-upper opportunities abundant in 78704, Clarksville, Rosedale, Brykerwoods, etc because they are very old neighborhoods with old homes, all of which sit in great school districts and still provide you the opportunity of building sweat equity.
Thanks. We actually looked at a few homes over by the old plant, off of Holly. Our agent didn't know much about that area, and she never told us it was being dismantled... so that's good to know.
And I wouldn't say our MAIN concern is for appreciation in value, but it's something we want to consider.
I'd be extremely skeptical of a Realtor who claims to know East Austin but wasn't aware of the power plant being decommissioned. The City has been bidding and rebidding that project for two years now; and debating it for twenty or more.
I also think that this:
Our agent has shown us a few properties south of 12th and around the Chestnut area, and she seems to think that putting $40k of renovations into them will increase the value instantly by $75K.
Is real wishful thinking. If improvements showed those kinds of payoff's in that area, it would be a much hotter market then it is.
That is not to say that given time, investing in that area is not a good idea, it is gentrifying and has great access to downtown. Location, location, location, it has all of those advantages. In the long run I believe it will be a good investment. It will "offer a decent appreciation in value over time". But don't expect any short term windfall profits.
I think this is a very good time to invest in that area, if you are comfortable living raising your children there. In the long run it will probably be a positive investment. In regard to crime in that area, it is really not as bad as some people say. Violent rime is very low in Austin to begin with and when you look at the actual statistics East Central Austin is much safer then downtown or East Riverside Drive, and comparable to South Central Austin. http://www.trulia.com/crime/#!travis-tx/15/30.25743,-97.73228/Austin,TX,East_Cesar_Chavez/
Property values near South First and St. Elmo, will probably remain stable. There is a lot of office/health business related activity in the area which is expanding and encrouching on the residential neighborhoods. The area to the East is very industrial. I don't expect to see big improvements in property values in that area. I predict it will remain stable. I would invest in central East Austin before I'd invest there.
We bought on E 8th in 2006 and we've had around 30,000 in appreciation when we refinanced last year - at least that's what the estimate was - not sure that we could really sell for that price in this market but for what its worth - I think there is some decent appreciation here - School are really the issue here - if you can get into the UT charter school though you'll be sitting pretty, its one of the best school in the state and only open to East Austin residents - Good Luck
I'm curious; have they actually physically begun dismantling the Holly power plant? I looked at a house over there early this year and decided against it (though for other reasons). At the time, thought there were plans to take it down, it seemed anyone's guess to when (or if) that would occur.
As for the OP. I myself bought a place on E. 8th and there are tons of renovation projects going on all over that area. While that is only one indicator of appreciation, IMHO it's a pretty good one. Nowhere else in Austin has properties that cheap within a mile of the center of downtown.
I don't want to disparage our realtor too much. She may know about the plant, and just didn't tell us... or think it was important in our decision making.
One thing I think would be important to do would be to take a couple fly bys on the house your considering. I've done this everywhere I've considered living and would certain do it on the east side. Drive by the house late at night to get a feel for what's going on, and do it again on a weekend night. Not to be overly dramatic, but there are a few places along 13th street or along Cesar Chavez where there are still streetwalkers and crack dealers walking the roads at night. They are getting pushed further and further out of course and it is only a matter of time before gentrification solves that problem, but you do have a wife and small child so just make sure you'd be comfortable.
With that said, I think you'd be very happy with yourself in 30 years when the mortgage is paid off having bought in east Austin today, so long as you solve the school issue I mentioned earlier for your child.
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