Buying vs. Short Term Rental (Austin: real estate, rentals, mortgage)

[SurferDude]

I am building a home in Austin which will take 12 months to build. I will need a temporary place to stay for a year, and want to consider buying another place instead of renting. I figure why spend $30k in rent when I could be paying myself. Once my house is done, I intend to turn the short term house into a rental. Any thoughts on this?

[cdelena]

Do the math (with closing, taxes, etc.) but everytime I looked at short term purchase the answer came up rent.

[jwb123]

I have to agree, but I am not a professional real estate agent by any means. I can't imagine that with closing costs, and taxes, that buying would be cheaper.

I don't know where you get $30k for renting.

You can rent a decent sized (3000 sq ft, 4 bedrom) single family home in a nice golf course neighborhood in RR for $1400 a month. Even less in some cases, as inventory is high.

I would rent the smallest thing you can get by on for a year, in an inexpensive area - and deal with it - if you are concerned about not throwing away money.

There was a thread around here somewhere, in which I asked how people made it on investment rentals. Seems like inventory is, like I said, high - and people can anticipate having it empty for months at a time, sometimes. Especially given this national market slow down.

[texastea]

Originally Posted by cdelena

Do the math (with closing, taxes, etc.) but everytime I looked at short term purchase the answer came up rent.

On the other hand, if you need the Federal income tax break, all of the above is tax deductible. There are no fee loans that would reduce the closing costs. And I've seen some homes with signs out front that say "instant equity," not to mention all the forclosures and/or homes that need some work. You could always sell it if the market for turning the home is better than the retal market in a year

[gigi927]

Originally Posted by Jenbar

I don't know where you get $30k for renting.

You can rent a decent sized (3000 sq ft, 4 bedrom) single family home in a nice golf course neighborhood in RR for $1400 a month. Even less in some cases, as inventory is high.

In my part of town (NW), houses of that size rent for upwards of $2500 a month or more.

If you do a second purchase with the intent of renting it out in the future, my advice would be make sure that you are willing to accept some negative cash flow in the short term (unless you are paying cash or putting a huge downpayment on the second home). When you factor in the high property taxes here, mortgage and other costs, it will take time for the rental to be positive cash flow for you.

[jwb123]

In my part of town (NW), houses of that size rent for upwards of $2500 a month or more.

I don't doubt that within this area (Austin proper, suburbs, etc) there are homes that rent for a huge amount. There are some over here too - depending on golf course view, etc. Lake Forest neighborhood is an example of high priced/high rental $$.

My point was - that the OP COULD rent for less than $30k and not be renting a shanty town efficiency.

I was only offering that perhaps, for a year, the OP would be better suited to concede on some of his "housing needs" (size, location, etc) to avoid negative cashflow and costs of buying.

[austin-steve]

Originally Posted by SurferDude

I am building a home in Austin which will take 12 months to build. I will need a temporary place to stay for a year, and want to consider buying another place instead of renting. I figure why spend $30k in rent when I could be paying myself. Once my house is done, I intend to turn the short term house into a rental. Any thoughts on this?

If you plan to keep the rental for 3+ years, and can handle negative cash flow, it might be an idea to consider.

Other things to consider are:

1) Are you cut out to be a landlord, or are you willing to pay a property manager? Many people are not emotionally able to be landlords.

2) Do you have consumer debt that you should pay off instead of investing? If you have car payment, credit card debt, etc., you probably should take care of that first.

Steve