Apartment Rents going up up up... how much has yours increased? (Austin: 2014, lease)

[DittoDitto]

I bought a home in Austin in 2007 at the height of the market. Two months after I purchased my house, the housing market stalled and my home eventually lost about 10% in value. The house didn't actually lose this amount, because I didn't sell it, but had I sold it, I would have taken a 10% loss, if that makes sense. I lived in the house for 21 months. In that time I met a man, we dated, we fell in love, we got married. He did not want to live in my home. So, we bought a home together and I turned my home into a rental property.

Each year my property manager raised the rent $1200 annually ($100 per month). Each year the old tenant left and a new tenant arrived. Each year I worried about what damage the tenant would do, what would break in the house, what would need replacement, whether or not the tenant would pay the rent timely, who would the tenant move into the house breaking the paragraph in the lease that discusses this, and what pets the tenant would sneak into the home.

Despite all of the maintenance, property management commissions, and other expenses, I managed to make a profit on the rental. I did not make a lot. Certainly I could have invested my money more wisely than investing in a home that turned out to be a rental property.

This year the market changed. The house appreciated in value. I sold the house. The profit from the years of rental combined with the appreciation in value covered the closing costs. I basically got my investment back after owning the home for 5 years.

This means that I lived for 21 months in that house and it cost me nothing other than utilities, and real estate taxes for 21 month. Had I rented the same house for 21 months it would have cost in excess of $30K just for the rent.

[jakobv84]

Originally Posted by DittoDitto

I bought a home in Austin in 2007 at the height of the market. Two months after I purchased my house, the housing market stalled and my home eventually lost about 10% in value. The house didn't actually lose this amount, because I didn't sell it, but had I sold it, I would have taken a 10% loss, if that makes sense. I lived in the house for 21 months. In that time I met a man, we dated, we fell in love, we got married. He did not want to live in my home. So, we bought a home together and I turned my home into a rental property.

Each year my property manager raised the rent $1200 annually ($100 per month). Each year the old tenant left and a new tenant arrived. Each year I worried about what damage the tenant would do, what would break in the house, what would need replacement, whether or not the tenant would pay the rent timely, who would the tenant move into the house breaking the paragraph in the lease that discusses this, and what pets the tenant would sneak into the home.

Despite all of the maintenance, property management commissions, and other expenses, I managed to make a profit on the rental. I did not make a lot. Certainly I could have invested my money more wisely than investing in a home that turned out to be a rental property.

This year the market changed. The house appreciated in value. I sold the house. The profit from the years of rental combined with the appreciation in value covered the closing costs. I basically got my investment back after owning the home for 5 years.

This means that I lived for 21 months in that house and it cost me nothing other than utilities, and real estate taxes for 21 month. Had I rented the same house for 21 months it would have cost in excess of $30K just for the rent.

A few thoughts,
- I would consider worrying about tenants a very real cost even if it's not in dollars and cents.
- You also took on a significant risk of either increases or decreases in value that renters do not. Few rational people would invest in any single asset (except for their house) that has such a high risk relative to their net worth

Finally, without any deep analysis let's assume your house is worth ~$200,000 (given a monthly rent of ~$1,500 that you allude to) your cost of money (borrowed or could have invested) may have been ~5% or ~$10,000 a year. Add on property taxes and some maintenance costs it doesn't sound free.

There's certainly advantages to home ownership, but it's not quite as rosy (at least to me) as real estate agents somtimes makes it seem. Granted, in a growing town like Austin is at the moment it probably works out for a lot of folks

Anyway... each to their own.

[mickey65]

After renting apartments and rooms out of houses for about 20 years, all I can say is that it's really cool to own my own home finally. Going on 4.5 years now!

[Lije Baley]

A third option could be buying a small house....a really small house (I'll admit I didn't look up mortage rates for such dwellings but they've got to be cheaper than those for a "typical" home):

"11 Small Eco Homes That Live Large"

The Ikea here in Houston has a six hundred square foot "home" inside the store and for two people I thought it would be pretty comfortable (the kitchen includes full-sized appliances and lots of counter space, though the bathroom only had a a shower stall i.e. no tub).

[EzPeterson]

Great idea, but many city codes mandate a certain size single family dwelling. i.e. Cedar Park is 1100 sf (I think - pretty sure, and likely depends on zoning)

[Lije Baley]

^ whoa, didn't know that. I wonder if it has something to do with preserving the look of the area the house will be part of.

[Shredding_Gnar78]

Originally Posted by Gingersnap92

renters almost always overextend themselves - they pay as much rent as they can afford - just like they would treat a house. Those who can't commit to owndership, or live within their means are on course for long term wealth destruction.

Ya.

Americans saw wealth plummet 40 percent from 2007 to 2010, Federal Reserve says

"The median value of Americans’ stake in their homes fell by 42 percent between 2007 and 2010, to $55,000, according to the Fed."

[looking2tex]

Do the property managers do prepaid leases in the Austin area? We are looking to rent, but would like to put a lump sum payment for the full 12 months down. Although our credit is good, it is from out of country so I don't know how they would be able to do a credit check.

[EzPeterson]

Without a doubt they will. Money in hand trumps credit every time.

[mayfair44]

Originally Posted by looking2tex

Do the property managers do prepaid leases in the Austin area? We are looking to rent, but would like to put a lump sum payment for the full 12 months down. Although our credit is good, it is from out of country so I don't know how they would be able to do a credit check.

Unless your intent is to bargain down the monthly payment, why would you want to drop that much cash up front?