My wife and I are considering moving to Austin but have concerns about the weather (Addison: sale, how much)

[mesmer]

Originally Posted by bodyforlife99

Btw, this was from our local paper in SF....

Renting Full Time

If you move but keep your house as a rental property, you stop deducting mortgage interest on the building on the date of your move, and you begin taking rental property deductions and depreciation when tenants move in. The depreciation formula is the asset cost divided by its useful life. The useful life of residential rental property is 27.5 years. If you buy a building for $250,000 and allocate $50,000 to the land cost (land itself is not depreciable), the depreciation is $7,273 every year for 27.5 years. Because of depreciation, it is possible to make an actual profit but show a paper loss for tax purposes. Your rental income in this case is tax-free.

You can pretty much triple the depreciation expense, add in $5500 for property tax, and whatever expenses are incurred (property management, insurance, repairs). Assuming all of that is allowed, there would be very little income to pay taxes on.

Of course, this is just an article on the internet (so by no means am I saying it's gospel). I just know what's been the situation with our other property. Our accountant can be the final say on this.

My understanding was that you do eventually pay taxes on the depreciation when you sell. But that's off something I read awhile ago as well, and not personal experience.

[bodyforlife99]

Originally Posted by mesmer

My understanding was that you do eventually pay taxes on the depreciation when you sell. But that's off something I read awhile ago as well, and not personal experience.

Yes...Post 57

[CT_ATX]

Originally Posted by A-Tex

I'm not sure what site you're looking at but a 2000 SF newer home in that price range will not be found within five to ten miles of the city core (except maybe in some of the developments by the airport as someone mentioned.) Five to ten miles from the "city limits" is a whole other animal, which puts you in some of the lower priced suburbs. I think Kyle and Buda may even fall into that definition.

Realtor.com has 200+ homes under $300k that are 2000+ sq ft. A lot of them are around South Park Meadows (Slaughter to William Cannon) and a good distance from the airport. The furthest distance for most of those is around 11 miles to downtown.

I can't speak to the OP's tax situation, but it sounds like they've done their homework. My only caution would be these $250k houses were $150k a few years ago, and they may be $350k in a few more years. So, that tax bill may continue to rise. Austin is a fun city, but if your chief goal is to save money then it is not the best choice. I've definitely been thinking about reducing my expenses in a similar fashion by moving from Austin. Just something to think about.

[bodyforlife99]

Originally Posted by CT_ATX

Realtor.com has 200+ homes under $300k that are 2000+ sq ft. A lot of them are around South Park Meadows (Slaughter to William Cannon) and a good distance from the airport. The furthest distance for most of those is around 11 miles to downtown.

I can't speak to the OP's tax situation, but it sounds like they've done their homework. My only caution would be these $250k houses were $150k a few years ago, and they may be $350k in a few more years. So, that tax bill may continue to rise. Austin is a fun city, but if your chief goal is to save money then it is not the best choice. I've definitely been thinking about reducing my expenses in a similar fashion by moving from Austin. Just something to think about.

Keep in mine CT_ATX, whatever movement you see in Austin will be magnified on a monetary basis by the SF Bay Area. Our home a few years ago hit a bottom of roughly $600K. It will now sell for between $850-900K. The SF Bay Area had an average drop of 27% in our last recession. As much as Austin has climbed monetarily, the Bay Area has been more (and the drops are more also). Most places in our neighborhood go for $100K over listing price. During the summer, we had two homes list in our neighborhood for $725K and $765K. The $725K sold for $845K and the $765K sold for $905K. I don't doubt that you're correct that there are other choices across the country that are more favorable than Austin on strictly a financial basis (of course it might not appeal to people in other ways). But if you're comparing to the SF Bay Area, your dollar is going to stretch much further no matter where you move to. The prices and cost of living here are simply outrageous. Seriously, would you see anyone in the state of Texas pay that type of money for a 1070 square foot home? Our initial incentive for moving was just that housing had gotten to that point again that it seemed like a good time to cash out (and most economists are predicting 2017 for our next recession). But considering that after each recession, the Bay Area has not only recovered but exceeded the previous highs, we are leaning more to renting and letting a tenant finish off our mortgage payments while we benefit in the short run with some cash flow. The Bay Area has so few houses that I believe rent prices will not drop significantly (plus landlords often will hold out longer to get the proper initial rent since the city is subject to rent control restrictions). I read somewhere that we would need to build 100,000 new units to make rents affordable again (the area is just too small to accommodate the amount of people trying to fit in here). Last I checked the median price on a 1 bedroom apartment was $3600. It's just crazy and Austin would be a welcome relief from what we're dealing with here.

[Roadking2003]

Originally Posted by ashbeeigh

If you are concerned about the flooding you should be. Austin, Texas "One of the most flood-prone regions in North America"

Flooding isn't a problem for 99.9% of us. That would be the least of my concerns and is very easily avoided.

[Roadking2003]

Originally Posted by bodyforlife99

I'm not sure where you're getting that from. Based on the research I've done, the Austin area should have property taxes ranging from a low of roughly 2.25% to a high of 3%. Most homes we're looking at (all at least 1 1/2 to 2x bigger than our home, are running between $250K-$275K), so the max we'd be looking at is roughly $8K. We are currently paying near $5500 (so a net difference of roughly $2500 on the high end). On the other hand, our state taxes have varied from a low of $7K to a high of $9K (recently it was $7K). We would not be paying those in Austin. It seems like a slam dunk that the tax ramifications (taking into account property and state taxes) would be significantly better in Austin (not to mention the cost of living).

For almost everyone, taxes in TX are lower than CA. The exception would be someone with very low income and a very expensive home since TX home taxes are higher and CA has a state income tax.

[Roadking2003]

CNN has a nice site that let's you compare costs by city. Here is the SF and Austin comparison. As you can see, an income of $100,000 in SF will buy you the same as $54,665 in Austin. Housing is 72% less in Austin.



Cost of living: How far will my salary go in another city? - CNNMoney

[bodyforlife99]

Yep, that pretty much says it all, eh Roadking? Thanks for posting that.

[A-Tex]

Originally Posted by CT_ATX

Realtor.com has 200+ homes under $300k that are 2000+ sq ft. A lot of them are around South Park Meadows (Slaughter to William Cannon) and a good distance from the airport. The furthest distance for most of those is around 11 miles to downtown.

I can't speak to the OP's tax situation, but it sounds like they've done their homework. My only caution would be these $250k houses were $150k a few years ago, and they may be $350k in a few more years. So, that tax bill may continue to rise. Austin is a fun city, but if your chief goal is to save money then it is not the best choice. I've definitely been thinking about reducing my expenses in a similar fashion by moving from Austin. Just something to think about.

I don't know what you're looking at because I just pulled up listings in 78748 (Southpark Meadows area.) The OP is looking for something new/er between $250 - $275K. There are three listings that fit those requirements. None of them new.

[A-Tex]

Originally Posted by bodyforlife99

Btw, this was from our local paper in SF....

Renting Full Time

If you move but keep your house as a rental property, you stop deducting mortgage interest on the building on the date of your move, and you begin taking rental property deductions and depreciation when tenants move in. The depreciation formula is the asset cost divided by its useful life. The useful life of residential rental property is 27.5 years. If you buy a building for $250,000 and allocate $50,000 to the land cost (land itself is not depreciable), the depreciation is $7,273 every year for 27.5 years. Because of depreciation, it is possible to make an actual profit but show a paper loss for tax purposes. Your rental income in this case is tax-free.

You can pretty much triple the depreciation expense, add in $5500 for property tax, and whatever expenses are incurred (property management, insurance, repairs). Assuming all of that is allowed, there would be very little income to pay taxes on.

Of course, this is just an article on the internet (so by no means am I saying it's gospel). I just know what's been the situation with our other property. Our accountant can be the final say on this.

That's federal taxes, not state taxes. The other thing you need to concern yourself with on a federal basis is the way things get all kind of messy if you've ever written off part of your home as a home office when you go to sell. Make sure to mention that to your accountant.

Life as an absentee landlord of your former home is full of headaches -- especially for the first time landlord. It just takes one horrible tenant to wreak havoc on your life, and trust me, there are plenty of them out there that look good on paper to start. I'm in agreement that you shouldn't sell your home before you're sure you're going to make a permanent relocation, just want you to understand there are a lot more financial implications and outlays than you're taking into account.