Where are the middle class buying in Austin? (for rent, lender)

[787]

Originally Posted by Trainwreck20

No, it is not impossible at all, but it is a crap shoot, and a patient one at that. I think CptnRn said he bought the house in 1981? So, the house has gone up by 4x (or a little less) over the last 32 years? That is right around 4.3% a year, which is a very nice return; however, it is not doubling in value overnight. I suspect a lot of that appreciation occurred relatively recently (say, the last 15 years) when the Oakhill area started really building out a bit and everything closer in got more expensive. Note that CptnRn bought a house in what was then a pretty 'far flung' area of the city (was it even in the city at that time?).

So, the trick to getting that return is to buy an inexpensive house further out and wait a long time..... Assuming a constant appreciation, CptnRn would have made 88% (not 400%) after 15 years (instead of 32).

So maybe I should look for a 10-year house in an up-and-coming neighborhood instead like 78745. If I can find new builds in that area for a reasonable price, I should probably jump on it.

[CptnRn]

Originally Posted by Trainwreck20

No, it is not impossible at all, but it is a crap shoot, and a patient one at that. I think CptnRn said he bought the house in 1981? So, the house has gone up by 4x (or a little less) over the last 32 years? That is right around 4.3% a year, which is a very nice return; however, it is not doubling in value overnight. I suspect a lot of that appreciation occurred relatively recently (say, the last 15 years) when the Oakhill area started really building out a bit and everything closer in got more expensive. Note that CptnRn bought a house in what was then a pretty 'far flung' area of the city (was it even in the city at that time?).

So, the trick to getting that return is to buy an inexpensive house further out and wait a long time..... Assuming a constant appreciation, CptnRn would have made 88% (not 400%) after 15 years (instead of 32).

No it was not in the City at the time, as I wrote it was in Oak Hill, none of which had been annexed into the city at that time. There were a few years when the property value, tax assessment even went down. You can still do the same thing today, buy in a suburb outside of the City, in an area that has fairly close proximity to major employers in the City, and in all likelihood it will appreciate in a similar manner.

As an additional plus that property is now a rental house that produces a decent income for us, as it is still in a desirable location for access into the city. We will eventually sell it when we get so old we don't want the hassle of dealing with renters anymore, but for now it is helping subsidize our retirement. Actually most of the income from it goes into CD's which we may need later in our retirement years.

[Gaylord_Focker]

I know some realtors if you need help.

[centralaustinite]

Originally Posted by 787

^^^^ Thank you! this is what I'm trying to do. Buy a brand new house, and have it go up 4X in value, which people on this board are telling me impossible and I'm foolish for trying. I guess I just need to find out which area will be the next to be established and go up in value like Oak Hill did.

You never told us that your time frame was 32 years!! Then it is a different picture.

[Trainwreck20]

As an additional plus that property is now a rental house that produces a decent income for us, as it is still in a desirable location for access into the city. We will eventually sell it when we get so old we don't want the hassle of dealing with renters anymore, but for now it is helping subsidize our retirement. Actually most of the income from it goes into CD's which we may need later in our retirement years.

I am still kicking myself for not keeping my first house - I could have, as I got married and we ended up in my wife's house, and the payments on my first house were only $1,000 a month. It was a 1,500 sf house in NW Austin (near MoPac/Duval) and would probably (based on rental rates in that area) be renting for $1,500-$1,750 a month now. I bought it in 1999 for right at 100k and would likely have paid it off by now - I was paying $200 a month extra, which cut it down to about a 13 year equivalent mortgage.

In any case, the negative side of that property (the trade-off I had to take) was the energy inefficiency, some minor to moderate repairs, and proximity to a train track. I was very worried about resale/future value when I bought it, but ended up selling it for about 65% more than what I bought it after 7 years. That is about 7.4% per year; however, it has gone up and down since then and probably has appreciated much slower since then. A good bit of that 'profit' went into repairs/upgrades (probably 15k over the years I lived there). If the current owner has done nothing for energy efficiency, I would guess an average of $75 or so are wasted each month (maybe more) on poor insulation/old AC. The AC was in need of replacing when I left, so if they replaced it since the, that number may have gone down a bit, but the new AC would be ~$5,000 in of itself.

[CptnRn]

Originally Posted by Trainwreck20

I am still kicking myself for not keeping my first house - I could have, as I got married and we ended up in my wife's house, and the payments on my first house were only $1,000 a month. It was a 1,500 sf house in NW Austin (near MoPac/Duval) and would probably (based on rental rates in that area) be renting for $1,500-$1,750 a month now. I bought it in 1999 for right at 100k and would likely have paid it off by now - I was paying $200 a month extra, which cut it down to about a 13 year equivalent mortgage.

In any case, the negative side of that property (the trade-off I had to take) was the energy inefficiency, some minor to moderate repairs, and proximity to a train track. I was very worried about resale/future value when I bought it, but ended up selling it for about 65% more than what I bought it after 7 years. That is about 7.4% per year; however, it has gone up and down since then and probably has appreciated much slower since then. A good bit of that 'profit' went into repairs/upgrades (probably 15k over the years I lived there). If the current owner has done nothing for energy efficiency, I would guess an average of $75 or so are wasted each month (maybe more) on poor insulation/old AC. The AC was in need of replacing when I left, so if they replaced it since the, that number may have gone down a bit, but the new AC would be ~$5,000 in of itself.

In the long view, replacing HVAC, adding insulation still pays off, especially if you are living there paying the utilities. I added numerous trees so the house is well shaded now. I replaced the HVAC in 1996 and upgraded the insulation to standards recommended by CoA, cost $3,945 but got a rebate of $1,093. It is a small house, 1300SF. I will probably upgrade again when that 17 year old HVAC goes out in the next few years. I have it checked every year to keep it in good condition. Reroofed in 1995 for $1817. We did a significant renovation of all interior finishes in 2000 ($3-4K), a year or two before we started leasing it out. Some of that will need to be replaced in the next few years.

[ppp38]

Originally Posted by 787

So maybe I should look for a 10-year house in an up-and-coming neighborhood instead like 78745. If I can find new builds in that area for a reasonable price, I should probably jump on it.

78723 is a much better bet than 78745. If you want maximum appreciation then you should go east.

[CptnRn]

Originally Posted by ppp38

78723 is a much better bet than 78745. If you want maximum appreciation then you should go east.

Some parts of 78723 are still pretty rough, with poor schools. Other then the Mueller redevelopment I have a hard time seeing 78723 as much better bet than 78745. There are many parts of 78745 I would consider better neighborhoods.

[EzPeterson]

Originally Posted by CptnRn

Some parts of 78723 are still pretty rough, with poor schools. Other then the Mueller redevelopment I have a hard time seeing 78723 as much better bet than 78745. There are many parts of 78745 I would consider better neighborhoods.

If you're betting the 20 year come, schools will change dramatically if you hit your number on the neighborhood.

78723 and 78745 are too close to call in this regard.

[ppp38]

Originally Posted by CptnRn

Some parts of 78723 are still pretty rough, with poor schools. Other then the Mueller redevelopment I have a hard time seeing 78723 as much better bet than 78745. There are many parts of 78745 I would consider better neighborhoods.

78723 is flipping at a much faster rate. Have you been to the area recently to see how much renovation is going on? There have already been several houses in Windsor Park/University Hills selling 250-400K and several that are listed in that range now (78723 Homes For Sale :: 78723 (Austin, TX) Real Estate :: Homesnap). I agree that there are pockets of 78723 that are scary but the rate at which its gentrifying is alarming.

I almost bought in 78723 (ended up in 78736) but thought the investors were asking too much and I never wouldve considered 78745 East of Mancahca since a run down looking area thats not in the process of flipping quickly enough.