Investment property in Round Rock and Pflugerville (Austin, Anderson Mill: for sale, real estate)

[austin_or_sd]

New in town due to job. Not sure where to buy a house nor even sure if I will stay in Austin for the long haul. But I don't want to rent just to throw money away. So I am thinking to buy a smaller house around $150K in 78664 area, stay there for a year or so. After I find/build my dream house, I will then turn the house to a rental property.

Any opinion/suggestion on this idea? What about the rental market in the Round Rock and Pflugerville area?

[Trainwreck20]

This may or may not be a good idea. If you are familiar enough with the business of renting houses, fair enough, you probably know more than me. However, owning a house for one year throws away more money than renting, most of the time, once you consider closing costs and maintenance. Also, most rental houses are cheaper than house payments, so even the tax benefits may be outweighed.

It sounds like you can affored to have a 150k house and still qualify to buy another - that could be critical, depending on how much time it would take to sell or whether you would not be able to get a loan for your dream house.

I don't know much about the rental market in that area, but many people like you are trying to buy instead of rent, so make sure you have a good chance of filling a rent house.

[austin-steve]

I've been investing in real estate in Austin since 1994.

Round Rock and Pfulgerville are not the best areas to purchase investment real estate, in my opinion. Others can and will disagree, but I never have and never will purchase a home there. Too subject to High Tech ups and downs as was proven from 2002 through most of 2005 when the area became glutted with unsold homes and rental property after Dell layoffs and the general slowdown of related businesses. That's my personal opinion though, I know investors who like RR because of Dell. Different strokes.

Stick to mature areas that are closer in to Austin, built out and in demand by renters. Stay away from cheap vanilla cracker-boxes subdivisions that are poorly constructed and attract marginal renters and sub-prime borrowers. Those areas don't mature very well.

For example, I'd buy an older home in north Austin before I'd buy a newer home in RR or PF. I just purchased a home in Oak Hill (sw Austin) last month in the $160's, built in 1973. It rented immediately to the first person who called from the sign because there is very little available in that neighborhood and the home attends good SW Austin schools. Anything you find for the $150's in RR or PF is going to have a lot of rental property around it.

My rule of thumb is to never buy a home that will have to compete on price against nearby new homes if you end up having to sell it in a year or two. The newer starter home areas outside Austin have been over-sold to investors over the past several years, especially east of IH35.

Stay away from those areas. Re-sale homes are difficult to sell in that situation, and the appreciation isn't as good as more established, closer in areas where pride of ownership can be seen driving through.

Steve

[austin_or_sd]

Thanks, TW and Steve, for your insight. I did the quick search from realtor.com in the 78664 area. Nearly 300 houses match my criteria. I may have to re-consider my option. As many have sugested, rent for a while before buying.

Steve, What neighborhood would you recomment for north Austin?

[mrsengle]

I live in 78664, and I ditto Steve. Even if you did purchase a home here and decided to rent later, it will be on the market for a long time. There are two homes in my subdivision (Cambridge Heights) that were on the rental market for MONTHS. Wherever you decide to purchase, though, try to stay for at least 2 years to avoid capital gains - and the appreciation is better in Austin.

[love roses]

I agree with the above two. I live in Hutto, in what started out as a pretty nice neighborhood, with a vintage feel, but lately it's turned into an investors paradise. I'd be surprised if this neighborhood had more than 10-20 actual homeowners, and not renters. There are several houses for sale here, and they have been on the market for a very long time. Part of the reason is that the neighborhood is nowhere near complete, and people would rather buy new if that option is available. My next door neighbor has had his house on the market for nearly a year, as he is moving back to Tennessee. He has had most of his offers from investment companies, and thank heavens he has turned them down. He says he's not in that big a hurry to move. All that said, I still love this little place.

[austin-steve]

Steve, What neighborhood would you recomment for north Austin?

I like the areas north of 183 between Between Mopac and IH35. There are some rough pockets in there to avoid, but in general, that is fast becoming "close in" and you can still find good rental stock around $150K.

I also like the area northwest of Mopac/Duval, back in there south of Braker. Those homes are good bread-and-butter home and the area is going to go nowhere but up.

The downside of the older properties is the condition sometimes isn't the best, but the same can be said about most of the new homes with cheap plastic toilet seats, appliances, plumbing fixtures, etc. Those new homes are what I call "apartment grade" quality and they start falling apart after about two year if not sooner. I'll take a 1970's or 1980s' home over a new $150K home any day.

What was said above about the two year capital gain exclusion is true. But it sounds like you want to buy and live, then move up and hold the home long term, in which case it won't be a factor for you unless you sell within three years of converting it to a rental after living in it for two full years.

Steve

[DarlaNew]

I agree with Steve. I'm a realtor, and the rental market is saturated for rentals in Pflugerville and Round Rock. Sounds like Steve is talking about Quail Creek/Quail Park area. Anything around the new Domain shopping would be good. You may also consider Anderson Mill or Milwood subdivisions to keep in your pricepoint if you work North. Good Luck!

[austin_or_sd]

Thank you all for the advice. It seems whenever I have a questions, the forum members will have an anwser. Great forum.

I will take the advice and avoid RR and PF area for rental properties. I think I will stay put when I am ready to find my permenant house.

[achtungpv]

I sold my first house in June to an investor from San Diego. Since then it has been occupied for probably 3 months total. The rent price is $1300. That's not covering the mortgage much less upkeep. That lady is bleeding money.