To Rent, or Not to Rent? In Austin, That is the Question

Let’s use me as an example.

I am looking to buy a 2 bedroom condo in Riverside for about $160-200K. But my rental situation is pretty great right now. I live in Clarksville, my favorite neighborhood in Austin. It’s one of the most expensive neighborhoods to buy in, one of the safest to live in and an easy walk downtown. I’m right across the street from Whole Foods, this is dangerous to my wallet, but life is good. The best part of this whole situation is the cost of my monthly rental payment. I only pay $700 a month, all expenses are paid and I live with just one other person who also pays $700. This is pretty unheard of in Austin right now. Rent is expensive, especially anything downtown.

So, is renting or buying better for me? Let’s look into this.

DETAILS OF MY FUTURE CONDO.

Location: Southeast Austin. Zip Code: 78741
Bed/Bath: 2
Sales price: $200K
Down Payment: 10% or $20,000
Interest rate: 3.5%
Estimated Appreciation Rate: 4%

BREAKDOWN OF AVERAGE MONTHLY PAYMENT.

Private Mortgage Insurance (PMI): $90 Required if you put less than 20% down payment
Taxes/Insurance: $330
Maintenance/Bills: $160 electricity, internet, small random repairs, etc
HOA: $150 Most often this will cover grounds/pool maintenance & trash
Monthly Mortgage: $800
TOTAL MONTHLY PAYMENT: $1,530

But wait…I have an extra bedroom. If I decide to have a roommate (and I will) I could charge anywhere between $700-850 a month depending on the condition of the condo.

This would cut my total monthly payment from $1,530 to only $680-830.

SO, DOES IT MAKE SENSE FOR ME TO RENT OR BUY?

The chart below shows in red when it would be better for me to rent and in green when it would be better for me to buy. The first 2 years are in red, showing that if I was going to sell in 2 years, it would probably be best for me to stay put in my current lease. Yet, this chart is not even taking into account the money I’m saving from renting out an extra bedroom. Even if I didn’t want to rent out my second bedroom, and I planned on staying in my condo for 3-5 years it would still be more beneficial for me to buy. And remember, I currently only pay $700 a month in rent yet, It’s still better for me to buy, rather than rent, in my currently low payment situation. How am I even sure that my current rent will stay at $700 each year? There’s no way!

I found an excellent “Rent VS Buy” calculator online and you can run the numbers on your own rental situation. Should you rent or should you buy?

THINK IT THROUGH:

If you plan on staying put in Austin for a few years and currently pay high rent, it’s probably a good idea to buy.
If you get a fixed-rate loan, your monthly payment will not change over the loan term BUT rent will continue to rise.
You can get roommates to help with the monthly mortgage payments.
There are tax benefits you can utilize when you buy a property. You may be able to have multiple write offs: mortgage payment, homestead, home office, etc.
A home also means home equity, which can be used in the future to secure other loans—to help do repairs, remodel, landscape, even pay your child’s college expenses.

The Bottom Line: Test out this Buy VS Rent calculator! You may be surprised at what you find out about the long term costs of renting and buying.

To find out more about buying a house, feel free to contact me. You can also search for current homes on the market and get neighborhood stats at KristinaModares.com