Building wealth by buying a home in Austin
Recent headlines read “Millennials aren’t Buying Homes” while others say “Millennial Homeownership is on the Rise.”
It doesn't really matter what the headlines say. It's about what you want to achieve.
I bought my first house when I was 24. It wasn't easy, and it was far from perfect. But that first purchase helped me gain equity that I was then able to leverage into buying a better home a few years later. That initial purchase was key to my financial independence.
If you're unsure about buying a home in Austin, I wanted to share a few reasons you should consider taking the leap.
Money, Money, Money Money, Monnneeeyyyy!
If you’re truly looking to MAKE money early on in your real estate journey and don’t mind sharing your space with others, being a landlord might be for you. Once you purchase a home, you can actually rent the individual rooms out to your friends. In most cases, your mortgage will be significantly less than the cost of rent, and it’s possible that the rent you collect could cover the entire cost of the mortgage and then some! In this scenario, you would either be making money or at least breaking even.
The Future is Now
The very first home you ever buy might not be your dream home -- and that’s okay. Chances are you will live there for a while and eventually rent it out to Gen Z or Gen Alpha tenants. This gives you the opportunity to have someone else pay your mortgage, and over time, earn passive rental income.
Even if you’re unsure of exactly where you want to end up permanently, buying in Austin still makes a lot of sense. If you spontaneously decide you want to teach English in China or be an au pair in London, you can easily rent out your home (which equates to having someone else pay your mortgage and allows you to earn passive rental income).
Just be sure to set aside some extra cash for unexpected repairs because you’re #Adulting now.
2,4,6,8 All the Homes Appreciate!
It’s pretty much a given that most homes across the country not only hold their value but also increase steadily over time. One of the benefits of buying young is that you lock in the current price of your home and then watch its value rise over the years. Home values in the United States have gone up 8% in the past year alone and are predicted to keep increasing. This increase in home value becomes equity you can benefit from when you refinance or sell.
Sure, there will likely be some ups and downs in the real estate market over time, but in the long run most homeowners sell for a lot more than what they paid. That’s why we love real estate as a tool for building wealth.
Real Life Pinterest Board
The feeling of owning your own home is unmatched. You've probably lived in a few cramped dorm rooms with your belongings in plastic tubs and in apartments with your mattress on the floor because you never felt 100% settled enough to buy a bed frame. When you own a home you have freedom to customize your space without worrying about the terms of your lease or what your landlord will think.
It’s a great feeling knowing you won’t have to move again for a while and that you can really make that new space your own. Want to fence in your backyard for your fur babies? Go for it. Want to build an awesome back deck so you can host parties? You can do it! When you’re the landlord, you make the rules.
Stairway to Wealth
Let’s face it. You will need to live SOMEWHERE for the rest of your life. You could easily spend half a million dollars or more renting for the next 30 years of your life and have nothing to show for it. Or, you could purchase a home of your own that you will own free and clear someday as you prepare for retirement.
Eight out of every 10 millionaires own real estate, and their renters ultimately make those landlords rich because the rent they pay covers most or all of the mortgage. But why pay someone else's mortgage when you could be paying your own? If you have a stable income and want to make the best investment possible for your future, buying a home is a smart move for building wealth.
Austin is a good bet
Research from the National Association of Realtors (NAR) showed that Austin is the best market in the nation for millennials to purchase a home. According to NAR Austin had the largest number of millennials living in (18%) and moving to (29%) the area than any other city in the nation. No other Texas city made the top 10 list in 2016. Even Forbes named Austin the second best U.S. city for young professionals in 2017.
But how do you pay for it?
If you’re pumped after reading this but worried about affording a home in Austin, there are options.
Consider, as an example, a make-believe person named Smith who has been renting a 2-bedroom apartment in Austin for $1,195 a month.
If Smith earns $48k a year, has minimal to no debt and has been working steadily at the same job for 2+ years, Smith will likely qualify for a home mortgage of $154,000. But here’s where the planning comes in. Smith will need to save at least 3 - 5% for a down payment (the equivalent of $7,700) + estimated closing costs (around $7039.30). Put those together and Smith needs to have at least $14,739.30 saved up to buy that $154,000 home.
Smith’s path isn’t easy, and it isn’t perfect. But just like when I bought my first home at age 24, it’s a start.
Ready to make the move?
There is nothing hard about buying a home, but it is a BIG THING with a lot of pieces. We will take you from contract to closing on your new Central Austin home and explain every step along the way. We share our advice and we have your back. Call or text us for a no obligation consult today.
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