How To Buy a House In Your Early 20’s And Make Money In Austin, TX.
How To Buy a House In Your Early 20’s And Make Money In Austin, TX.
The majority of people I talk to in Austin have made up their minds; Austin rent is expensive and Austin housing, in general, is expensive. Since moving to Austin in 2007, I have not seen this side of Austin. Why? Because I’ve been a resourceful housing ninja...I rented that dingy old home in Clarksville and cleaned it up a bit so I could live downtown for $600. I scoured craigslist and every housing FB group. I did everything in my power to buy a house even though money was tight at the time and I didn’t have a salary job. I made sure I knew my mortgage would not be over $700 a month like my rent used to be. And I realized that so many young twenty-something-year-olds that move to Austin could be benefiting from learning how to make their house an asset, so, I made a career out of it.
You’re probably wondering why I seem to be “ageist” in this post. Calling on only the twenty-something-year-olds, what gives? To be clear, anyone can use these strategies! As I’m approaching my 30’s, I’m realizing this may not be something I will want to continue doing as I get older, well, at least not in the same way. I’m talking about a specific type of house-hacking. I’m talking about having people you live with pay for your mortgage for a few years or at least while you are still cool with having roommates. There are multiple ways to go about this strategy, but in this article, I’m directly speaking to people with roommates. If you are currently living with at least one other person (unless you and that person are trying to start a family...it may not be a good time) you should look into buying a house and making it an asset through house-hacking.
Let’s look at an example of someone trying to house-hack in Austin:
Millennial Austinite
Name: Sarah
Job: Salaried at $70Kish a year
Living Situation: Lives with two roommates and is paying $1,250 a month with rent & utilities.
Austin Home Sarah Can Buy & House-Hack
Address: 7008 Mount Carrell Dr, Austin, TX 78745
Sales Price: $340,000
Monthly Mortgage: $2,100 If she put 10% as down payment this is including taxes & insurance.
Bed: 3 Bath: 2 Sqft: 1,279
Sarah decides to gets pre-approved and makes an offer on the house.
Her lender tells her that her mortgage payment will be $2,100 a month. Ah, $850 more than what she was paying in rent! BUT Sarah has been reading all about house hacking and how to find roommates and tenants and has a strategy.
Sarah’s House-Hacking Strategy:
Bedroom 1: Sarah will live in this room, it has it’s own bathroom.
Bedroom 2: Sarah’s friend from a meetup group will move in with her and agreed to pay $800 a month in rent, this is not including utilities. She could probably charge more but it’s her friend and she would rather live with at least one person she knows!
Bedroom 3: Sarah was unsure about what she wanted to do with this room...she has two options. Find another roommate through her network or craigslist/Facebook groups and charge $800. OR she can furnish the room and use it as a short term rental. She can market to people who are looking for a flexible lease and charge $850 a month. Many people are looking for 3-5 month rentals.
Sarah’s New Monthly Payment Because of House-Hacking?
$750 (Bedrm #2) + $850 (Bedrm #3)= $1,600 in income from “tenants”
$2,100 (mortgage) -- $1,600 (income) = $500 a month + $185 (utilities +internet)= $650
So, Sarah is now only paying $650 a month for housing. She has a good home warranty on her house that the sellers paid for this year, so, if appliances or the AC breaks down, it should be covered. She also knows what to look out for in repairs because she had an inspection done on her house prior to closing.
When Sarah was renting and living with two roommates, she was paying $1,250 to live in her home. That is $15,000 a year that she would not ever get back.
When Sarah bought a house with the intention of house-hacking, she will pay $650 a month. $7,800 a year. That is half of what she was paying for in rent. And people are paying down her mortgage! Even if Sarah ended up paying $7K one year in renovating her home, when she sells it in 3-5 years, she should be getting money back AND appreciation. I hope this is blowing your mind a bit…
Ok, I'm Listening...
If you are reading this and getting very excited about house-hacking, that is exactly how I felt when I started listening to Bigger Pockets Podcast, reading the Four Hour Work Week and Rich Dad, Poor Dad years ago. It’s exciting to know you can live a little differently than people and save/make money! I was curious as to why I didn’t learn more about finances and investing in school, and I wanted to make it super easy for people to get into investing at a young age.
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