My Background

I moved to Austin right after college in 2012. I fit the stereotype of a typical Millennial. I wanted to live a certain lifestyle and working for a company with limited options seemed suffocating.

I had a lot of big ideas and no clue how to implement any of them. Despite not having a stable salaried job, I was determined to buy a house in Austin. My lack of education regarding buying real estate and not knowing the difference between a good home purchase and a waste of money, lead me to a career in real estate.

I wanted to help others like myself buy their first home, and I wanted to become a real estate investor. After a few years, a career change, and a lot of trial and error, I was finally able to buy my own house in Austin. 

Property Details

Location: Central East Austin. Zip 78702

Purchase Price: $280,000

Monthly Mortgage payment: $1,800

Repair Costs: $17,986

ARV (After Repair Value): $330,000

Beds: 3 Bath:1 Square Footage: 891

The Search

A realtor’s income is commission-based and is not a stable salaried job. It tends to be harder to qualify for a home loan. After talking to a lender and not getting the budget I wanted to buy a home in the area I preferred, I spoke to my sister, and we decided to join forces.

I had the cash, and she had the salary job, and together we qualified for a higher-priced home. Our budget was under $300K, and our search was tough. We were looking for single-family homes in east central Austin (zip code 78702), and with my criteria, there were only a handful of homes on the market. Most of these homes were torn up or needed way too much work and were out of our budget.

After making a few offers and getting beat by investors with cash offers, I stumbled upon our house. For some reason, I saw the potential of this once dark, damp and smelly home. It seemed like a project we could take on.

I wasn’t thrilled that it didn’t have central A/C or that the house looked like a dark cave (natural light is important!) but I had found the house. Luckily the owner of the house didn’t want to sell to an investor and was happy that I would be living in and maintaining her old grandmother's house.

Narrowing Down Repairs

Once upon a time I coordinated weddings and consider myself a low key planner. The minute we went under contract on our house, I began gathering bids from contractors and planning out my renovations. I was determined to have all the work done in 2 weeks. Why? I knew that the first mortgage payment was due a month after we closed on the house and I wanted to get a roommate by that time.

I didn’t want to pay the whole mortgage payment by myself, on top of all the renovation costs! The first thing I did was make a full list of all the work the home needed. I picked the top things I thought would make the most difference in the appearance of the home and get me the most rent. I then wrote down estimated costs next to each repair and reviewed the money I had available to pay for repairs. I decided to:

1.Paint the entire house (cosmetic)

2.Install new floors (functional and cosmetic)

3.Install central AC (functional)

4.Open up the kitchen wall to create a counter bar (cosmetic/functional)

5.Replace 2 windows (functional and cosmetic)

6. Repair laundry room (functional)

My original list was long, but those repairs can wait. For example, I originally planned to replace the kitchen cabinets. After getting a couple of contractors to look at my house, I decided to replace two windows and make a closet a more functional laundry area instead.

Coordinating Repairs

Over the years, I’ve found that contractors tend to overbook themselves and need to change timelines around last minute. I couldn’t risk that happening, so I created a timeline, checked in with the contractor's weekly to make sure the dates we scheduled still worked for them.

Once I had my list, I started making calls. I received bids for all of the work and created a spreadsheet. I set the appointments of when I wanted the work to be done. I scheduled the AC to be installed first...because... July in Austin.

The next step would be painting the entire house. My sister and I did this job, I’m not a handy person and figured this was something we could do ourselves. Next on the list was replacing two windows and knocking down half a wall to open up the kitchen and create a kitchen seating area. The flooring would be installed last to avoid tracking dirt and paint everywhere.

Closing and Repair Costs

Cash to close: Cash to close is the amount of money you bring to closing, which includes your down payment, closing costs, and escrows for property taxes and homeowners insurance. We put 10% down.

Install Central Air: I found a reputable company through another realtor. Barton Creek AC Co. Our house is small, so, I looked into getting a mini split system instead of central air but it made more sense to go with central air, and the house had the attic space for a unit and ductwork. They completed the work in three days.

Electrician: I hired the electrician, Michael Tunks with Altek for work that was necessary for installing the AC. He completed the job in a day.

Floors: I had a few contractors come out to give me bids. The cheapest I could find was $1.50 a square foot. I did not hire him because when he came over to give me a bid, he didn’t measure the rooms and didn’t even look at the floor under the carpet. I didn’t get a professional vibe.

I hired Edi Castellanos with EDC floors. He charged $2.50 a square foot for floors and the trim. They told me the work would be completed in 2 days and stuck to his word. I was very pleased with his professionalism and timeliness.

Paint: I am not a handy person, and I figured that we’d save money by painting the house ourselves. My sister and dad helped, and we all soon realized that painting SUCKS SO MUCH.

We applied 3 coats of white paint over some very horrible purple, blue and beige walls. When they left me after a week, I still had three rooms to conquer. If you ever need a humbling experience, try painting three ceilings in a row. I think in total, painting took about a week.

Handyman: This will be an important hire. To find this person, reach out to your friends and family and find someone they trust to not only do the job well but complete the task within a reasonable timeline.

I met my contractor, Marshall through a friend. He did everything I needed at a great price. He completed the work in about a week. It took luck and proper follow-up to have a move-in ready house in two weeks.

House Hacking

House hacking is a term coined by Brandon Turner of Bigger Pockets, my favorite Real Estate investing website. Simply put, house hacking is getting other people to pay the mortgage payments on a house you occupy. This is done by renting out the other units or rooms.

This idea of house hacking was the focus of my home purchase. My current house hacking options are 1) roommate and charge $800 a month. Or, 2) I could have two roommates and charge $650 a month. For now, I’m testing out short-term rentals with no roommates.

My sister and I worked out a deal with this property. She does not live in Austin and won’t be residing in the property. She contributed half of the money needed for initial repairs and closing. I will pay the monthly mortgage since I will reap the benefit of living in the property and could have two roommates’ rental income that would cover the monthly costs.

When we sell in 5-10 years, we will save the money needed to pay a realtor’s commission (since I’m a realtor) and she will get her investment back at that time. If you want to partner with a friend or family member, think it through carefully! Come up with an agreement...and put it in writing.

Learn From My Experience

I’ll be honest with you; this is the first year in my life that I’ve made a decent wage. I understand $49,793 is a lot of money. My sister and I work hard for our money and most of it went into this home, and that's a big deal! I learned so much and now have a home in an area I love. I don’t have a slumlord or horrible property manager to deal with or chase down every time something goes wrong. I can rent out my rooms or host people on Airbnb.

It’s the freedom and control I want in my life. Many houses are left sitting on the market because buyers can’t see past an old bathroom or kitchen that needs a little tweaking. My house sat for 45 days on the market, and two months later you can’t even find a house in the neighborhood for under $300K.

The initial costs may not make sense to an investor who is trying to make a high profit from rental income, but it does make sense to many first time buyers who will be living with a significant other or roommate and will split that mortgage payment.

Also, the confidence and knowledge you get from a home renovation project is something I can’t even begin to describe. There were so many other details I was going to include in this article--all of the struggles I encountered along the way. None of that even seems relevant now.

After looking around at my beautiful home, I don’t even think about those little inconveniences. It was all worth it.

Actionable Steps

If you have any questions about buying a fixer-upper in Austin or house hacking, please feel free to reach out. It’s not for everyone, but you’ll be shocked how a little paint and new floors can transform a house!

Here are some actionable steps to get you started:

1. Look at your finances! If you have a hard time-saving money, figure out where it’s going every month. Cut yourself off from those monthly memberships. Make a plan to save cash.

2. Talk to a lender. They will help you figure out what you need to do to finance a house. They may have options for you to bundle repairs into the loan. Don’t know a reputable lender? Ask our team.

3. Pick an area you want to live in that fits your budget. Get an idea of what the monthly mortgage payment is (My website has a mortgage calculator attached to each listing).

4. Start to look at homes. You’re not a home inspector but you’ll be able to eyeball some of the repairs you need to make. Make a list. Go home and guestimate costs. Use google and your realtor as your initial sources!

5. Be realistic. Pick a house with good bones and a good layout. Think paint and floors for your first house. Maybe a few other projects depending on your budget.

6. Once you’re under contract, schedule contractors to come over and give you actual numbers. Get a few bids for each repair. Now you can compare your estimated costs to the real costs. Reassess your repairs and make sure they all fit within your budget. You’ll get an inspection while under contract. This will give you a better idea of the repairs you should prioritize.

7. Schedule the repairs for after your close date! Check in with your contractors regularly to make sure you both are still on the same page about your timeline and costs.

8. Start looking for roommates/Airbnb/short term roommates. You can use Craigslist, NextDoor, Facebook groups or Roomster to name a few. Your realtor can send you current and past properties in your neighborhood that are for lease so you can figure out how much to charge.

*These steps are a good starting place to get your wheels turning. You can research real estate investing for years and not learn as much as you will by actually pulling the trigger and getting into your first project.

I wish you all the best!

Further Reading