buying a house and how it will affect life....

S

Smurfette

500+ Posts
I'm posting this here instead of Horn Depot becuase I'm more interested in opinions and personal expiriences than more techinical kind of stuff.

LHF68 and I are ready to buy a house. For the last year, we've had our eye on a peice of property that we want to buy and build on. We went to the bank this weekend to discuss financing, and we told that it's basically impossible to get a construction loan right now due to the poor housing market.

So, Now we have to decide what we want to do.

We know that we can afford up to 300K for a house, (bank agreed.) We know that we want to buy on the east side of Austin-- in what most would consider the ghetto.

Now, here's where it gets more complicated.

We're both almost 30 years old. We have no kids, but will have kids-- probably the first one within the next five years. RIGHT NOW, and probably for the next two years at least, we're more interested in enjoying being financially stable, so we want to travel and basically enjoy our party and no responsibility lifestyle.

We're trying to decide what to do as far as buying. The reality is we can't get what we really want because the time isn't right to build, but we're sick of throwing money away on rent.

Our options are below:

Option 1:
Go cheap. We could buy an older house for 85-125K. We'd need to put some work in to it. We would make it livable, do some remodeling, etc for the next two years. We'd have plenty of extra money to take trips, and save for a better house, while not throwing money away to rent. We would probably go ahead and buy the peice of property we've been wanting to build on in the future. When we build our house we really want, we'll rent the cheapo out. My concerns with this plan is that we could end up in a ****** house with more problems that we want to deal with. Also, I'm just kinda tired in living in old houses.

Option 2:
Look for a mid-range house. We could buy a remodeled or new home on the eastside where we're looking for 175-200K. We'd have a nice house we could be proud of, that we would enjoy living in. We'd still have extra money to travel and save for the dream house. We would live in this house for 5-ish years, and it would most likely be nice enough that we could even stay there when we start a family. The downside is that it's going to take us a lot longer to get where we really want, and we're going to be spending a lot more money on a house that definately won't give us everything we want.

Option 3:
Buy a multi-plex. We could buy a duplex to a fourplex. It might not be super nice, but would be a good investment. My concern is that we'd have trouble getting good tenents in the area we want to live in right now.

Option 4:
Go ahead and buy a 300K house. We would be able to buy something pretty damned nice, but it would still most likely be an older, remodeled home. We would be spending our max to not get exactly what we wanted. The upside is that we would have a really nice house, and we'd be able to get something that had almost everything we wanted.


Anyway... what are your thoughts? I'm curious to hear from some of you who have been in the same situation. Opinions?

Thanks!
 
I'd go with #1 because:

1) The remodeling would give 68 a chance to flex some architectural muscles

2) You would save money. And you will likely need it later. How are the schools on the east side? Are you going to need to pay for private schools when you have kids?

3) The market is in a downturn, which means you can probably buy the land cheaper -- and not worry about someone else getting the lot/plot you wanted.

(I'd consider 2 or 4 if you can find a bargain that will practically guarantee substantial built-in equity once the market recovers)
 
I have always believed your payments should be such that you can do it on one income.

Also IMO, 15 yr mortgages rock.
 
15 year is great but sucks i couldn't afford it.

i doubt you will get out "cheap" in austin. i live in fort worth and real estate prices sure as **** ain't falling here. i doubt they are in austin either.
 
The schools are terrible on the eastside, and the moment you begin to think about having children you will move. I know that some people just do it, and try to change the system themselves, or send their kids to private schools. But I think that is a mistake.

We bought a great condo near downtown. It was fun for a while. Like a lot of marrieds, we went out a lot at first, but after a couple of years of being downtown, it lost its luster. Some people still do the live music thing twice a week, and constantly hit up barton springs. After a while, we just didn't. Then we started thinking about familiy, and bought a starter house (well, the cheapest in the area type of thing) in a great established neighborhood with schools we can trust (183/greathills). I take the bus to work 9 out of 10 days. Really couldn't be happier. Paid well under $200k for a house we really really love, in A+ schools.
 
Paying rent is not necessarily "throwing money away". There are A LOT of real benefits to renting.

1. No Closing Costs Up Front - When you buy a house you have to pay lots of money before you ever move into your new home (appraisals, inspections, loan fees, etc.) If you continue to rent, you avoid this outlay.

2. No Maintenance Costs - I'm in the process of replacing two AC units at a cost of $6,000 to $10,000 depending on how efficient I want to be. I wish I had a landlord to call right about now. Same goes for the roof, the plumbing, the landscapaing. It never eneds.

3. No Closing Costs to Move Out - Just like buying a house. Selling a house is not cheap. On top of all the other closing costs, you get to toss in a $12,000 real esate commission. On top of that, you'll usually spend a few grand sprucing the palce up before the sale. And the icing on the cake, is that if you move out before the house is sold, you get the joy of paying the mortgage, taxes and insurance on a house you're not even living in.

4. No Risk of Capital Losses - Housing prices have held up well in most parts of Texas. The future of real estate, however, is quite murky to say the least. The credit markets are in disarray. Fannie and Freddie are ward of the State. No one knows for sure what the future holds for interest rates and home prices. You're taking a huge financial risk when you buy a house. Renting doesn't expose you to these risks.

Getting back to your actual question, I don't have any actual advice. Only you can decide how much house you want to buy. Everyone has different priorities in life. Only you can know if the joy of home ownership is worth the opportunity cost of not spending the money elsewhere.

Bernard
 
I teach in AISD, so I can send my kids to whichever school I want, when that time comes. And, in 10 years when I have kids starting school, the east side is going to be a VERY different place.

Right now, there are a lot of houses under 100K where we're looking, which is basically between airport and 183, north of 7th, south of Mueller.
 
Do not let the decision be primarily driven by a financial decision except for avoiding the obviously bad purchases / staying within your limits. It's a preference and way of living decision.

Owning a house is only a wise financial decision in the case of very strong appreciation (and you stay put for the appreciation over 5 years) or steady prices when you can't save money on your own anyway and need to be forced to get the principal to accrue in a home (basically you're horrible at managing your finances).

Else wise, owning is huge time and money suck. We are in our 2nd house (we only own because it is important to my wife to be able to make the place we live "ours" for our child) and if you really document all the time and money you put into it, it's a horrible place to put money.

We bought a house a few months ago that we agreed needed little work and we have spent well over $5k on various small things - the wonderful old oaks trees needed trimming to the tune of $1,5000, $1,000 on replacing a water purifier, $2,000 on tiling the master bath to remove nasty carpet, getting a new couch because the old one just didn't look right for $2500, etc, etc. I also spend 3 hours a week on the yard that comes directly at the expense of spending limited free time with my son. Anyways, you get the point.

Buy a house because you'll enjoy making your own and for no other reason. For example, I like pulling up and seeing the fruits of the hard work I have done on my yard. You can't predict prices. Even if you could, you could have to move and lose money as we did. Buy because you enjoy being at home and spending your time and money on it. If you still want to travel and allocate cash to doing stuff, don't bother buying.
 
I loved downtown and lived in Travis heights for several years. Five dollar cab rides and knew a crap load of bartenders to keep my party expenses ridiculously low for the time. I still regret not moving Northwest Sooner. Mainly as the reason I didn't buy in travis heights (passed on a 1800 square foot houe on a lot and a half for 150K was I envisioned my daughter coming home from elementary school with this cool thing where they drew with a ball point pen and stuck themselves with a pin and the image didn't wash off. Cost me at least 100K in two years.

now I already had kids, so my feelings were skrwed.

You want to live East then go with the multi-unit and know it's short term. Get good tenants and cut their rates after a year to keep them forever. Sounds nuts but lose one months rent and where are you on the math spectrum?

OR- look for a weak house in a strong neighborhood with GOOD if not great schools. I don't know you and perhaps you haven't partied enough yet. If so rent cheap and party your *** off and do not regret the appreciation in property you would achieve moving to a better school district.

In the end if you are wise school district and more importantly the SPECIFIC school path for your child will be the most important aspect of your decision making. I LOVE downtown, but i woudl probably be home schooling my kids if we still lived in travis heights ( no offense to those who may live there). My daughters go the the best school path in Austin, perhaps Westlak has one set of school paths as good, IMHO.

East Austin still has opportunities to be sure. But nothing like 5-7 years ago. You might look at some Condos that I used to live in for a cheaper downtown version of being able to party and still have a secure smaller community, Sunnyvale Villas Condominiums, between riverside and woodland on the East Side. I with I hadn;t sold mine in all honesty, and it waill ALWAYS be rentable.

Anyhow if you are planning to have kids start deciding where you want to live and look very hard at the school path. In a down market these homes will still move more quickly than the rest of the market.

The good news is there is no wrong answer, only an evaluation of where you want to be in the future...
 
Since you plan on having kids soon, do not go option #4 and get the most you can afford.
You may find yourself putting kids off longer than you want to.

A few years ago me and my wife (both were 27 then, now 30) were in teh same situation, with exact same affordability.
We ended up buying a house for 175K (your option #2). That was comfortable for both of us even if she stopped working, which she did.
We now have a 2 year old and my wife is 5 months along with our second.
 
Continue to rent until you have kids. Your perspective about many things, including where you want to live, will change dramatically when you have a kiddo.

Save your cash for traveling.
 
Be very careful if you buy a house on the east side. Your safety is paramount if you are going to live over that way. Yes the gentrification is ongoing, but that doesn't mean that it has pushed out all the problems.
 
no worries. i'm in good w/ the 21 bloods.
smokin.gif


Like I said... Schools don't matter. I can take my kids where I want.
 
I know what you mean Smurfette, my wife also teaches in AISD.

But it really is a good idea to send kids to the nearest school. They will have friends in the neighborhood, the same kids they will see at the pool during the summer. And those same kids might be around come middle and high school.
 
We already live east and the problems most people perceive are vastly exaggerated. There are bad areas but you are more likely to be a victim of a crime in west campus then on the east side.
 
Good luck with your price range.
As with all houses, it is about location. Your initial option depends on your comfort level with doing your own work. Budget 5K for the upkeep of an old house. Look for very good insulation -- you do not want to feed Austin Energy. Also check out the Travis County Tax Appraisal District and see what you are getting into taxwise, particularly if you are buying from an elderly owner whose taxes have been frozen for a while.

Prequalify for a mortgage, and go shopping within your budget. The upside to ownership is the nice tax deduction you get in April. The downside is making the payments in December.

Memorize this: Home Depot at IH35 and St. John's. They rent tools. This will rapidly become a favorite weekend destination.

Opt for house over yard.
 
That last statement is true. I am not a big gardening/landscaping person. I'd much rather have a nice house than a nice yard. But if both are possible, great.
 
check the age of:
roof
fence
a/c
heater
carpet/flooring

Those are all big chunks of change to replace.

get copies of the electric bill for as far back as you can.
 
Location re:Energy costs, and transportation costs.

We bought a home we could afford four years ago. We needed to move up in size, because we had been in the same 929 s.f. apartment for five years. Our children were ages 8 and 6. I was looking for a house right at 2000 square feet, so we stumbled onto a street that had three repos for sale. 2 HUDs, and one VA. My wife convinced me to go for the largest home, 2720 s.f. Yes, we nearly tripled our s.f.! (I knew the only thing that could be a gotcha was the energy cost, but I didn't have a clue it could almost triple)

And location, we have grades 6-12 within walking distance.

But, energy costs have nearly tripled since then. Both the apartment and our house are all electric. Our apartment electric bill was about $140. We started out in our house at an electric bill of about $190, no problem, the Kwh rate lasted about two years, and the bill gradually moved up to an average of about $230. Then they raised the rate, the bill started averaging about $330ish Then last year, I got a three year contract at a good rate, 12.9 cents.

The bill continued to rise, even though I lowered the rate. Obviously we have some issue, but I suspect the culprits are the cheap Fox and Jacobs windows.

So, this summer, after getting a new A/C unit installed on the inside, the bill was $515, then the next month $355.

Transportation costs: Before we moved into a house we were pretty good at keeping vehicles until we paid them off, and that has changed. Now, I'm an expert at GAP insurance. (two wrecked vehicles, both with GAP, the first one I botched because I didn't know I had to file for GAP, the second I came out smelling like a rose, because I knew what I was doing)

And the toll road! Look out! Before we moved, I might have spent $40 a month, at the max. Now, I bet it's $80 easy.
 
my 2 cents.
-plans are great, but things happen and you don't always have control.
-owning is a lot of work, regardless of the house. "there's always something..."
-take your time. the market isn't getting any better. buyers have power. there are great deals out there. check banks pre-foreclosure listings.
-don't settle. buying a house is the biggest investment you will ever make.
-if you're dead set on building on that land, buy it.
 
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