The 5 Best Ways for Millennials to Buy Affordable Homes in Austin

There’s no denying the city of Austin has seen a massive growth over the years. Most of these transplants are young; in their 20’s & 30’s. I’m involved in many meetups and organizations in Austin and have had the opportunity to talk to numerous millennials about their living, and financial situations and I’ve started to see a pattern. Most of these transplants want to live close to the city and are paying $1,200+ in rent each month AND living with a roommate or even a couple roommates. That’s $14,400+ a year on housing alone! I was dumbfounded by how many people in Austin are in this rental situation and I wanted to make one thing clear…there is a BETTER WAY!

I understand that not everyone should buy a house. It’s not the right move for everyone. But if you are paying over $1,200 a month in rent and plan to stick around Austin for a few years, it’s worth looking into. Even if you have student loans you’re concerned about, or your credit score isn’t as high as your friend who just bought a house, still look into your options! Talk to a lender and figure out how much you’d get approved for and then talk to me or your other realtor friend about what properties in that price range look like and in what areas you can buy. None of that research will cost you a penny, and it’s just a little of your time and a conversation about your finances that you’ve probably been putting off. Let me tell you something — lenders have seen it all. They don’t care if you make $40K or $140K, they will provide you information for free that may change your life!

So, what are the best ways for millennials to buy an affordable house in Austin?

Find out if you qualify for a first-time buyer program

I had a client this past year who wasn’t sure she’d be able to buy a house for at least another year. One lender even agreed! But she spoke with Melanie Hadley at Cornerstone lending and was able to get full down payment assistance. My client took a first-time buyer course one day, over a weekend and between her earnest money and closing costs, she bought her home and only paid $5,000! Even if you have a high salary and may not qualify for downpayment assistance, find out if you would be eligible for a tax reduction.

If you can’t get downpayment assistance, every homeowner still gets a homestead exemption. A homestead exemption helps you save on taxes on your home. It removes part of the value of your property from taxation and lowers your taxes. For example, if your home is valued at $100,000 and you qualify for a $20,000 exemption, you pay taxes on your home as if it was worth only $80,000.

Another way to get your closing costs paid for is by asking the seller for assistance. If a home has been sitting on the market for a while, you’ll have more room to negotiate these costs. Remember, a seller cannot pay for your down payment, only your closing costs. That has to be from your personal funds or a gift from a relative. Want to know the difference between these two costs? Read more here.

Buy a “Live in Flip”

A live-in flip is a fixer upper home that somebody buys to live in and fix up over the years before they sell it. I think this is an excellent strategy for people in their 20’s and 30’s because life is unpredictable at this age! Who knows what we will be doing in a few years. Some people may get a job transfer, move in with a significant other or even have a baby! If your life stays pretty consistent, you can keep your house. If something happens and you need to sell, you’ll have a home that you not only have built equity in, but you should see a notable amount of appreciation from your renovations. A live-in flip can be as tame as you’d like it to be. For example, if you’re intimidated by a lot of renovations, look for a house that may only need cosmetic work. Not all of us are handy.

I bought a live in flip this summer. I wanted to buy a house in a competitive area in Austin, about 2 miles from downtown. The problem was my budget was around $280K, and this would not get me the updated three bedrooms/two bathrooms house I wanted. There were barely any homes on the market in that area for under $300K. I decided I would buy a fixer-upper, and I’m very thankful I did. Not only is my mortgage payment more manageable but now that I did all of my renovations (you can read about my renovation story here), my house’s value has increased significantly.

Get roommates or short-term renters

Roommates are another great option, especially if you would rather have a house closer to downtown. Real estate in those areas can be more expensive and that means your mortgage payment may be a little higher. Remember, the goal is to cut down that payment so it’s less than your rent. If your mortgage payment is going to be $2,000+ a month then you’ll want to make sure you can charge a roommate or two enough money to cut down a significant amount of this payment. This is when your realtor can help you. Have them send you recent leases in the areas you’re looking for homes. Check Airbnb rentals in the area. How much are people charging a night and for a month? Look on Craigslist or the Facebook Marketplace to see how much people are charging per month. It’s also about supply and demand. If your home is in a popular area, it may be a prime spot for somebody who only needs a place to crash for a couple of months. You may also be able to charge more for a furnished room. My house is in a pretty popular neighborhood but my two extra rooms are small — not ideal for somebody staying a year. I also don’t want a long-term roommate, I like the freedom of a short-term roommate. Think about most roommate issues you’ve ever had…they usually start after a few months of living together!

I’ve tried different methods of cutting down my mortgage payment. In the busy month of October, I only utilized Airbnb and had guests stay for 16 nights and made $1,475. My mortgage payment is $1,800 a month, so, I only paid $325 in “rent” that month. I expect December-February to be slower times for Airbnb and will have a short-term roommate stay in one of my furnished rooms for $850 a month and will leave my other room open for Airbnb guests. There are many possibilities!

Buy a less expensive house further away from the city

Are you a super saver? Does the thought of not paying any mortgage payment make you extremely happy? What about making a couple extra hundred bucks a month? Then consider buying a house a little further away from the action. This may be ideal for people who already have jobs that are further away from the city. Think about the pros and cons, how often do you REALLY venture downtown? Figure out how much money you could save on rent and then get back when you sell your house. It might be the best decision you could make for your wallet. Start looking at homes under $230,000 and see what comes up. Are you willing to make that sacrifice for a few years?

Use a combination of these methods for the ultimate house hack!

Think about all of your choices! You could buy a live in flip further away from downtown AND have roommates for a fantastic investment deal. You could buy a house further away and do Airbnb every so often if you would rather live alone the majority of the time. You could buy a house near downtown and have two full-time roommates or just use Airbnb or short-term leases. There are so many options to make your living situation more affordable, and in my opinion, that’s the best part of being a homeowner!

No matter what your budget is, you can still make these strategies work for you. Please let me know if you’d like to discuss this in further detail. I’d love to hear what you have to say. House hacking is one of the main reasons I got my real estate license in the first place! I think it’s the best way to jump into real estate investing and to save money, especially for people in their 20’s and 30’s. If you’d like a great lender to help you out with first-time buyer programs, I recommend talking to Melanie Hadley with Cornerstone Home Lending.