A duplex can offer some financial advantages when compared to a single family house, especially if you don’t need tons of living space.  Although most people think a duplex in one neighborhood costs about twice what a single family house does, this is rarely true.  Here in Austin, a similarly-located duplex generally costs about 1.25 times the price of a house in the same neighborhood.  To pick an easy number for an example, if a single family house is selling for $200k, a duplex in that area will sell for about $250k.

A Duplex Gives a Lower Net Monthly Payment

In February 2012, two properties near St. Edward’s University in South Austin were for sale.  The home, at 613 Long Bow, was a 1,042 square foot home with 3 bedrooms and 1 bath on .179 acres, offered for $224,900 and had “some” updates.  The duplex, at 2715 St. Edward’s Circle, was on .2 acres, and offered two units, each with 2 bedrooms and 1 bath units, with a total of 1,575 square feet, offered for $229,900.  Each “updated” unit was rented for $950 per month.

If you plan to live in the duplex, you are eligible for FHA financing, which many first-time buyers use because it requires only a 3.5% down payment.  This example assumes an FHA loan with 3.5% down, a 1% origination fee, and a 30-year mortgage at 5% interest (although we are currently seeing interest rates as low as 4%) with no closing costs paid by the seller.

*If you are able to put 20% down, you will not need to pay PMI and some banks and credit unions have financing that does not require PMI, even with down payment of less than 20%.

The bottom line?  Your net monthly out of pocket on a duplex is much lower, even assuming that you have to pay for repairs on a duplex that you would not have to pay for on a house (as home owners, we can tell you, there are always repairs).  You may also be entitled to tax benefits for certain expenses associated with repairs, maintenance, and upgrades to the rented side of your duplex (check with a tax professional).

Buying a Duplex can Lead to Faster Payoff and/or More Equity

After several years of living in your duplex and renting the other side, you will have almost the same amount of equity than if you purchased the single family home, even though your net monthly out of pocket was less.  After 10 years in the single family home, you will owe just over $176,000.  Assuming that property values have not changed (although in Austin, we usually see appreciation), your equity in will be approximately $41,000.  After 10 years in the duplex, you will owe approximately $180,400 and also have approximately $40,000 in equity, but you will have paid approximately $114,000 less out of pocket because your tenant has been paying about half of your mortgage payment! 

Instead of using the monthly savings another way, you might use it to pay your mortgage off faster.  Assuming you add about half the rent – $450 per month – to your mortgage payment, your mortgage on the duplex would be paid off in 17 years. Even paying an extra $300 per month would pay your mortgage off in 20 years!  At that point, you would own a $230,000 duplex free and clear.

So, I’ve Paid off the Mortgage — I Don’t Have Any Payments Anymore, Right?

Once you pay off your property, you live mortgage free, but not payment free.  Based on the original assumptions, after the house is paid off, you’re still paying $450 per month for taxes and insurance.  Once the duplex is paid off you still pay taxes and insurance of $455/month, but with your tenant paying you $950 per month, your monthly profit is $495/month!

That’s Great!  Why Doesn’t Everyone Do It?

Buying a duplex is not for everyone.  You have to manage your property, including finding tenants, making repairs, etc.  And, instead of living in a 3 bedroom, 1,042 square foot home, you’re living in 750 square feet.  On the other hand, instead of having a roommate to share expenses, your “roommate” is in the other duplex (and, in the one in this example, your units are separated by a carport and have no shared walls, much less shared bathrooms).

Moxie has sold owner-occupied duplexes to people who have found it to be a great investment.  As one client says, “Honestly, a duplex was not on our radar when we began looking. But the one we bought did not look like a ‘typical’ duplex. It also allowed us a chance to start doing whatever remodeling we wanted in small chunks rather than have to think of a whole house all at once while income was coming in from the other side. The rental market in Austin is red hot; ours was on the market 3 weeks and we had a waiting list of tenants. For us it has been perfect!  The additional income got us into a great location and neighborhood, the size is just right, and we can be very picky on who we want to share the other side.”

One of the real pluses of Austin’s duplexes is their diversity.  Not all duplexes are mirror images; you may be able to find a duplex that has a 3 bedroom, 2 bath unit on one side and a 2 or 1 bedroom, 1 bath unit on the other.  You might start out single and living in the smaller unit.  Then, if you meet someone awesome, you can move to the larger side and rent out the smaller one.  If you’re ready to add to your family, you could sell the duplex and roll the equity into a larger single family home (or keep it as an investment property and rent both units out).  If you think a duplex might be right for you, contact us and we’ll be happy to run the numbers, discuss your options, and work with you to find the perfect place!

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Homestead exemptions remove part of your home’s value from taxation, so they lower your taxes. For example, if your home is appraised at $200,000, and you qualify for a $15,000 exemption (this is the amount mandated for school districts), you will pay school taxes on the home as if it was worth only $185,000. Taxing units have the option to offer a separate exemption of up to 20 percent of the total value.

Other taxing entities provide a different “break” for the Homestead Exemption. For example, Austin Community College gives 1%. It may not seem like much, but there is no reason to pay taxes you don’t owe.

Don’t miss out. Although you can file retroactively (do you hear us, 2010 buyers?), it’s just easier to do it up front. Here are the forms for the various counties:

Travis County

Williamson County

Hays County

Caldwell County

Bastrop County (Not online; call Lisa at 512-303-1930 ext. 22)

For those of you in other counties, here is the general form: http://www.window.state.tx.us/taxinfo/taxforms/50-114.pdf
The deadline to file is April 30, but you can file any time. If you haven’t done so, do it now!

The The following video from the Travis County Tax Office should provide any additional information you need to  determine your eligibility.

The Moxie Ladies (Justine and Mishell)
- A referral is the highest compliment you can give us. We will take great care of anyone you send our way.

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This gorgeous, spacious home is ready for you to move in and enjoy low maintenance living convenient to everything Austin has to offer. Green built in 2003, this home features over 1500 square feet of well-designed living space. Vaulted ceilings make this home feel even larger than it is. With a master bedroom downstairs and two bedrooms and a bath up, this home is perfect for a growing family, roommates, or work-at-home professionals. On a quiet, tree-lined street in the heart of everything East Austin has to offer — artist studios, urban farms, hip restaurants and bars — yet only 10 minutes to UT or downtown.

Large, private yard and shady front porch invite you to throw the perfect barbecue or design a garden paradise (East Austin boasts some of the most fertile soil in town). Inside, the open kitchen — featuring energy star appliances — welcomes you and your guests. Green built, with stained concrete floors, structurally insulated panels, and double paned windows equal low energy costs and low maintenance. Detached shed gives plenty of storage options.

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Amazing opportunity to buy or lease this 3000+ sf family retreat in one of Dripping Springs’ most desirable neighborhoods.  3-4 BR, 3 BA plus multiple living areas, library/office, bonus room, formal dining, open kitchen, and expansive deck give ample space for entertaining or busy families.  Exemplary Dripping Springs schools plus club house and neighborhood park with playscape, baseball and basketball fields, tennis courts, etc. make this an ideal family home.  This one really does have it all!  Incredible custom pecan bar in recreation room/den.  You must see this home to appreciate its thoughtful layout.  New wood floors and carpet in master, and new kitchen counter tops.  Recent upgrade to well.

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Robert shared his dream with Moxie:  to become a goat farmer, humanely raising goats and making artisanal goat cheese.  Robert and Justine then had many driving adventures in beautiful central Texas and they’d found both the perfect location (in Elgin) and house (a gorgeous Victorian in Taylor that was to be demolished if not rescued).  Everything was moving along when the sellers of the Elgin property decided they wanted substantially more money for their property and the deal fell apart.  But Robert’s dream of Amalthea (literally, “tender goddess”) Farms, named for the foster mother of Zeus, who is often depicted as a nurturing goat, lived on.

Robert and Justine kept looking and eventually found just over 5 acres of beautiful ranch land in Paige, Texas, just outside of Bastrop.  The property had a (barely) livable home that would work until Robert’s “new” home could be moved and some outbuildings, and Robert thought it would provide a perfect home for Amalthea Farms.  With Justine and Mishell’s help navigating some complicated title issues, Robert closed on the property on which he would begin to build his dream at the end of July 2011.

The Victorian home he had originally had his eye on was no longer available, but Robert wasn’t worried because he had a place to live on his property.  Justine began combing ads all over Texas looking for homes available to move.  In the meantime, Robert began building a barn to house the dairy goats that would be the heart of his new business.  Amalthea would soon be a reality!

Then, tragedy struck.  The Bastrop area was devastated by wildfires that were nearly impossible to put out due to Central Texas’s long term drought.  Robert suffered through the fires, but attempted to fight back.  While the fires raged, Robert made this incredibly powerful video chronicling those tense days:

Although the livable building was burned to the ground, somehow, miraculously, Amalthea’s not-yet-completed goat barn remained standing.  And, in the meantime, Robert had found the perfect house to move to his land from Mexia, Texas — about 130 miles (interestingly, both Justine and Robert’s dentist had sent pictures of the home to him).  KXAN explained how this all came about:

Century-old Mexia home on the move: kxan.com

When Robert moves the 100 year old home (it was built in 1915) to his property, he’ll be able to upgrade all of the basics — electric and plumbing — and install central heat and air, but he will be able to keep the charming, original details that drew him to the idea of an old home in the first place, like the clawfoot tub, original light fixtures, farm sink, screen porch, and gorgeous longleaf pine floors.  He’ll have a gorgeous, character-filled piece of history without sacrificing any conveniences, and you can’t come up with much “greener” construction than re-use.

Robert had intended to buy his goats already, but because of the vegetation being so badly burned, has postponed the actual goat farming until spring 2012.  But he’s raising 20 – chickens while he waits for his “new” home to be relocated.

Moxie plans to be there as Robert does this work and will update this blog as his progress continues.  And, of course, we’ll let you know when you can start buying Amalthea Farms cheese!

What factors are contributing to Austin’s growing housing market?  Job growth, increasing population, and a tightening rental market (currently, we are seeing an occupancy rate for rental properties of 95 to 96 percent and property owners are able to get top dollar for their rentals).  Combined, the effect is a higher demand for housing in Austin and the surrounding areas, according Metrostudy’s Rude.  It’s great time to buy if you are renting since rents are increasing, or to branch out and buy a rental property!

Austin currently has the lowest inventory of homes available for purchase in the last 3 years.  We will continue to see increased demand for housing as Texas, and Austin in particular, continues to be a major relocation area.

In 2011, the Austin metro population was approximately 1.763 million. By 2020, Rude predicts that the Austin metro area will have a population of approximately 2.304 million. This growth in population of over 540,000 people is equivalent to 31% total growth, or an average of 3.4% per year. If even 60 percent of these new residents purchase homes, the result is 13,333 new homes built and sold per year in Austin. The forecast also based its optimism for 2012 on the continued stabilization of the new housing market combined with an improving resale market — good news for both buyers and sellers!

KXAN weathercaster, Jim Spencer, weighed in on the impact that the drought is having on our local market.  Spencer said the weather outlook for 2012 is not promising — Austin should expect a warmer dryer winter, although after yesterday’s storms it might be hard to believe, and possibly more of the same into the summer months (yep, more drought).  Overall, the drought is the only blot on Austin’s rosy economic outlook.  Now is the time to put in those rain water collection systems, plant a drought tolerant garden, and enjoy the 70 degree days while they last!

As always we are here to help – if you are planning to relocate to Austin send us an email and we will send you our relocation guide. Just want more market info; we would be happy to share! Email info@moxierealtygroup.com.