So, here’s the deal – I’m in a pretty decent financial situation, so no need to sound the alarm. I’m facing a major decision about my house in the Austin, TX area that I bought at the end of 2020 for $620k. The house prices shot up close to $1 million at their peak but have been steadily dropping since then. I keep track of the prices using Zillow. I’ve been living away from Austin for a couple of years now and have been renting out the house.
My mortgage rate is at 2.75%, with an initial loan of $500k, and I still owe $440k. The current value of the house is around $780k, and it’s expected to bounce back to $800-820k in the spring (according to Zillow). The rent I receive is $3,900, while my mortgage and escrow come to $3,500. Out of that, only $1,000 goes towards paying down the principal, another $1,000 covers the interest, and $1,000 goes towards taxes (yep, those taxes can really bite!).
At best, the house brings in $1,400 a month for me ($400 in positive cash flow and $1,000 towards the mortgage), and there are always some repair costs popping up throughout the year. Over the last two years, I’ve been making around $10k annually from the property. I also get some tax benefits through my LLC since I’m technically “losing money” on the rental due to house depreciation, which I estimate at $8k a year (thanks to a $26k tax reduction at my effective tax rate).
But here’s the kicker – according to Zillow, the house is losing value faster than I’m making a profit. Year over year (from October 2024 to October 2023), the price has dropped by about $20-35k. And to top it off, I can’t find any predictions indicating when this downward trend will stop. The “Austin housing forecast” even suggests another 2% decline by 2026.
Now, my current renter’s lease ends in May, and I’m mulling over the idea of selling the house. If I can get $750k after all the fees, that would leave me with $300k in cash, which might be better off invested in VTI. Right now, it seems