Income Generator… the Austin TX Duplex

If you’ve read Robert Kawasaki’s book Rich Dad, Poor Dad, you’ve probably caught the passive income bug. The bug that says if you buy property, rent it out, you’ll have free passive income forever. Post 2008, this dream is much harder to come by now since the value of homes has fallen through the floor. Now, lots of people have homes that are under water (worth less than what was paid) that went from assets to liabilities.

While lots of people have given up on this avenue for now, if you do your homework, you can still find homes that support Kawasaki’s principles. Namely, this is the Austin, TX Duplex. We’ll jump right into it:

How I Have a Home & Get $150/month

Let’s start with a personal example. I have a home in the north area of Austin near Austin Community College. Great neighborhood. Nice small duplex home. Here’s the home info:

Price of the Home: $187,000

Size: 1789 sq ft.

Bed: 4

Bath: 4

Type: Multi-family

What’s the big deal and how is this passive income? Lets crunch the numbers.

30-year-fixed @ 5.25%, 20% Down: $1117.35/month (includes property tax and insurance).

Now the going rate for a rental in Austin TX is slightly less than $1/sq ft. So with each side having about 875 sq ft, priced to rent quickly, I currently get $700/side. You’ll have to include the property management company @ 6% coming out to $84/month. Throw in about $50/month for random happenstance.

With income at $1400/month and expenses at around $1250/month, I’m up close to $150/month and own a home.

What the Austin Duplex is not!

Unlike Seattle, New York, and portions of L.A., Austin’s property value, for the most part, does not appreciate much at all. Austin is one of the most rock solid housing markets, going neither up or down very far during boom or bust. Your home will go up only incremental values during the life of a 30 year fixed loan. The value will come out when you sell the home and from your tiny passive income.

That said, you have a home that pays $150/month.

About the Author: Justin Louie is a writer and primary technologist for Incolo.com – Seattle WA Homes for Sale. Having lived in Austin, TX for 2 years working at National Instruments, he learned of the Austin housing market in late 2007. After narrowly avoiding a terrible home purchase for his first home, he picked up the property near ACC. Incolo.com is a real estate start-up out of Issaquah, WA servicing the greater Seattle area.