This 612 Square Foot, Plain Jane Home Just Sold for $400,248 in Austin

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At $654 a square foot, this small house illustrates just how hot Austin real estate is today.

The East Cesar Chavez neighborhood of Austin, Texas is a lure for hip, young professionals. Located near the Emma S. Barrientos Mexican American Cultural Center, the community is an eclectic mix of art galleries, BBQ joints, coffee shops, vintage boutiques, craft cocktail lounges, and supremely fashionable brewpubs. And after dark, there's plenty of live music to entertain the late-night crowds.

All-important location

In this chic little neighborhood, a 612 square foot, one-bedroom, one-bath home recently sold for $400,248 or $654 per square foot. We're not sure what the initial asking price was, but it's safe to say that the seller received more than the asking price. And it's all because of what the little house has going for it: Location, location, and location.

Rather than refer to the home as tiny, the agent chose the adjective "charming." Instead of saying that the entire house could easily fit inside the average U.S. apartment with a couple hundred square feet left over, the agent highlighted easy access to the highway. And everything the agent advertised is true.

The property

Imagine a 1930s bungalow, freshly painted, with a chain-link fence extending around the entirety of the small yard. A short walkway leads up to a deck spanning the width of the narrow house, and two shabby chic rocking chairs are perched on the deck.

Interestingly, there are two sets of online photos. The first shows a bungalow badly in need of paint, bars on the windows, sagging rail on the deck, and trash cans pushed near the deck. The interior boasts dirty walls, floors covered in old linoleum, rickety furniture, a bed with a bare mattress, and a kitchen and bath straight out of the 1950s.

In the second series of photos, the walls have been painted, the linoleum replaced with gorgeous acacia wood floors, and the kitchen and bath have been brought into the 21st century. None of the appliances appear to be high-end, but they look clean and serviceable.

The house's exterior has been painted white, although a close-up shot indicates that the painters failed to scrape the house before painting. The lawn has been mowed, although there are still weeds growing from the foundation of the home. A small deck on the side of the house has been staged, although there is a large section of cushions missing from the patio furniture.

Increase in value

Before this sale, the home was last on the market in 2013. At that time, the owners were asking $167,900, or $274 per square foot. That's an annual increase of roughly 18% since 2013 -- the perfect illustration of a red-hot housing market.

A smart move

Despite the high price tag, second-rate paint job, and weeds sprouting like whiskers from the foundation, someone made a smart purchase. The tiny white house with the chain-link fence is, by far, the least expensive property on the block.

As tempting as it may be for a first-time home buyer to purchase the largest, most impressive house on the block, it's not a great strategy. Taking a mortgage out on the least valuable property allows a buyer to make improvements without "over-improving" for the neighborhood. In other words, there's less risk of putting "too much" money into improvements when their home is the least expensive house to begin with.

Add to that, Austin real estate prices are up 42% over last year and expected to keep soaring, meaning someone might have jumped into the market at just the right time.

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