how are LTR profitable with these figures?

[Klaas V.]

Hi everybody,

I'm looking to buy a property in my are (north Houston) as an investment. My plan is to do STR, but I am also making the LTR calculation in case STR does not work out or in case I do no longer have the time to self-manage.

I'm looking to buy a single family for 250-350. I did my calculations for a LTR and currently a 310k listed home I am looking at rents out for $1900. Assuming to buy it for 300k, then taking into account maintenance (5%), Capex (5%), tax, insurance ($170/m), vacancy (5%), that results in a negative CoC return of -7.4%. I understand the unfavorable interest rates doesn't help, but the Cap rate is also only 3.3%. I also understand home values are high, but even if I would find a similar property for 225k and do a 25k reno and be able to rent it out for 2000, the Cap rate would only be 4.3% and cashflow still negative (-1.7%).

So my questions is: what am I missing here?