Questions from a Houston Newbie

[Victoria C.]

Hello BP community!

I’m Victoria, and I’m ready to learn all I can about investing in single family LTRs in my north-Houston area. I plan to purchase my first property within the next six months.  

I hope it's okay I jump in and start asking questions. 

A few questions to start:

1. How much cash should you have in your rental-business emergency fund for each property you own to cover repairs, damage, voids, etc? Is there a rule-of-thumb-percentage based on the price of the house? For example, I’m looking at houses around $300,000 - $350,000. How much should I keep in my business bank account for that first house as an emergency reserve (NOT counting money for the initial rehab, general business start-up costs, etc)?  Also, I will be keeping my business finances and my personal finances separate, so this money is outside of my own personal/family emergency cash reserves, which I never want to touch for the business.

2. I understand the concept of property classes (A,B,C,D), and for the most part I know when I see them. However, sometimes there are small pockets of much less expensive, older and smaller properties in more expensive neighborhoods – does that make those homes a lesser class, even though they are part of the broader, better neighborhood? Are the class levels averages of the broader neighborhood, or can they be street-by-street (or cluster) specific?  

3. Are there maps for the Houston area, that show which neighborhoods flooded during Hurricane Harvey? I want to know more than what general flood plain/topography maps will show me. I specifically do NOT want to buy property in areas that flooded during Harvey for peace of mind (SWAN) reasons. I lived through that once – never again.

4. In the Houston area, are there certain times of the year when it is better to put a rental property on the market (for renting)? Are there slower months to avoid? I’m thinking about my overall timeline for purchasing/rehabbing and putting on the market for rent.

Thanks!

[Gustavo Delgado]

1. I would keep around $5k in that emergency account. In Houston heat that could be an HVAC issue. Just keep adding to that account with your monthly rent collection. What % amount, that would be up to you.

2. I would focus more on the neighborhood rather than property condition since you can always upgrade the condition

3.Don't know of any maps but maybe visit the neighborhoods of interest and ask neighbors that may lived through it.

4. Best times in my opinion would be April/May- August. Most families are looking to make move during summer breaks. Once school starts it will be slower to lease.