Market Analysis - Spring, TX / Houston, TX / The Woodlands, TX

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Market Analysis - Spring, TX / Houston, TX / The Woodlands, TX

William Lunsford
Spring, TX · Member since 2016 · 42 posts · 5 votes

Hello Everyone,

I am beginning my journey in real estate and am looking at investing in the North Houston area (Spring, The Woodlands, Conroe, etc) in the next year.  I grew up in Spring but left for college and then the military.  I now live all over the place but visit Spring 1-2 times per year.  I have had a pretty good perspective on the growth/changes to Spring over the last 20 yrs and feel pretty good about The Woodland's as a rental market, Spring would be my second choice.  Since I have never owned property as an investor in these areas, I would like some perspective on my analysis and also any input from current property owners that hold in Spring/Woodlands.  I am currently tracking for sale/rentals using a google docs tool I built.  

https://docs.google.com/spreadsheets/d/1bxAxiNgEu6...

If anyone is willing to look at my analysis on the profit worksheet I would appreciate it.  I am also tracking houses on market and rentals on separate worksheets.  I have programmed this sheet to pull data off zillow links. 

Thanks for any input in advance.

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Gaurav M.
Investor · Irvine, CA · Member since 2014 · 53 posts · 27 votes
10y

You did not account for leasing fees. Almost all PMs charge a leasing fee equal to 1 months rent. If you have a large turnover, then that eats into your cash flow. I usually try to average it out over 2 years assuming the tenant stays there for 2 years.

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  • Jen Hoang
    Investor · San Diego, CA · Member since 2015 · 96 posts · 37 votes
    10y
    I have a rental in the woodlands. I went and saw it for the first time last year, even though I've had it since 2007. It's a really good area. Good schools and good jobs. I've had no problem with renters.
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  • William Lunsford
    OP
    Spring, TX · Member since 2016 · 42 posts · 5 votes
    10y

    @Jen Hoang thanks for the feedback.

    0Reply
  • Marat Nizberg
    Wholesaler · Spring, TX · Member since 2015 · 8 posts · 0 votes
    10y

    Hello William,

    I live in the Woodlands and have recently started investing again after a few years off. You have to look at your investment goals first to figure out what to look for. Please PM me if you want to discuss 

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  • Debra Broussard
    Realtor · College Station, TX · Member since 2015 · 26 posts · 10 votes
    10y

    Hello William,

    I live in Houston very close to Spring and just want to caution you about the flood that occurred in April causing the Spring Cypress creek to overflow its banks.  Homes and businesses  that have never seen water were affected.   I would be weary of buying anything sight unseen or not thoroughly inspected in the Spring area. 

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  • Michael Delpier
    Investor · Houston, TX · Member since 2015 · 176 posts · 121 votes
    10y

    @William Lunsford I do invest in the NW Houston area. I have a rental in spring and it is doing okay. The difficulty you will find is finding deals that will work. I would be happy to look at your analysis, and give some feedback but for some reason I could not open. PM me if you want to talk.

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  • William Lunsford
    OP
    Spring, TX · Member since 2016 · 42 posts · 5 votes
    10y

    @Michael Delpier let me take a look at my sheet and I will post an analysis on this feed outside of the excel file that I would have considered investing in.  Thanks!  @Debra Broussard appreciate the information.  My family is close to the horse ranch that flooded out in Spring.  It's crazy the amount of rain they received.  When I was growing up there it seemed like we got a massive flood like that about every 10-15 years.  When it rains in Houston it certainly pours.

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  • Trey Watson
    Investor · Phoenix, AZ · Member since 2015 · 191 posts · 152 votes
    10y

    Disclosure: I was born and raised (for the most part) in The Woodlands. 

    My question in regards to your spreadsheet- How do you utilize this to help you?

    As far as owning rental property in The Woodlands right now, you may find it difficult to find any buy and holds in there that meet the 1% rule. It really comes down to what your ROI expecations are.

    Think about it, if someone can afford to pay rent 2000/month or more, they can more likely afford or qualify to buy a home. In that case, what is stopping them from buying? A common reasonvis being transient, meaning they will not be your tenant for long, because they'll have to move soon for job related reasons. 

    On top of that, there are only a handful of pockets in The Woodlands where you can get in the price range that you need to be in, to meet the 1% rule...(think grogans mill village & panther creek village).

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  • William Lunsford
    OP
    Spring, TX · Member since 2016 · 42 posts · 5 votes
    10y

    @Michael Delpier here is a sample analysis in 77389: 

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  • William Lunsford
    OP
    Spring, TX · Member since 2016 · 42 posts · 5 votes
    10y

    @Trey Watson my primary objective is to build compounding cash flow but also build unrealized net worth through longer term buy and hold.  I primarily utilize the spreadsheet to track whether or not a property would break even/lose/earn based on rent received vs overall costs on a property.  What do you typically track for your analysis and how would mine be good/bad overall from an experienced investors standpoint?  Thanks!

    1Reply
  • Michael Delpier
    Investor · Houston, TX · Member since 2015 · 176 posts · 121 votes
    10y

    @William Lunsford, Your numbers look okay. A little thin for me but I think it is a workable investment if you could either save some money on the buy, or get the $1350/mo rent + yearly increases. I think you are a little light on the vacancy. I would double that number. This is a good rental area. I don't know how the Springwoods Village will affect this area but I bet it will be for the positive. But I also bet some of the positive side has already been accounted for in this ad surrounding areas.

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  • William Lunsford
    OP
    Spring, TX · Member since 2016 · 42 posts · 5 votes
    10y

    @Michael Delpier thanks for the feedback!

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  • Gaurav M.
    Investor · Irvine, CA · Member since 2014 · 53 posts · 27 votes
    10y

    You did not account for leasing fees. Almost all PMs charge a leasing fee equal to 1 months rent. If you have a large turnover, then that eats into your cash flow. I usually try to average it out over 2 years assuming the tenant stays there for 2 years.

    1Reply
  • Steven Anderson
    Investor · Spring, TX · Member since 2015 · 126 posts · 38 votes
    10y

    @William Lunsford here's my two cents

    I think your insurance rates are a bit high. My view is to insure the loan value, but the FMV and insure replacement cost. Even in Harris County, I think .8-1% of insured value is appropriate unless you are talking a 50-60 year old home.

    Given the cost of a PM I would strongly suggest managing your properties yourself.  I've always believed no one will take care of your things as well as you will.  Now, once you scale up then maybe get a PM.  And because you have experience managing your properties you will be much better equipped to screen PMs such that they will manage your properties in a manner that you can be comfortable with.

    Steven Anderson

    Berkley Properties

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  • William Lunsford
    OP
    Spring, TX · Member since 2016 · 42 posts · 5 votes
    10y

    @Gaurav M. & @Steven Anderson thanks for the inputs.

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  • Michael Delpier
    Investor · Houston, TX · Member since 2015 · 176 posts · 121 votes
    10y

    @William Lunsford Gaurav beat me to it, but how I figure the vacancy is to assume the tenant will stay 2 years, there will be a month of empty, an a placement fee of 1 month rent.

    So for your $1350/mo rent... 1 month empty @$1350 + placement @ $1350 = $2700 divided by 24 months = $112/month

    If you were using the BP rental calculator that would be about 9.5% on the vacancy allowance. But I only put that number in after i have figured it out using the 24 month method.

    There are ways to reduce this number but it usually comes as a trade off on another expense or risk.

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  • Willie Smith
    Rolling meadows, IL · Member since 2014 · 1 post · 0 votes
    10y

    Hi William,

    I purchased an investment property last September in Spring.  Reviewing your numbers, I would have to cosign Steven's feedback on your insurance being overestimated.  You should be in the $75/month ballpark with landlord insurance covering the structure of the property.  If you have to hire a PM, you can reduce your monthly fee to $80/month with Renters Warehouse BUT please be sure to manage them carefully.  No one has your best interest at heart like yourself.  Ideally, if I resided locally, I would manage the property myself.  Having great a customer service relationship with your tenant is crucial to ensure retention and mitigate turnover costs (huge savings!!).  Retained some beyond 3 years.  Good Luck!!

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  • Allen Wu
    Rental Property Investor · Member since 2021 · 335 posts · 193 votes
    3y
    Quote from @Jen Hoang:
    I have a rental in the woodlands. I went and saw it for the first time last year, even though I've had it since 2007. It's a really good area. Good schools and good jobs. I've had no problem with renters.
    Hi Jen - do you still own this property? Is it usually easy to rent out? 
    0Reply
  • Jen Hoang
    Investor · San Diego, CA · Member since 2015 · 96 posts · 37 votes
    3y

    @Allen Wu I’ve had a long term tenant for about 10 years now. Let me know if you want to get in touch with my PM. They’re very good and their fees are low. 

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