Help analyzing a BRRR townhome

[Kristi Chin]

Hi BP Community, I found what I thought was a great deal because it seems to be a "1.5%" deal in the Houston Heights area (highly desirable), but after further calculations it's not making much sense. I believe I'm running my numbers correctly, but would love some input.

Purchase price: $99,000.00

ARV: $150,000.00

Improvements: $2,000.00 (home is rent ready, but needs fridge, dishwasher, and a cleaning)

Closing cost: $5,000.00

Mortgage: $531.00

Property tax: $320

Insurance: $85

Vacancy: 5%

Maintenance & repairs: 5%

Cap ex: 5% (I'd generally do 10%, but this is a townhome)

PM: 0%

HOA: $300

Potential rent: $1500-$1600

Potential monthly cash flow: $40

Cash-on-cash return: 9.5%

Total Equity: $50,000.00

Here's the deal. I'm expecting high equity on this property, so did something I generally don't do - I factored in 0% PM, which probably isn't a good idea, but I plan on managing myself for the first year or two, and depending on the market, will either increase rent or sell. The equity looks great, which is why I'm still hoping the numbers will work and maybe I missed something. My first time analyzing a condo/townhome, and it seems the HOA eats up all the cash flow, so now sure if I'm just not finding the right property for it to work or if I'm missing something.

*note – this property is in Houston Heights, which is highly desirable, BUT it has also flooded during the previous 3 "500-year floods" that Houston has endured.

Bite the bullet regarding the first 2 years of cash flow, (with anticipated high equity) or move along? Thanks in advance for any input!