3 SFH Homes, College Town in TX, Look at These Numbers

[Jacob Shoesmith]

Hello,

Thanks in advance for all of the advice and help. I am 24 y/o living in Houston, looking to invest with my father in our first rental property (not worried about family and business joining together). I am mostly having my father help with this (50/50) because I do not want our first rental to affect me buying my first primary residence in Houston. I do not know the tax laws and rules with this nor do I know how much I will actually be hindered by purchasing a rental first with my name on it. However, I have heard it can hurt my future wife and I buying our first residence so I want to avoid that. I will likely have my primary house in Houston over the next year but definitely within two because I will likely be married before then. My father and I will split the down payment for the rental 50/50.

Last night we watched Brandon Turner's "How to Buy Small Multifamily Properties!" webinar and it was so helpful and encouraging! However, after signing up for BP Pro, using the calcs to run the numbers, and checking against 30+ properties in our desired area, we only found THREE with at least 7% CoC ROI and decent cash flow (it's funny because the few houses we thought were in the best areas with a guaranteed 100% occupancy year after year were actually really poor investments after we run the numbers).

I would like to put the high level facts here and get your opinions on which you would pursue and why. I understand it is all subjective and purely for reference, not legal advice. All of the below are single family homes (SFH) in a COLLEGE TOWN with one of the BEST rental markets in Texas. The typical leases in this college town are 8/15 through 7/31 or something similar. Additionally, due to COVID, many landlords were uncertain if the school would even have in-person classes. Therefore, they reduced rental rates so they would at least make some money per month. It wasn't until two months after most leases were signed that the university stated they would be having in-person classes. The current rental rates below may actually be better next school year because of this. I made some assumptions using the BP Property Insights calculator. It is all listed below. Thanks!

Property #1

• 3 bed, 2 bath
• Assumed purchase for $195k, listed for $200k
• Down Payment: $39k
• Interest Rate: 3.75%
  
• Monthly Rental Income: $1800
• Monthly Expenses: $1517.04
• Monthly Cash Flow: $298.54
• Cash on Cash (CoC) ROI: 7.96%
• Currently leased month-to-month for $1800

Property #2

• 4 bed, 2 bath
• Assumed purchase for $195k, listed for $198k
• Down Payment: $39k
• Interest Rate: 3.75%
  
• Monthly Rental Income: $1600
• Monthly Expenses: $1,273.01
• Monthly Cash Flow: $312.79
• Cash on Cash (CoC) ROI: 8.34%
• Currently leased until 7/31 for $1600

Property #3

• 4 bed, 3 bath
• Assumed purchase for $205k, listed for $214k
• Down Payment: $341k
• Interest Rate: 3.5% (Idk why but I assumed a slightly better rate)
• Monthly Rental Income: $1800
• Monthly Expenses: $1474.91
• Monthly Cash Flow: $339.57
• Cash on Cash (CoC) ROI: 8.67%
• Currently NOT leased (would not get tenants until 8/15 or similar unless we get partial tenants, a 6-month lease, etc.)

What do y'all think? Our cash flow would be split 50/50 by the way so if our cash flow is $250, we will each only get $125 (and maybe that's okay for our first property but I would like more obviously!). Brandon Turner's minimum is $100 total cash flow but he prefers at least $200.