First Rental Houston TX vs Orlando FL

[Ryan Lam]

I have been looking into my first investment property as a buy and hold rental. I started doing some sample simulations of potential properties to get a better understanding of how to analyze a profitable investment and of course doing this as an exercise helps with the learning curve. Recently it seems it has been relatively challenging to identify properties with positive cash flow.

Narrowed down areas between Houston TX (The Heights, Rice Military) and Orlando FL (maybe Winter Park). The thought process was that as a first investment property, these may be a bit safer compared to other areas considered such as Cleveland and Indianapolis. I am a CA resident so the Sacramento area may be included as well since that is a more manageable drive from the Bay Area. Any input on location selection would be appreciated as well. Surfed the forums and it seems there are different opinions about properties out of state and unseen (especially for first deals).

Budget was thinking around the $300,000 range, plus or minus maybe $50,000. Would be financed. Lowest down payment would be nice especially since the cost to borrow is so low at the moment. Already have a mortgage on the primary residence so I would assume I would need to coordinate to make sure additional lending would be approved. If I could reasonably find better value in other areas with maybe half the amounts, that might make decisions a lot easier.

Here are some examples of two examples I recently reviewed.
Pulled rents from Zillow estimates so not sure how accurate those may be.

Houston TX
List: $329,000
Loan: 30 year @ 3.125%
Down Payment: 20%, $65,800
Closing Costs: 1.5%, $4,935
Rent: $2,450/mo
Vacancy: 8%
Principal & Interest: $1,127/mo
Property Taxes: 2%, $548/mo
Property Management: 10%, $245/mo
Insurance: $125/mo
Maintenance: 10%, $245/mo
Capital Expenses: 10%, $245/mo

Orlando FL
List: $275,000
Loan: 30 year @ 3.125%
Down Payment: 20%, $55,000
Closing Costs: 1.5%, $4,125
Rent: $1,600/mo
Vacancy: 8%
Principal & Interest: $942/mo
Property Taxes: 1%, $230/mo
Property Management: 10%, $160/mo
Insurance: $125/mo
Maintenance: 10%, $160/mo
Capital Expenses: 10%, $160/mo

Am I being too conservative with rents and expenses? Should I be looking in different areas?

[Matt Leber]

@Ryan Lam what is your goal (cash flow, appreciation, just to park money?). I would say $1600-$1700/mo rent for Winter Park is reasonable conservative estimate as long as your not in the most upscale neighborhoods. But it looks as if you would be losing cash on this deal each month if cash flow is your goal. I would look further north to Deland, Deltona, Debary areas if I were you. You could probably buy a 3/2 house up there for $150-175k and rent for $1400 plus and not have to pour in as much money to the deal.