Newbie trying to buy a first rental home Frisco, Texas

[Tae Jang]

Hello BP, I've been studying, reading books & forums for the past a few months and planning to buy a first investment property before the end of this year.

Area I am looking at is Frisco or Plano Texas where people say hard to find a good deal. I picked Frisco or Plano because it is close to where I live so that I can manage myself and many other advantages.

Houses I am looking at ranges $250-290k which rents $1600-1900/month. Since property values are less than my house, I was told to put 30% down, which leaves me $700/month (I know it won't be the cash flow but just saying). I think the numbers aren't great but not too bad either considering the location and possible influx of population for the next a few years.

I still have a lot to learn but what's your thoughts just by looking at the number?

Thanks for helping out a newbie.

[Thomas S.]

Get yourself educated on investing. Higher down payment does not increase cash flow. The opportunity value of cash/equity has the opposite effect...it reduces "true" cash flow. Buying cash flow with equity is the most expensive way to create imaginary cash flow. A 4% mortgage paid down with cash worth a minimum 10% costs you 6% in lost income. Equity kills cash flow.

You will never see any positive cash flow on a SFH with those numbers if you intend to hold long term. Rents are simply too low to cover your costs.

The opportunity value of cash will kill your cash flow and turn your properties into a liability. If you do not keep a descent property leveraged you will not ever see any true positive cash flow.

If you want to make any money stay away from SFHs and find a multi unit that has a minimum 1% rent to value.  If you can't then do not invest. A bad investment is worse than no investment at all.