Seeking Advice: Houston Rental Investment

[Daniel A.]

Hi, 

I wanted to get some opinions on a potential rental property. It is a new build townhome in Houston ~1700 square feet. The location (schools, restaurants, crime, etc) is decent but nothing too promising in terms of appreciation (3% annual average) 

Here are the details: 

Purchase price: $170,000

Rental Estimate per month: $1500

HOA: $1000/yr

Insurance: $1100/yr

Tax rate: ~3.4%

I assumed the following:

I use a 20% downpayment on a 30 year fixed conventional loan w/ 4% APR

New build so warranty is covering most things so minor, if any, maintenance will be needed

Take into account 1 month of vacancy per year

Take into account annual broker fee to list of one months rent

~5K closing costs

~2k in appliance purchases

Result: Assuming rent range of $1500-$1550/month and assuming 1 year I wont have to pay the broker fee to list:

From my cash flow analysis I am projecting to have positive cash flow of around .02%-2.1% per year. 

I realize this is not a great initial cash flow. However, when I add back the principal and the tax benefit my net return is around 8.5%-10.6% per year. 

Also, assuming the property appreciates 3% per year and is sold in 5 years, I calculated my IRR to be 15%.

Thoughts?