Need advice on my real estate investment strategy

[Akshay Bhaskaran]

Hello fellow investors,

Need some serious advise on my real estate investment strategy

1. Currently having around $300,000 in equity from my primary home (in Hutto) 

2. Of this, I’m planning to take out a Home Equity loan for around $80,000 at 4.24% interest rate, and put it as a down towards a rental investment.

3. For the rental investment, I’m targeting Hutto, Taylor, and Pflugerville— to attract Samsung and Tesla crowd. House range I’m looking at are around $350,000-$400,000

4. Now, my monthly payment comes to around $3300-$3500 (PITI, HOA, Landlord insurance, property mgt fee, HE loan payment etc). Rental average is around $2200-$2500 in this area.

5. So I’m in a negative cash flow of $1000-$1200 per month. So even my NIAF is negative .

6. BUT.. BUT.. I’m “assuming”  the property prices will appreciate at-least 10% over the next 5 years in Hutto or Taylor. So, at the end of 5 years, after I sell the property, my final net is positive and it’s close to 80% ROI. 

Is this a good strategy? To bite the bullet with a negative cash flow? Am I assuming too much on the appreciation? Also, the schools are not so great here in the area? Should I re-consider rental over here?

Basis of my assumption: 

My house was $320,000 in 2020.
Now $550,000 in 2022

Target areas: Hutto, Pflugerville, Taylor