Realistic Cash Flow Expectations for Texas

[Ryan Betzing]

I’ve been investing in single family homes in Texas for the past 3 years. 

Here is something I am struggling with - I see posts throughout the forums about Texas being a strong cash flow market, and I’m trying to make sure I'm not missing something. Texas has a fun combination of high property taxes and high insurance that eats away at cash flow.

Here is an example of the numbers for probably my strongest property. I have to be very selective, and pick up homes at 60-70% ARV to make the numbers work.

Rent                 $1,150.00

Taxes               $185.17

Insurance        $71.80

Vacancy           $57.50

Prom Mgt.       $92.00

Maint.             $57.50

Capex $150

NOI $536.04

Debt Service $412.00 

Cash Flow      $124.04 

I have prop management for 8%, vacancy at 5% and maintenance at 5%. The debt service of $412 is 30 years fixed @4.75% on a 65K loan. The house is worth around 115 - 120, so my LTV is around 55%.

What I can't figure out is how investors are making the numbers work in Texas?  With a mortgage of 65K and monthly rent of $1,150, I'm approaching 2% rule territory, but my cash flow is still only $124 a month.  Am I missing something?