Newbie in Austin, TX area looking for my first central TX SFH

[Kellie Mecham]

Hi all,

I'm a brand newbie in Austin Texas trying to figure out if there are SFH buy and hold opportunities within a 2 hour or so drive of me. I know Austin is probably out; looking just south in Kyle/Buda I am worried about market oversaturation; suspect there might be opportunities down towards San Antonio. I work more than full time right now, maybe 55 to 60 hours a week, and am looking to ease out of corporate life and into investing to cover at least half of my retirement within 7 years or so.

Starting questions:  

1. what's a good simple formula for ROI on a buy and hold?

2. where would any of you with more experience be looking, if anywhere, with that criteria?

3. is there any point in looking outside of my 2 hour drive range? Is that stupid if I'd prefer no property manager for first SFH rental? (In other words am I better off looking further out and getting a property manager?)

Thanks in advance for any help and advice!

[Costin I.]

@Kellie Mecham - you need to define your search criteria, investment goals and exit strategy and aslo be clear on property evaluation. 

For example, here is what we currently have as search criteria (must have):

• Purchase price should be between $60,000-$150,000
• Neighborhood should be a solid B-/C+ (Working Class)
• I want minimum 200+ monthly cash flow or 100/door after ALL expenses
• Rent 1% or more of ARV
• 10-12%+ CoC ROI
• Schools above 6 rating
• Tenants pays all utilities

Ideally (or more flexible criteria):

• I will buy with cash and want to refinance with 25-30% down after rehab
• Built after 1985.
• When possible, I want to purchase multifamily units (2-4, max 8)
• I want to spend less than $3,000 on inspections and closing costs
• I want to spend less than $10,000 in initial repairs and rehab

Values we use in our calculations:

• 5.5% interest rate, 30 years
• 10% vacancy
• 6% repairs and maintenance
• 6% capital expenditures
• 10% management fees
• 2% annual income growth
• 2% annual appreciation growth
• 2% annual expenses growth
• 6% sales expenses

Property management will eat 10% of your net. You need to factor it in your calculations regardless, for various reasons, even if you plan on self-manage. My advice - if it doesn't cash flow with PM included, look for other opportunities.

That being said, with 10% PM and the high RE taxes here in TX, you'll have a hard time finding good rentals (at least on the criteria above).