Deal analysis in SE Houston (Clear Lake and surrounding)

[Nick S.]

I've been analyzing hypothetical deals to try to set my buying criteria and wanted to get some feedback on my numbers and assumptions. I'm a new investor looking at buy and hold rentals in the SE Houston market. Areas like Clear Lake, Webster, League City, Friendswood are my current area of focus due to reasonable price to rent ratios and good school districts.

My target property is a 3/3/2 home in the B/B+ range, with rent in the $1500-1600 range. This rental price estimate is based on current and past HAR listings.

Here's the type of deal I think I need to make the numbers work:

Purchase price: $105,000

Rehab cost: $20,000

(ARV: ~$150,000+ range, though I don't plan to sell)

Down payment: $25,000 (20% of purchase + rehab)

Closing cost: ~$2,500 (does this seem right?)

Monthly mortgage payment: $460 (assumes 20% down, 3.7% rate)

Insurance: $94/month (assumes 0.9%)

Property tax: $281/month (assumes 2.7%)

Vacancy: $133/month (assumes 1 month out of 12, or 8.3% vacancy)

Maintenance/repair: $104/month (assumes 1% of purchase price)

Cap Ex budget: $112/month (assumes 7% of rent, somewhat arbitrary)

Property management: $144/month (assumes 9% - I will probably self manage, but want to budget this into the cash flow)

Association fee: $25/month (many neighborhoods have a small yearly fee)

Total Operating costs: $893 (excludes debt)

Rent: $1600/month

NOI: $707/month

Cash flow after debt: $247/month

Cash on cash return: 11.6% (for $25,000 down payment)

I based my target purchase above to aim for > $200/month in cash flow with what I think are reasonably conservative assumptions. 

This works out for deals in this range to require rents in the 1.25-1.3% of the purchase + rehab cost. ($1,600/$125,000 = 1.28%)

Any feedback on the assumptions and numbers above are greatly appreciated as I continue to refine my target properties.

Assuming the numbers above aren't too far off the mark, then the question becomes: how is the wholesale market looking out there these days for 3/3/2 houses in these neighborhoods in the $100k-110k range? Properties in this range on the MLS are certainly few and far between.