Houston Single Family Rental Properties

[Brian Burke]

I was attracted to Houston because I thought it provided a good combination of cash flow and appreciation. After looking at several dozen single family properties (more or less with no rehab necessary) ranging from $130-$175K, I’m seriously beginning to question how you make money with a long term hold single family rental given the tax rates in desirable school districts and the lack of any exemptions on assessed value for owners not occupying the property. Is there a value range you have to stay under? Do you steer clear of the 3%+ tax rate areas such as the CyFair School District? Have you found even as an investment that the assessed value isn’t the price you paid?

I’m starting to bang my head against the wall trying to make anything pencil not knowing exactly what the property taxes will be but figuring it is the combined rate on the tax assessor’s site multiplied by the acquisition price. In doing so, the “1% rule” often doesn’t seem to work.

[Tony Castronovo]

I just sold my SFR portfolio, but had held properties in the areas you are interested in...Katy/Cypress. My average COCR was 10.6% (with one exception). It's definitely not easy but you can certainly find some great rentals in the area.

While I bought my first off the MLS I leveraged wholesalers for the others. What everyone has said...you compete against wanna-be owner occupants when you buy from the MLS and there is no rehab. You can find them, but it's very competitive. We looked at about 75 homes and put in 20 offers before we landed the first deal. Once I started taking on rehabs everything changed.

My bread and butter was typically buying homes around $100-110k, putting in around $20k +/- on the rehab and driving ARV to around $150-170k. I purchased with HML or private money and refinanced within 90 days. At 75% LTV I could reduce my cash left in the deal. No deal was a home run....but when you string together enough of these, it's a pretty awesome business.