Build to rent - too good to be true?

[Andrew Q.]

Hi BP! I've done four BRRR deals so far and recently hooked up with a builder and am looking seriously into small scale build-to-rent. Honestly it could be build-to-rent or build to sell, but I'm sticking with more conservative build-to-rent numbers in case something unforeseen happens with the market.

Would appreciate if I can get some feedback on my estimated return - I'm getting a little over 25% cash-on-cash returns after units are rented and refinanced but this feels too good to be true.  

I realize there are many other intricacies associated with working capital, loan draws, time value of money, appraised values, etc... but just scoping at this point and trying to get reasonable numbers to start with

Inputs/Assumptions: 

• 19,000 sq ft corner lot for ~$120,000 in Houston - subdivide into 4 lots at 4,750 sq ft each. No HOA restrictions
• $80/sq ft SFH build cost for 1700 sq ft house
• Property tax rate at 3%, insurance roughly 1%, property management at $125/month

Calculation: 

• (Annual Rent - taxes - insurance - prop mgmt) / ((build + land cost) * 30% left in properties after refinance)

Any comments are appreciated!