Houston area property analysis

[Denise Mayo-Walley]

Hello BP community!!!!

Several hours ago I viewed a property with my realtor and was very excited about the property potentially being my first- that was until I started crunching numbers. I sure hope my cash flow calculation is incorrect. Please help! And keep in mind this property is in Houston - 2% rule is RARE

Here are the numbers:

Potential Purchase Price: $99,000

Cash to close (downpayment plus closing costs): $19,800 + $5,900 = $25,700

Mortgage: $401/month = $4,812/year

Income:

$1200/month = $14,400/year

vacancy rate (10%)= $120/month = $1,440/year

net income = $12,960

Expenses:

Property taxes = $1853/year

Insurance (complete guess): $1380/year

Property management (though I plan to self manage): $1,400/year

Maintenance & repairs: $1,400/year

HOA dues: $411

Total expenses: $6,524

NOI = $12,960 - $6,524 = $6,436

Cash flow = $6,436 - $4812 = $1624 (???)

Cap rate = $6436 / $99,000= 6.5%

***So this translates to only pocketing $1624/ year - more if I self manage and repairs are less than I budget for?

I am trying to figure out if I should make an offer. There are 4 other offers as of today and the home has been back on the market for 2 days. I want to make a smart decision based on the numbers and not on the number of offers.

Thank you for your help!!

[Patrick Parry]

Those numbers look correct.

I imagine this is a turn key home ready to rent and it seems like a fair deal. You are buying a property from a Realtor so that means fair market retail price. You want better numbers you will most likely need to look for distressed homes or off market home sellers that just want to sell with out the hassles of listing a home.

If your plan is buy and hold and you have a day job or business and want long term investments then this seems like a great start.

Don't forget you are paying down a mortgage, getting tax write offs, and locking in an exceptional interest rate.