Jacksonville, FL - SFH new construction

[Brandon H.]

Long time reader, first time poster here.  I wanted to include the details of my most recent deal and open it up to critiques and suggestions.  I am working with a turnkey company (JAX Investments) and Suncoast Property Management.  This is a new home on the west side of Jacksonville (4 bed / 2 bath).  

Onto the numbers...  

Target rent = $1395-1365

In a typical month, I should cash flow around $328-301/month. This includes the mortgage payment of $647, property taxes @ 1.5% ($207/month), annual insurance ($398 for liability/PD + $574 flood), $250/year HOA, and the 8% property mgmt fee. I'm assuming $0 in maintenance for the first two years since the home is brand new with a warranty.

I setup a separate bank account which will process all transactions associated with this deal. I wanted it separate so it didn't impact our day-to-day finances. In that account, I'm setting aside ~$4k as reserves for any expenses that come up, vacancies, etc. My plan is to apply any proceeds above and beyond this reserve threshold to the mortgage since it would be a guaranteed 4.75% return and could pay down the mortgage faster. Hopefully, I could have the mortgage paid off within 15-20 years so when a major repair is necessary (e.g. new roof) the property would be cash flowing closer to $1000/month instead.

ROI should be around 7-8% depending on where the rent falls in the above range assuming no appreciation on the property. Granted, this rate does not take into account vacancy or tenant placement fees (50% of one month's rent + $150 renewal fee). In my annual pro forma, I assume one month vacancy and a new tenant every year which would bring the ROI down to the 3-4% range before appreciation. I'm not sure on my exact closing costs so these percentages aren't nailed down yet.

I could increase the above numbers if I opted out of flood insurance (the home isn't in a flood zone) but I'm waffling on that a bit. The more I learn and the more research I do on RE investments the more I think that every property has to cash flow at least $300/month otherwise it'll never be profitable. Unfortunately, there is no easy money in the world...

Looking forward to any input from the BP forum!