Quote from @Lucas Hunt:
Hello BP Family - I am looking for some of your wisdom and/or opinions on my current investment situation. I will not take any of your responses as investment advice!
I have made two aggressive offers on a couple of single-family homes in the northern suburbs of Houston, TX. At this point, both offers have a strong likelihood of getting accepted. This will be my first long-term hold investment property and I am only able to choose one property. They are both turnkey. My current goals are that I am looking to get a base hit so that I can get into the game and build some wealth. I am struggling with choosing between the property that has average cash flow in a class B neighborhood [PROPERTY A] versus a property that has below average cash flow in a class A neighborhood [PROPERTY B]. I have provided some info on both properties below. I can imagine that some of you were in my shoes some time ago. Is there any wisdom/insights that you would be willing share that could help me make a decision? I appreciate all of you!
Property A
Year Built: 2013
Estimated Home Value: $233,000
Offer: $210,000 w/ a $10k credit to the investor (me)
Year 1 Estimated Cash on Cash Return: $150 / mo
Neighborhood: Class B
Nearby School Rating: 2/10
YoY Appreciation: 3%
Home Layout: 3 bed, 2.5 bath, 2 car attached garage
Property B
Year Built: 2009
Estimated Home Value: $226,000
Offer: $215,000
Year 1 Estimated Cash on Cash Return: $50 / mo
Neighborhood: Class A-
Nearby School Rating: 7/10
YoY Appreciation: 3%
Home Layout: 3 bed, 2 bath, 2 car *de-attached* garage
Hi Lucas, great efforts, below are the numbers I'm getting for property A after running in the BP calculator. This does not take into account if there's an HOA and I did not include management fees in case you are managing yourself. It seems tight on the cash flow, you could recoup on the loss after the appreciation, mortgage paydown, etc but it might be several years. I am curious how you are calculating the expenses, etc as well. It would definitely help to work with investor friendly realtors, and the properties don't have to be on the mls, you could still have a realtor represent you with off market properties as long as the numbers make sense after commission fees etc
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Purchase price: $210k.. the $10k credit will probably cover the closing costs
Loan amount 20% down: $168,000 at 7.125% rate
Total cash needed for 20% down payment: $42,000
Rent income: $1700/month
Mortgage: $1132/month
Taxes: $3500/yr
Insurance: $1800/yr
Vacancy 5% of rent: $85/month
Maintenance 5% of rent: $85/month
Capex 5% of rent: $85/month
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Total cash flow: -$127/month for the first year
