All Forum Posts by: Nick S.

I’ve found that you need more like a 1.25% rent ratio in Houston, if you want to budget for property management, vacancy, repairs, and capex.  Those deals are very hard to find in good school districts. 

Yes, I always assume that the purchase price (or the ARV if you are making significant repairs) will be the assessed value. Even if they don't update it the first year, it'll catch up.

And you’re correct, the exemptions apply to owner occupants of the property, not to investors.

I ended up calling the planning and development department and got some info and ballpark idea of how to go about this. I was told that the city of Houston charges about ~$1000 in fees and a survey company will charge something like $7-10k to do the surveys/plans/applications/etc. 

As long as the proposed lot split meets the criteria in chapter 42 of the municipal code, the process takes about 2 weeks to review and get approved. Doing a “simple” lot split is considered a Class II re-plat. 

The planner also mentioned that developing a site plan for any proposed new buildings would be good to review with them before finalizing the replat to make sure everything is going to work out when applying for building permits. 

I’m curious if anyone has experience in splitting a lot in Houston. Looking for a ballpark idea of how much it costs, what the process looks like, and how long it takes. I know I should contact the Planning and Development department for an official answer, but I’m just tying to get an idea. 

As an example, let’s say there is a 10,000 sq ft lot in a neighborhood without any deed restrictions or minimum lot sizes. Say I want to split it in half, making two 5,000 sq ft lots. Seems pretty simple, right? What considerations might make things more complicated? 

Would this be in the couple hundred dollar range, couple thousand dollars, tens of thousands?

Thanks!

@Etheridge Mixon Did you ever find out about the procedure to split a lot? If so, what did you learn?

@Victor Mondragon Have you decided to go through with this garage apartment project? Any updates to share? 

Welcome to BP! I agree with @Tyron McDaniel, there are some good areas to house hack in the inner loop including East End and Third Ward (among others). 

Make sure to keep educating yourself by reading and listening to podcasts, but don’t neglect the personal relationships part of the business - get out there and see some properties and meet people in person!

You can also check HAR for active rental listings, or ask a real estate agent to pull the recent "solds" (rented) rental rates from the MLS

Pretty interesting project. I’ve played around with GIS software a bit, and I like all the different ways of looking at data that it allows. 

What did you use as your source of data? Are there publicly available records of things like flood depth by address that you used to compile this database? I assume you used the HCAD database for most of the other info?

@Victor Mondragon I don't know which Houston, TX you're talking about, but property tax here is anything but reasonable!

All kidding aside, I really think this is an interesting idea. I’ve been curious about this strategy myself, and it’s good to see some actual estimates for build, rents, costs, etc. At first glance, your numbers look reasonable. I tend to be more on the conservative side, so I would budget in something for a capex reserve fund, even though this is a new construction. If you plan to hold it for the long term, you're eventually going to need to replace the water heater, HVAC, roof, and all that - even if it's 10-20 years out.

Did you look at calculating a cash on cash return for this project? How much of your own funds would you have tied up in the project? If you actually are making $362/month in profit and say have $20k tied up in the deal, then your COCR would be 22%. Not bad!

And back to taxes: $6100 seems a bit low for a house in the Heights. Even assuming a 2% tax rate (with homestead exemptions?), that would put it at a valuation of about 300k. Does that sound about right? You might consider talking to an appraiser to see what your property would appraise at with the new garage apartment. Eventually they are going to tax you at the market value of the property, so taxes will creep up.

Another thing you might consider is if there is any way to maximize your potential rental income without increasing the build cost too much. For example, could you add 2 units instead of 1 for a similar build cost, but for a proportionally higher expected rent? Maybe a small studio that rents for $900 and a 1 bedroom that rents for $1300?