All Forum Posts by: Sandeep S.

@Michael Washburn - is your purchase also in same eastpoint sub-divison? (they say subdivisions matter a lot in Houston!) And given you own in the area - what is your opinion on my purchase price?

Totally agreed @Kevin Auyong . That is exactly what I am trying to find out, as even $100-$200 lower than estimated can screw up numbers.

Thanks @Michael Washburn for the very relevant information! Looks like rents have gone down since you bought (seasonally or otherwise). And I should probably assume rent in $1400-$1450.

I had checked craigslist and rentometer - but found no useful data.

@Jason Eyerly Yes, I am buying cash (although I don't like to include that factor to decide what to buy and for how much). I agree that rent is almost always more than the mortgage to allow for the flexibility (to move) that you mentioned.

@Aaron Montague @Joey Ickes I am not trying to defend the $1500 rent. May be I will get less. I am looking for some data from folks who have rented in that area. Estimating rent based upon the prevailing mortgage for a similar house is simply an incorrect method. Buy & hold investors specifically look to buy in the areas where prevailing rent is lot more (at least twice) than the mortgage. That is the whole basis of generating cash flow from rentals!

Thanks @Joey Ickes for your feedback.

@Kevin Auyong and Joey - while my rental numbers could be wrong but I (almost) cannot believe that it could be so wrong. I have 2 separate professionals who have done the rental comps based on real data. A realtor and a property management company.

Joey's method of estimating rent is not correct. No buy-and-hold investor can make money if the rent he/she will receive will be comparable to the mortgage payment the tenant would have to pay (if the tenant chooses to buy a similar property). There are too many other factors (and costs) that dictate rent for any neighborhood.

I do agree that if I were to sell the property - it has to compete with the other properties selling in the neighborhood including new construction. Similarly, I have to compete with other rental properties in the neighborhood when I rent it. However, I don't have to compete with the new homes available for sale (@ $1100 mortgage) when I have to rent for $1500 (or any other amount).

Thanks @Jason Eyerly . You are right that this doesn't fir the revered 70% rule for flip. However, note that my intent is not to flip. I care for the ARV info to an extent such that I don't lose money at all (should I need to exit the rental soon for any reason).

It is very difficult to abide by the 70% in newer construction properties (IMO) which need little rehab. However, I prefer lesser rehab properties (esp. when I am out of state and have to do everything remotely).

I am in contract for this REO property: 8119 Eastpoint Blvd, Baytown, TX 77521 for $110k. I expect that rehab will take another $10k (max).

It is a 2005 built, 4 BR, 2500 sq ft home in decent school district. I am assuming rent of ~$1500. As such I am going to hold it as rental - I think the ARV (should I flip) is ~$155k. Even for rentals - I always want to make sure there is enough room for flip (to qualify it as a good deal).

This will be my 2nd acquisition in Houston area (note that I am in California) and I am hoping that it is better than the first deal I am closing today (23527 Hidden Maple Dr, Spring, TX)

Thoughts on my numbers and quality of deal?

@Eric Tait@Eric Tait .

I am assuming ~1275 rent for now. My agent has seen the place and said that it was in quite good shape (needs paint and carpet). Being remote - I just have to go by pictures and others' description!

I'll PM you for the prop management reference.

As far as I know the insurance is required only if you have (and as long as you have) too little own funds into the deal. If you pay 20% down - you don't have to pay insurance. I am no expert in the PMI related stuff though (I have never paid mortgage insurance so never had to deal with it).

Fannie Mae guidelines to qualify after 4 properties (up to 10) become much more stringent. And even if you could meet the more stringent criteria - most conventional lenders (all big banks in my experience) simply do not entertain you if you already have 4 mortgages in your name (as it is too much work for them)

A lot will depend on your financing. If you can get conventional financing - I think you can easily do better than $200 per property. Say $300-$400.

And as you gain more experience - you may be able to find even better deals. However, getting conventional financing gets harder with every new loan (esp. after first 4). I suggest you focus on deals that can net you $400+ per month and then aim for your goal to be met with 4 rentals (not 10) :-)

Good luck!