ok, I am leaning towards a single family home in Houston as my first rental prop. I have seen many 100k and below in various areas. Always wanted to check out Texas anyway and it is closer than Ohio and has some potential.
- In this area, is a SFH the better investment verses trying to find a duplex?
- Are there any areas to absolutely stay out of?
- What is the lowest home I should look at? IE look for homes 80-100k only. Not looking for a huge fix it upper.
- Where can I find rent data? Trying to figure out what normal rent is.
- Got any good links for Houston data? I am reading the paper website and got some but want to know others.
- Any advice?
It seems to me that a home is easier to manage long distance. Should I seek a PM for this home? I live in Vegas.
I have been looking at apartment rental rates but homes normally rent for more right? Any clue as to how to figure out rent? For example, what if in your home’s area or zip, there are no homes for rent that you see but you see an apartment of same size is going for $x a month. Is there a rule of thumb for how much higher it should be? I am mainly looking for a way to get an idea before I buy so I can say “well it should rent out for $X per month”.
Any other comments, info, etc is helpful!
another question. Is this about right, or high or low?
Found a home 3/2.5 in Channelview listed at 100k. You figure with a 20% down and even slight negotiation, you are looking at a mort of 450ish per month.
I then hit the classifieds in the Houston Chronicle and located a home in Channelview that was 3/2 and close to same sq ft for $1100 per month.
Just thinking that this was a nice spread.
1100 - 450 = $650 per month for expenses/profit.
Bust that home to 90-95k and if the market stops the flat line, it looks extremely nice.
Also would make my goal of a new rental prop every 8 months look simple.
When you figure in a %30 vacancy/repair, and your taxes and insurance and various other expences that comes with owning a house, that spred changes so much that any unexpected expences or assessments on the property could put you in the Red.
I say, single family homes are equity plays (flip-em) or I dont buy them, and Bottom of the market Multi-Unit homes (bought carefully) are a good way to go for regular monthly cash flow.
An $80K investor loan will probably run about 7%. For a 30 year loan, the P&I is going to be $532 and some change…
You haven’t accounted for taxes (Texas does NOT have an income tax but I hear that they’ve got some real estate taxes for you!), insurance (I pay about $280 a year for a rental property policy on $60K houses), maintenance, management, and a vacancy rate of some amount.
Even if you don’t hire a local manager, you will have management expenses (time, phone calls, mailings, travel, etc.)…
Even so, I think a property with these numbers will probably cash flow…using $1200 in taxes (a SWAG), a 7% vacancy (another SWAG), $600 a year in maintenance (basics at best), and a 10% management fee, I get about $950 in expenses so about $1,800 a year in cashflow…
Just my two cents – I’m sure other local Texas investors can tweek these numbers a bit for you…
Many investors have said that SFH’s are excellent rental props and the king of rentals. The property price factors in a lot though. For example, if you were to come to Vegas and invest right now, you would have to play for equity. The maximum rent you could charge would still put you in the red even if the mortgage was interest only and your only expense.
The goal of the home(s) in Houston are 3 fold.
- some cash flow
- some equity (Houston is kind of flat though but that is great)
- eventually own the property, which in time = more monthly profit.
If I could pocket $200 per home per month after all expenses, I would be quite happy. I would be getting experience as well plus looking for other deals around.
I also believe that my main equity profit has to be made at the time of sale.
I also plan to look into duplexes too.
I do buy and hold here in this area. With the cost of Money (mortgage rates), taxes, insurance, etc… the 1% rule is pretty accurate (a $100K house should generate 1% income = $1,000/per month). As you can see, a $100K house renting for $1,100 does cash flow (as it would with a $1,000 income). Remember also that my estimates were based on a 7% vacancy rate (maybe it’s less in Houston – it is here on decent properties) and a 10% management fee (less if you do it yourself or find someone to do it cheaper).
yes. I have seen rents even higher.
One thing I did was print out a report from the Houston Chron. on all the areas in and around Houston. It is a very good read and gave me some ideas.
What do you think about trying to buy a rental home in areas where there are less rentals ( apartments, et al). Seems to me that less competition is good.
I also buy and hold in Houston and agree with kdhastedt. We don’t generally have 30% vacancy on single family homes. I will tell you that Houstonians generally don’t do duplexes. We move out of apartments for garages. BUY A HOUSE WITH A 2 CAR GARAGE. You want a house with these 5 elements 1) 3 bed 2) 2 bath 3) 2 car garage 4) 1500 sqft 5) 1 story. I also look for build dates newer than 1984 it is not an absolute, but they are a little closer to some of the major repairs than I like. Any of these 5 elements that you ignore will make your house either harder to make ready, or harder to rent. These houses rent in a week or 2. The link http://www.har.com also will search rentals. (keep in mind these are the asking rents not what they actually rented for). I would put in your price range and when you find a house you like, search residental leases and specify the subdivision of the house you found. It will tell you what houses that look like yours are renting for. That site has a pretty accurate mortgage calculator, add about $200 to that figure and you will be pretty close to what your monthly costs will be. Subtract that from the subdivision lease and that is pretty close to what you will get per month. Houston has a higher than the national average percentage of its population that are renters. That along with low house purchase prices makes it unique for making money in this area. Maintenance needs to be accounted for in your lease. Specify the first $200 in maintenance is the tenant’s responsibility. That takes most repairs off the table. None of my appliances cost more than $200 new. For $80k to $85k you can get a house that is sound. One that will not need any major work until you are ready to refinance in 5 years. Then you can pull out equity to cover those things (roof, exterior painting, remodel kitchens and baths, etc.)
thanks BlueMoon. I am really sold on Houston. I pretty much had your 5 guidelines as my own already. The only exception was build date. I was finding many homes in my range to be built in the 1960’s or 1970’s.
Seems like Houston is the place for positive cash flow. My goal is to purchase 2 homes. I figure that this gives me some cushion when it comes to vacancy and ups my cash flow.
Do you live in Houston or area? I was wondering where the best place to get some BBQ was. We (wife and I) just got done watching the BBQ cookoff in Austin on food channel and man did that look good. Anyway, she wanted me to ask
Thanks guys! Excellent info on these boards.
Excellent post and insights!!!
Husband and just came back from TX-Looking to buy rental properties-plan to rent section 8. Houses are so cheap (compared to the DC area)
Our friend’s realtor took us to Legend homes www.legendhomes.com-currently offering up to $9000 towards closing + refrigerator/microwave and in some houses, washer and drier for free. Hources were in 110 to 150’s and up
Is this for real?
we are too overwhelmed-not sure what to do.
what more research do we need to? the realtor will help with renters, housing inpection and lisiting with section 8 housing
as a houston investor - i can confirm the opportunitites are here. not sure if i would go the Legend Home route…the least expensive house i see is listed at $104k and is 1100 sqft. Investors don’t buy anything at these prices…forget the discounted closings, washers, refrig, etc.
i would suggest that you go to www.richclub.org and view the properties page. many Richclub investors have great properties available with 20- 40% equity positions. Or get involved with Lifestyles Unlimited of Houston. Further, i would concur with Bluemoon 100%. red
thanks Bluemoon and Reddoor
you guys have been very informative