hosuton

This property is no longer available! Sold.

This supplier is amazing. They are very much a mom-n-pop style shop and with a great reputation. They even offer a 12-month rental guarantee on your property when you purchase! I promise, the size of the picture is not indicative of the quality of the properties they sell. (give me a break, it’s the best I could get).

Location: Porter (Houston), TX. Built In: 2003

Purchase price: $110,000 (not a foreclosure, normal sale)

Property info: 3 bedroom, 2 bathroom, 1229 square feet

Income

Monthly rent collected: $1,195

Expenses

Monthly expenses

Property taxes: $226.36

Insurance: $83.33

Property management fees: $107.55

Monthly expenses (conservatively estimated)

Vacancy (7%): $83.65

Repairs (5%): $59.75

Total Monthly Expenses- $598.14

Net Income = Income – Expenses =  $596.86 ($740.26 with no vacancy or repairs)

 

Advanced Numbers

Cap Rate =

annual net income (non-inclusive of mortgage payment) / purchase price = 6.5%

Cash-on-cash return =

Depends on your leveraging.

 

Are you thinking the cap rate is lower than what you are interested in? Check out one of Ali’s articles from BiggerPockets that hits this exact topic!

The 2% Rule: Fact, Fiction, or Feasible?

Comments
  • Mario Alexandrou
    Reply

    A quick question Ali, if you paid 20% down and got a mortgage at say 5%, you would only make about $150 if you had no vacancy or repair that month. Am I correct in thinking this. I understand you get a build up of equity, but isn’t this to small a margin.

    • Ali
      Reply

      Hey Mario! I totally understand your concern. Houston definitely has lower returns because of higher TX property taxes. It is likely, without me running the actual numbers, that $150 would be right. I wouldn’t say it’s too low by any means but it is lower than other markets or opportunities. It’s always a trade-off, lower returns for better growth potential and higher quality market, or higher returns with not as much promise on other factors. One thing for this property too, and a lot of the TX ones, if you were to buy it, the sellers will almost immediately appeal the property taxes and try to get those lowered. I’ve heard in some cases of them getting lowered by 35%! That makes a huge difference on the cash flow.

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