Texas House Rental - Annual Return?

[John Clark]

I have considered buying houses ($150-200K value) in Texas for rental income. However I'm not impressed with my expected annual return. If someone could help me with my analysis; it would be much appreciated. Below is the math (all in % of house value):

Rent: 12.0%
Taxes: -2.8%
Average Long-Term Maintenance & Repairs: -1.7%
House Insurance & HOA: -1.6%
Average Vacancy/FinderFees/Tenant Issues: -1.0%
Property Management: -0.8%
Total Average Annual Return: 4.1%

I have heard landlords making 10% (no leverage) and 20-30% (with leverage). What am I missing?

[Bart H.]

Originally posted by @John Clark:

I have considered buying houses ($150-200K value) in Texas for rental income. However I'm not impressed with my expected annual return. If someone could help me with my analysis; it would be much appreciated. Below is the math (all in % of house value):

Rent: 12.0%
Taxes: -2.8%
Average Long-Term Maintenance & Repairs: -1.7%
House Insurance & HOA: -1.6%
Average Vacancy/FinderFees/Tenant Issues: -1.0%
Property Management: -0.8%
Total Average Annual Return: 4.1%

I have heard landlords making 10% (no leverage) and 20-30% (with leverage). What am I missing?

 Two things you are missing is annual rent increases, say 3-5% (or more) a year, and price appreciation.  Call it 3% a year, although in Dallas you have been at 8-10% a year for a the last few years. 

 I have one property that we bought in Nov'15 for $185K, its appraised last year around $315, and I think it might be worth $400K or more. (Have to love getting in ahead of the path of progress.)

Now that was a REALLY unique situation, and we hit big time on a neighborhood that was about 18 months from having a really big uptick in development.

On that particular property, we have done a cash out refinance, and literally have none of our original money tied up in the property.