Advice regarding a recent buy

8 Replies

Hello Biggerpocket, 

This platform has been very helpful in increasing my insight into real estate and really appreciate everyone's input.

I am almost end of the process of buying a property in Houston.

Purchase price :154k, 2007 built, 2160 sq feet, decent school ratings.

May rent for $1395

20% down

Cash flow after all expenses PITI, management 8%, vacancies 5%, repairs 5%, leasing 1/2 month rent per year- will be around $60.

Was it a good buy with so low cash flow. Any advice for future buying and is it still good to buy anything in Texas! 

All inputs highly appreciated 

@Souji Kumar   I invest 2 hours outside of Houston and I would say that cashflow is a little low for me.  A 2.3% return on your downpayment is not too good.  I also think that your estimated 5% vacancies and 5% repairs are a little low.  I estimate 10% vacancy and 12% repairs/capex.  Personally from what info you have given me, I would not buy this property.  I could purchase 2 properties for 154k and both of them would easily rent for $1,250 a month.  I would double check your numbers and make sure you are not buying a negatively cash flowing property because with the info you gave me it looks like it will be close. 

@Ryan Detig , where do you invest near Houston?

I thinks it's late now as I already paid for inspections appraisal and initial escrow deposit. What can be done from now 

@Souji Kumar   I invest in South east Texas.  Beaumont, Nederland, Groves, Port Neches area.  Have you gone past your option period? Obviously everyone has different financial situations and maybe a negatively cashflowing investment (is it an investment at that point?) aligns with your current financial plans but I would be very cautious about this.  I think you  should get some advice from someone that knows the area of the property, run your numbers with the local person input, and be prepared a make a tough decision regarding moving forward or backing out and potentially loosing your deposit.   

This cashflow looks slim.  I would see if there is a way out of the contract without losing your deposit.

@Souji Kumar

If you keep all expenses as you estimated them, but raise the vacancy to a full month a year, you would break even or effectively have 0 cash flow with 30K+ out of pocket. I would suggest looking for another deal. 

Losing your earnest money deposit is better than losing your shirt every month on an investment. 

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