Evaluating Rental Property -similar cash flows, different age and location

4 Replies

I'm currently evaluating two buy and hold properties.  Both are $150k asking.

Property A: Built in 2003. Comps rent for $1350. Near Austin airport. Cash flow $200 (no HOA and slightly higher tax rate).

Property B: Built in 1974. Comps rents for $1200. Closer to downtown Austin. Cash flow $150 (no HOA and slightly lower tax rate).

My gut reaction is Property B may end up costing me more in the long run because of CapEx/ R&M. The location of property A isn't as ideal, but the numbers keep telling me that it's the better investment of the two.

What does everyone else think? Is this enough information to analyze? Thank you so much for your responses in advance.

From the info you gave i would go with the newer home.  

@Rachel Trimble

Hi Rachel and welcome to BP.

On the surface, Property A looks like the better deal, however, the location of the properties is very important. Depending where Property B is, it may have the chance to appreciate significantly more than Property A, as the downtown areas of Austin have been appreciating rapidly for years, with many of the homes being renovated by investors. Typically, properties that are closer to downtown are also easier to rent and being near the airport is undesirable, depending how close you are. 

Just a few items for you to think about. You need to speak to someone local who knows the precise location of the properties for a better evaluation of the locations. I haven't lived in Austin for several years now :)

-Christopher

My gut reaction would be to take the one closer to downtown. Everything near the airport I've seen is decidedly low-end and I can't see it ever being anything else; people don't like airplanes interrupting their barbeques. Which neighborhood is B in? Is anyone doing tear downs and rebuilds in the area yet?

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