How would you determine the maximum budget for rental properties?

Question

We are putting together our strategy for rental properties in Houston. We own rentals in Canada but are pretty new to the market in Texas. One question we had, was about the maximum amount spent on a single property. We are mainly interested in single family houses, and we hear from some investors that it is a good idea to buy several properties but spend less than $250k on each. Some others believe that the rent to price ratio is higher for more expensive ($500k) houses.
my question is, is there any advantage in buying more properties for cheaper price?

Aaron Dominy · Answer

What's your #1 goal, cash flow or appreciation? I think we need that info to most accurately answer your question. Also, LTR/MTR/STR? Assuming LTR and you can find properties at 250k that cash flow 500/month, go for those. If STR, I'd be less concerned with the price per property and more with identifying the type/size/location that you'd need to acquire to be profitable and work backwards from there. If you'd like to chat more, feel free to reach out. My wife and I are investors in Galveston and have lived in Houston our entire lives

Shane Lyons · Answer

I would agree with the previous comments about diversification. On top of this I would look at what your demographics are. If the median income for the area is say $60k, how many families would you think are looking to rent a $500k+ home? Just seems like from the sense of trying to find renters, your pool is much larger for more affordable priced places.

Karl McGarvey · Answer

The advantage to buying more for cheaper is diversification. If one 500K house sits empty, you have nothing. If one of two, 250K properties sits empty, you have 50%. That being said, its all about the numbers and the area. I work with investors on the SE side of town and in Galveston, if I can be of any help to help you get to know the area, feel free to reach out!

Jeffrey McKee · Answer

When considering whether to buy multiple cheaper properties or fewer more expensive properties for rental investments, there are advantages to buying more properties for a cheaper price:

• - Diversification: Spreading your investment across multiple properties reduces risk.
• - Cash Flow: Cheaper properties often have a higher rent-to-price ratio, resulting in better cash flow.
• - Financing: It may be easier to obtain financing for multiple cheaper properties.
• - Market Flexibility: Owning multiple properties allows for more flexibility in adjusting your investment strategy.

However, factors like location, property management, and potential appreciation should also be considered. Evaluate your investment goals and market conditions before deciding on the best approach.I have a selection of properties that you may find interesting. Please feel free to get in touch if you would like more information or assistance.