1st rental property in Houston. TX

[Denita Ozenne]

Hey BP's Im currently working with a RE agent to locate my first rental property. Preapproved for FHA loan of 250K, currently looking at MFH's (yes the market is limited but we're working with it). I have been reading and researching how to properly analyze a property I'm interested in. What are the numbers I ABSOLUTELY must have in front of me to calculate my true cash flow. I don't want to overlook anything as the beauty is in the bottom line.

For my fellow investors, when considering a rental property, what property related data must be in front of you before you place an offer?

[Lyall Storandt]

The only thing I would add to @Luka Milicevic's post above is management expense. Whether you self-manage or hire a property manager, there will be expenses related to managing the property. Your time is valuable!

When evaluating a rental property, I'm typically looking at the following:

Gross annual rent

- taxes

- insurance

- HOA

- mortgage, if applicable

= "net" annual rent

Then, to get to a true cash flow number, you'll also want to subtract the following:

- maintenance (~ 5%)

- management (~10%)

- vacancy (~5%)

The bottom number divided by the amount of money you invested to acquire the property will be your annual ROI. This number will fluctuate some from year-to-year as you have more or less vacancy and maintenance, but your initial investment will remain constant.

Best of luck with finding that first rental!