Quick Analysis? Is this Deal worthy?! Spring, Tx 4BR 3BA

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Quick Analysis? Is this Deal worthy?! Spring, Tx 4BR 3BA

Chris Lockwood
Member since 2021 · 6 posts · 0 votes

Hi All!

I recently jumped on the SFR train and have since acquired my first rental and looking at a second rental. This rental happens to be located in Spring, TX East of I-45 near The Woodlands, TX. I have provided a brief review of the numbers below to represent a 4CAP. Please note I have decided to remove management fees and leasing fees as I may try to do that myself. If not, I can hire a realtor for 1 month rent to lease out (2k is what I am hoping to receive/month).

 This is located half mile away from a house I own (my mother lives in it) as well as my first rental so this would be my third purchase within the area. I am hoping that it can generate good cash flow as Spring, TX seems to be a renters market and being close to Exxon HQ and Woodlands. I understand this wont cashflow too much at first (perhaps 100-250 first year) but am curious if this is a good idea for a growth and income approach hoping that this location can make up for the higher price point and lower cash flow for greater price appreciation. Since its also located near my other homes I like the approach but...IS THIS WORTH IT? Would love yalls opinions after looking at the math as I still am not too saavy on underwriting the deal in comparison to other TX projects. 

THANK YOU EVERYONE FOR YOUR QUICK ADVICE AND FEEDBACK!

Calculated Results

Annual Profit & Loss

Rent?$24,000

Vacancy$1,972

Net Rent $22,027

Taxes$7,046

Insurance$1,600

Repairs & Maintenance-$1,321

Property Management? $0

Leasing Fees-$0

Total Expenses? $9,968

Net Operating Income (NOI)-$12,058

Cap Rate-4.96%

Financed Returns

Interest Payment-$8,198

Return After Interest-$3,900

Investment Amount (down payment)-$48,600

Financed Return (ROI)-8.02%

Principal Paydown-$3,277

Net Cash Flow-$622

Cash on Cash Return-1.28%

After Tax Returns

Depreciation-6,185

Taxable Income-$-2,326

Income Taxes-$-930

After Tax Return-$4,830

After Tax Return %-9.94%

After Tax Cash Flow-$1,552

Cash on Cash after Tax 3.20%

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  • Carla Gordon
    Real Estate Agent · Houston, TX · Member since 2016 · 63 posts · 27 votes
    5y

    I agree that cash flow is low. $125 a month doesn’t excite me at all. I do have one property that cash flows low ($150 a month) but is in a rapidly gentrifying area where new builds and rehabs are actively popping up. So while you shouldn’t invest for appreciation, there are some instances where it can pay off big time if you’re strategic. With that said, I have other properties that cashflow much better and make up for my low cash flow property while I wait it out.
    Something else to consider is multifamily properties which can have much better cashflow. Have you consider those or just SFH?

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  • Chris Lockwood
    OP
    Member since 2021 · 6 posts · 0 votes
    5y

    Carla, 

    Thanks for your response. I have considered MF but feel that the cap rates in MF currently are lower than what SFR can provide. I also would want to own the investment outright and not have partners. If I am dealing with an LP/GP scenario it will be on a value add investment, not an income property.


    I just put a 203k offer on a SFR lease that is already rented for the next 10 months at 1525. Turnkey 3/2 built in 2005 in Spring, TX. Nurse is renting. Although its not a high cashflow (similar to 125 a month) next year I believe Renting it for 1650 should be easy as 1525 is a little lower. What are your thoughts on that!?

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  • Joseph Medina
    Houston, TX · Member since 2021 · 72 posts · 35 votes
    5y

    @Carla Gordon and @Chris Lockwood, Yeah this is not a good COC, but right now finding good cash flow on SFR right now is super hard. you could do what Carla said and do multifamily. you don't need a large multifamily just a duplex, triplex or quad could drop the trick.

    But back to the original deal... I don't know how your after tax income is higher than your pre-tax income. COC 1.28% and then COC after tax: 3.2%. this is a single family home, and even though knowing the cap rate is kinda cool, its a residential home and the value is based on fair market AKA appraisal so cap rate is not warranted.

    I am having a hard time deciphering some of the numbers here... but I am going to approach it the way I see it. your net rent is equal to your NOI. Just as I would look at a company's 10K your gross income is $24,000 and your net income is $12,058 which just means the amount you have left over from all expenses. the only way I would think your NOI will differ from net rent/ income is if you charged for parking or had a coin mech laundry or something like that.

    I mean those property taxes are really expensive for the area. But they could be gentrifying the area. insurance seems a little low, but it might be comprompable for the area, but if the prop taxes are 7K a year you're gonna be looking at home insurance around the 3-4K area. 

    I am going to assume you're putting 20% down on this place, and if so then I don't see how this property will cash flow positively because that puts purchase price close to 250,000.

    But, I will say this based on the extremely ROUGH reverse engineering of these numbers through the BP Calculator I would run far far away from this deal, because it will lose you (-761)/ month. that is not including HOA fees. With the numbers you're giving me you will need 2100/ in rental income to see only 12/ month in positive cash flow. that is a twelve. https://www.biggerpockets.com/...  for your property results bud. this is from my analysis bud and my analysis is saying this is not a good deal. 

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