How's this deal in Baytown, Texas (near Houston)?

[Sandeep S.]

I am in contract for this REO property: 8119 Eastpoint Blvd, Baytown, TX 77521 for $110k. I expect that rehab will take another $10k (max).

It is a 2005 built, 4 BR, 2500 sq ft home in decent school district. I am assuming rent of ~$1500. As such I am going to hold it as rental - I think the ARV (should I flip) is ~$155k. Even for rentals - I always want to make sure there is enough room for flip (to qualify it as a good deal).

This will be my 2nd acquisition in Houston area (note that I am in California) and I am hoping that it is better than the first deal I am closing today (23527 Hidden Maple Dr, Spring, TX)

Thoughts on my numbers and quality of deal?

[Joe Kim]

Originally posted by @Sharon Tzib:

That house is way too big for a rental. Every time you have to paint or carpet, it will cost you a fortune. More sq. footage, more repairs, maintenance and cap ex that needs to be allotted. My max for rentals is about 1500.

My single rental homes with sqft greater than 2500 (actual 3100) and rent of $1775/month has appreciated nicely in texas.

If you buy larger homes in B+/A neighborhoods you can get upside of appreciation.   I know that's not as important as cash flow.....

Actually, I think appreciation is a HUGE upside and re-thinking this cash flow vs. appreciation equation.

I will only buy properties (SFR) with positive cash flow $200-$400/month but I'm going to target properties that have the most "potential" for appreciation by buying in good neighborhoods and locations.

The other key to appreciation is buying properties on the cheap or at a discount to start.

My "large" property = 3100 sqft 5bed 3ba home in houston area in 2014 bought for $150,000  now worth around $220,000-$230,000 based on comps.   B+ neighborhood.  Initial rent $1700/month.   Lease renewed with same tenant for $1775/month.  I don't mind a little extra paint/repairs when I see appreciation like that!