Sanity Check on Assumptions for First RE Property

[Dozie Eme]

Hello,

I am a First-time investor looking to pressure-test my assumptions on a property that we will be closing on soon. My priority is to get over the line rather than waiting for the almost elusive homerun. Thank you in advance for your time. 

Home & Mortgage

Status: New Construction (2026) located in the Legacy / West Plano area 
Home Price: $462k; Sale-List Ratio: 93.9%
Description: 3/2.5, SFH, ($310/Sq ft, but came with an appliance package (W/D/Refrigerator) and blinds that should effectively lower the price/sq ft)
Interest rate: 3.875% 7/6 ARM
Hold period: 7 years
Down payment: 20%; Net closing costs: Approx. 10k
Total OOP costs (including minor upgrades (EV outlet and modern ceiling fan) and $1k to future tenant's agent): $105k

Expenses

Monthly Carry Cost ($):
P&I: 1,738
Taxes: 647 (1.68%)
HOA: 133 (covers landscaping)
Insurance: 70 (H0-5 policy, 1% deductible, 3% deductible for wind or hail)
Total: 2,591

Given maintenance and vacancy is likely to be low during the hold period, I made them 0.5% ($192) of sale price and 4% of rent ($106), respectively.

Total expenses: $2,899

Revenue

Conservative rent (at first analysis): $2,650
Likely rent : $2,900 (a slightly bigger (50 sq ft bigger) home in the community recently rented for $2,900 and it didn't include appliances. Ours would likely get listed in May which I also hope would make this rent more probable. I also plan to eliminate monthly pet rent as I read tenants hate this (thanks to Reddit)

Returns

Gross cash flow:
Base case rent : $59  or $708 annually (at least it covers monthly carry cost)
Likely rent: $309 or $3,708 annually

Net cash flow: 
Base case rent: -$239 (-$2,868 annually)
Likely rent: $1 or $12 annually (LOL)

Principal paydown:
Average monthly principal paydown over the 7-year period: $624 ($7,488).  Thus, I estimate a total return of 4.4% (i.e. (7488 - 2868)/105) . But using $2900 rent increases the return to 7.2%. I tried to account for appreciation (1% because I think the builder has incorporated some of it into the price), mortgage interest and property tax deductions, and an AI model arrived at 8.3% using $2,650 and 9.5% with $2,900.

Thank you for reading all of this and I look forward to learning from insights.

[Rod Hanks]

@Dozie Eme 

You’re thinking about this the right way, but I’d pressure test a couple assumptions.

First, your insurance number looks very low for Texas. $70/month on a $462k new construction home is probably optimistic. I’d model closer to $200-275/month just so you’re not surprised at renewal.

Second, I’d be careful assuming low maintenance just because it’s new. Major repairs should be minimal early on, but things still break and turnover costs money. I usually budget 5–8% of rent combined for maintenance and vacancy just to stay realistic.

The bigger point though is your deal is basically breakeven. That’s not necessarily bad with a 3.875% ARM if the area has strong long-term demand, but you’re really betting on appreciation and principal paydown more than cash flow.

Plano is a very strong rental market, so the rent assumption around $2,800–$2,900 seems reasonable. I would just run the numbers assuming rent is $2,650 and insurance is higher. If the deal still works in that scenario, then you’re probably fine.

A lot of first deals look exactly like this. Not a homerun, but it gets you in the game and you learn a lot from owning the first one.