Help with Analyzing Property

5 Replies

I recently found a potential rental home in southeast Texas. 2 bed, 1 bath and 1064 sqft. Asking price is 65k. Now, I have zero experience other than reading a lot of articles over the past few months and I'm in need of some input. I anticipate putting around 10k in renovations. My questions are:

(1)Do you think this is a viable unit in terms of cash flow? Rent would need to be at least 750 to meet the 1% rule (would hope for more), but I'm concerned that will be too expensive for the size of the house.

(2) Considering flood insurance, taxes, home insurance, etc., will all these extra fees eat away any returns? I'm unsure of the actual values currently.

You should talk to a lender if you haven't already then you will have exact numbers that you can plug into a mortgage calculator to help you determine cash flow.  I'm not sure about your area of Texas, but here in Southern California I don't bother with flood insurance as it is far too expensive, I stick with standard non owner occupant policy.  Taxes should also be easily calculated by looking them up on the county website or asking your Realtor.  Also to get an idea of what insurance will cost call an insurance agent and ask.  The same goes for potential rental value in the area, you can call a local property manager and ask or you can look up similar homes for rent on sites like zillow or rentometer.  If it were me I would do a bit more research before you pull the trigger on anything.

Hi there @Sam Evans Welcome to SETX investing. Look for some BP instructional videos by Brandon Turner. He's got some good ones on rental property analysis and buying older properties.
I'm in Jefferson county and absolutely get flood insurance for every property. Taxes and insurance tend to be pricy so I find that I need to be closer to 1.5% for any decent cash flow. The higher the better of course. Without looking at the deal specifics, I would tend to agree that you may be paying too much for the property. Feel free to PM me if need additional help or contacts.
There are a couple of REIA groups that meet monthly in Bmt. I encourage you to attend one or both.

As Arron suggested, make sure you know what other 2 bedroom 1 bath houses are renting for in the area. Maybe visit some of these rentals and see what a tenant gets for that $750 rent. Would your unit be in a similar condition once you renovated.
Also you mention you would be putting about 10K into it. It’s very easy for the 10K to become 20K. Stick to the budget. I personal have fallen into that trap and overspent on renovations. Yes you can sometimes get better rents, but on a down swing in the area will forces you to lower rents. There is a sweet spot somewhere there, you just have to get as close as possible.

Originally posted by @Sam Evans :

I recently found a potential rental home in southeast Texas. 2 bed, 1 bath and 1064 sqft. Asking price is 65k. Now, I have zero experience other than reading a lot of articles over the past few months and I'm in need of some input. I anticipate putting around 10k in renovations. My questions are:

(1)Do you think this is a viable unit in terms of cash flow? Rent would need to be at least 750 to meet the 1% rule (would hope for more), but I'm concerned that will be too expensive for the size of the house.

(2) Considering flood insurance, taxes, home insurance, etc., will all these extra fees eat away any returns? I'm unsure of the actual values currently.

That seems a little on the high side for Winnie if that's where it is. If it's on the peninsula it's pretty good. 

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