good deal?

Question

Hi everyone, thanks in advance for your time.

im considering a 3/2/2 in Houston, TX for 60K; would like your thoughts and comments on the deal.

the house was built in 2007, it is 1500sf, in a decent developing neighborhood.  the comps are 75K- both had bigger lots, like 3x bigger.  the rental comps are $900-1100 per month.

I will be using Homepath to finance 10% down and ~5.25% interest.  the estimate i received from the lender showed ~5K closing costs and estimated monthly escrow (taxes, mortgage, and insurance) around $650.

Daniel R. · Answer

i plan on a long term hold. market is saturated with renters.  as you probably know houston has large oil and gas industry- specifically in my area there are many petrochem plants and such (ei: pipe yards, fabrication shops, drilling compnaies)

Account Closed · Answer

If this is going into your pile of properties for long term hold then I think it makes sense. As already mentioned a smaller lot means less drain on you and your tenant when it comes to watering and upkeep. Keeping it full will be your goal. How many rentals are in that area and what industry supports them?

Daniel R. · Answer

ya FMV seems correct.  
property taxes are ~$2K.
not really sure about the lot size impact, you sparked me enough to check into more closely- why did they sell for 15K more.

good stuff, thanks,

Nathan Emmert · Answer

What's your definition of a "good deal"??

Loosely based on what is said above (assuming everything is accurate), it sounds like a FMV type deal, not a steal.

"They" (whomever "they" may be) look for rents at 2% of purchase price, I generally go 1.5 - 2% but taxes are very low here.  Based on that, you'd want to be in the $45 - 55k range for the house if your rents are accurate.  That's a pretty broad range for rents so you might want to negotiate down a little if you can but you're safely above 1.5% which in Utah would make you money.  How are the property taxes there?

As for the yard size, is that important where you are?  In some places, a big yard is frowned upon (more water, more maintenance, etc)... other places small lots are hated.  What's your market?  I can see the yard size reducing the price point $15k but only you can understand the impact to your exit strategy.

The rates and down payment seem strong, I would advise financing in some of the closing cost to improve your cash on cash position.