Deal analysis in Lubbock, TX

15 Replies

HI Bp,

First time investor here. I have a sfh in Lubbock Texas. So I would like to run it across people in Bp to get some opinion. It is a brand new sfh for 327.9k with tenants in place. The neighborhood is Quaker ave and 130th street.

Down payment - 65580  (20% down)

closing cost - 4000

total cash investment - 69580

rental income - 2500

tenant pays all utilities (electric, garbage, water)

vacancy - 4% - 100

management fee - 5% - 125

repairs/maintenance - 4% - 100

insurance - 110

property tax - 450

mortgage - 1215

total expense - 2100

Cash flow - 400 / Month

CoC = 6.9 %

Does my calculation make sense? If so, is it an good/ok/bad deal? Thanks!

@Jing Xu The two things that sick out to me are the management fee and the property tax. For those two items, I would personally be budgeting the following:

1. Management Fee (10%) - $250/mo

2. Property Taxes (Est. $7.200/yr, per LCAD) - $600/mo

That's an extra $275 in expenses, bring your cashflow down to around $125/mo. 

@Jing Xu like Stuart mentioned, unless you have a deal worked out with PMs already, expect 10%. Also, go to LCADs website and type in the address in the search engine. This will pull up exactly how much in taxes that has previously been paid on the house. I believe that is in the Lubbock-Cooper school district so expect the amount to increase as 3 new schools were just approved to be built.

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Just to add to what everyone else is saying, my insurance is higher than that and my house is much less expensive. Insurance costs are really high in Lubbock and surrounding area due to hail damage and the possibility of wind damage. I'm not sure where you got your numbers from, but those all seem way too low on expenses.

@Stuart Chinworth @Brittany Warner @Shaun Morgan

Thanks Stuart, Brittany and Shaun! 

The management fee, property tax and insurance cost are all from the turnkey company (Morris investment if it matters). 

They told me 

1) the management fee is low because a) the property is in Class A area. b) the property is brand now.

2) the property tax is low because they help to dispute the tax every year and almost every property they manage does this.

3) the insurance fee is based on similar houses in the previous phase.

@Jing Xu , I don't know much about Morris investments, but you should do a quick BP search on them, they have been discussed previously. Are they the ones managing or do they higher out? There is only so much you can do to avoid taxes, but I would look at other properties in the neighborhood in LCAD and see what they are being taxed at, remember you won't get the homestead exemption.

Thanks for reminding me to do the search. I am newbie for re investment. I would rather staying away from morris investment for my first purchase..Thanks again! 

@Brittany Warner Lubbock does seem like a good place to invest though. Brittany, do you mind sharing your route to invest there?

I am pretty new to re investment world. I am looking for passive incomes. The only route I learned so far that is very passive is turn key properties. The only two companies I have initialed conversations are MI and REI Nation.

if you want to invest out of state passively I would could consider trying to connect with local investors to create a partnership instead of going turnkey. That is another option which could potentially get you better returns. Just another research opportunity for getting started.

@Jing Xu Of course! We (my husband and I) are buy and hold investors. The property we just purchased was a new built, but we went straight to the source. I highly recommend you reach out to @Matt Moreland , he is a local investor/real estate agent who I have worked with and highly respect. You can search his posts here on BP to get a feel for his knowledge base.

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Lots of good points here! @Brittany Warner @Shaun Morgan @Stuart Chinworth .

@Jing Xu one thing I would add to watch out for using any turnkey company is to double check the price you are paying for a property they are offering. I understand everyone has a different goal and some are satisfied with a smaller return then others but it wouldn't be the first or second time for me to hear from an investors to be upside down on a property they have purchased as a turnkey. 

To point out few things on your numbers

Taxes - property in that school district tax valued at $260K will have about $6500 in taxes annually ($540ish/m)

Insurance - looks right for a new built but will go up a little bit every year

Management - 5% - you will get what you pay for here

Vacancy - I like to be more conservative on that personally as your 4% (about 15 days) is pretty accurate with the current market but maybe 5%-8% long term is more accurate.

I am a property manager here in Lubbock.