All Forum Posts by: Jacob M.

Great thread.  Appreciate all the insights!  

Thanks JR. I'll check with @Jason Bott on the insurance. $25/door would be very nice! HOA does not help with leasing. The fee pays for common area maintenance - parking lot, pool, tennis courts and management company fees. A lot of money for the benefits. I agree that 8% is probably low in Houston, especially as we look to the next year.

Thanks Mark.  Good to hear that most of your numbers are similar.

Most 4-plexes and condo/town homes in Houston under 4 units have higher HOA fees single family. This typical covers exterior maintenance and some fees (parking lots, sewer, etc). Sometime it also covers roofs, but not on this property.

I was more concerned by property taxes in Texas.  Even a 1% difference in tax rate translates to about  7% of gross rents in this example (1% of purchase price = $300; $300 = 7% of gross rents).  

Thanks guys for the feedback.

My goal is about 10% COC but don't know how often those deals come along in Houston area. Cash flow is important especially on first few properties.

I'm a fairly patient person so I generally don't mind waiting unless it is very difficult to find properties using 10% COC (with 25% down) criteria. I would like to have some extra margin of safety since Houston rents are likely to go down over the next 1-2 years.

Cameron - Since you are from Houston area, are my expense estimates reasonable?  This property is a few mile south of the Energy Corridor.   For quick screening, do you use a number higher than 50% when evaluating Houston area properties?  

Just trying to get a sense of typical expenses and want to make sure that i'm not way off in my estimates.

Hi Everyone.  I'm looking at a 4-plex in Houston area.    When I run the numbers I seem to get expenses (including vacancy) that is usually 55-60% of gross rents.  I think this is partly due to property taxes that are higher in Texas due to lack of an income tax.  Anyone else seeing similar numbers for expenses?   

Should I use a higher expense ratio for Houston  or am I being too aggressive with the estimated expenses?

Here are some numbers as an example for a $300k 4-plex.   Please look over and let me know what you think.  Do these number 

Monthly Gross Rents $ 4200

Monthly Expenses

  Vacancy       $ 336 (8%);  (including here since 50% rule includes vacancy as part of expense)

  Prop Mgmt   $420 (10% of gross rents)

  Insurance     $208 ($2500 yearly; quoted by insurance agent)

  Prop Taxes   $680 (2.9%/year of assessed value; actuals; eats up 15% of gross rents)

HOA fees $330

  Maint Reserves:   $420 (10% of gross rents)

  Maint/Repairs       $84 (5% of gross rents)

Total Expenses : $2478 (59% of gross rents)

NOI: $1722

  Mortgage: $1215 (25% down @ 5% interest)

Approx Cash Flow: $507/month (about $125/unit)

Cash-on-Cash: 7.2% (Assumes 25% down + 3% closing costs as initial cash requirement)

Thanks,
Jacob