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Old 04-10-2008, 04:26 AM
 
18 posts, read 124,804 times
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I see many sale signs for cashflowing rentals. But when you get to the detail I can't see any cash flow and mostly they just calculate cash flow as a rent-piti.

Can any body can share his/her rental property investment experience and how it works in Houston ?
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Old 04-10-2008, 06:54 AM
 
Location: Visitation between Wal-Mart & Home Depot
8,309 posts, read 33,322,966 times
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I'm not a rent-house investor but it seems to me that the gig would be very difficult here. Any rental property will be non-exempted and the property tax will take a large bite out of your bottom line. If you owned several houses near a university or grad school you may be able to turn a reasonable profit but I think that renting fairly nice, appreciating properties would be very difficult. It seems to me that the amount you would have to charge to stay ahead of the game would be more than mortgage payments on new construction in the 'burbs.
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Old 04-10-2008, 07:14 AM
 
Location: Pittsburgh N. Hills / Houston-Clear Lake
8,156 posts, read 26,416,529 times
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I've looked into this extensively and would say if you're an honest landlord paying a mortgage on said properties, rent pits. I would only rent out my house if I were to leave on a long term assignment (1-3 years), so I can recoup at least most of the money I'm paying out every month.

Remember, there is a reason a lot of unscrupulous, absentee landlording exists. And many are fully supported by borderline-criminal property management companies. W/o oppression caused by this chain of corruption, there would be negative money in it, and (after taking matters to court and winning my case w/o a lawyer and w/o an appeal) you will not make me believe otherwise.

From all the calcs I've done, if you wanted to put real money on the bottom line w/o creative accounting / convoluted math, you could easily do it if you owned all the properties outright, didn't pay mortgage interest, and screened your potential tenants. Owning them in the higher appreciating areas w/o the payment, even better. Remember that ''higher appreciating'' means doubling value in 10 years... which you see people talk about on here, but all that means is a 7% annual return. *yawn*

That's really not enough return to overcome mortgage interest, taxes w/ no exemptions, insurance, maintenance, expected/unexpected repairs, or that stained carpet, holes, graffitti, animal smells, etc.
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Old 04-10-2008, 07:37 AM
 
18 posts, read 124,804 times
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What rent to acquisiton cost ratio can bring cash flow in Houston.

In general I believe it must be around %2. Half of this goes to the expences and other half pays the mortgage. What is left is cash flow.

Example

1000$ rent 50k house.

500 for expences. 350 mortgage 150 cash.

How is it work in Houston.

I can find properties on mls with 1%-1.4% rent to acquisiton cost. And was wondering how easy to fing better deals and where ?
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Old 04-10-2008, 07:44 AM
 
Location: Pittsburgh N. Hills / Houston-Clear Lake
8,156 posts, read 26,416,529 times
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The example of $1,000/mo rent on a $50k house is way off. No one will pay that much. You can rent a house worth about $120k for $1,000/mo. At the time, I was renting a house worth about $110k and was paying $950. There are $200k homes being rented out for $1,600 in my current neighborhood. All of those examples are closer to 0.8%, and is roughly the going rate/ratio out where I live. (Clear Lake, far-SE city limit fringe)
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Old 04-10-2008, 08:38 AM
 
13,723 posts, read 25,291,765 times
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In under five years of socking away $1K a month I can go buy my own $50K house outright. So no, you're not going to get that for rent.

I don't think residential property in Houston is a good investment at all. tstone mentioned that "doubling value in 10 years" isn't what it's cracked up to be. Then there's taxes and insurance, along with the fact there's no shortage of rent properties on the market. Ask for too much and you'll be left with a vacant house to insure and be taxed on. People buy here because they want to live here.

If you're going to be a landlord, don't buy a property unless you can afford it outright so you're not paying interest and monthly house payments on something that may or may not be occupied at a given time.
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Old 04-10-2008, 12:25 PM
 
299 posts, read 883,384 times
Reputation: 163
Default It is possible

I invest in rental houses in Houston. I currently own one and am looking to raise capital to pick up another this year. One of the previous posters was correct that property taxes are high here, but you just figure that into your calculations. I paid a little under 68K for my house and put about 24K of my own money into rehab, down payment, and closing costs. I'm not sitting on a ton of equity, but I will do better with my next house. I am renting it for 895 a month and after mortgage, insurance and taxes, I take home about 200 month. That isn't really enough to live off of, so I just have it sitting in a high yield online savings account. I'm very involved with my house, and talk to my tenants regularly. I am making money (increasingly more with principle pay down and expected increase in the market over next few years) and don't have to resort to absenteeism or scamming people.
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Old 04-10-2008, 03:53 PM
 
Location: Sugar Land, TX, USA
759 posts, read 2,837,204 times
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I have a few rentals in Houston...In the end, i net about 8K in profits/tax savings. both homes are starter homes valued at 100-110K. i bought them for 60K & 80K respectably. I plan on buying several more....I have a friend that has a few dozen rentals who quit his high paying mid-level manager job to manage his properties full time. I put 20% down to avoid PMI. My Mortgage rates are in the low 5% . I Rent both properties for $1100. My accountants takes care of accounting for the depreciating. I screen both my tenants. they are the same ones from day one. We have an understanding that as long as I get no trouble, they can live there w/o worry of huge rent increases.
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Old 04-10-2008, 06:30 PM
 
29 posts, read 92,029 times
Reputation: 13
im curious , what is the avg going rent on a 1 bedroom apartment, on a 2 bedroom apartment and on a 3 bedroom apartment?
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Old 04-10-2008, 06:31 PM
 
29 posts, read 92,029 times
Reputation: 13
and the max rent increase allowdper year?
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