Rent vs. Flip Underwriter
Harris County assumptions baked in — 2% combined tax with no homestead exemption, and the insurance load that kills most Texas rental math. Change any input; everything recalculates.
The deal
Carrying costs
Financing test
A leveraged investor can’t finance it (DSCR 0.95) and a cash investor earns 3.34% here versus 4.65% sitting in Treasuries doing nothing. The buyer is a family paying for the house, not the yield. To attract a 6.0% cap buyer you’d have to sell at $267,116.
Annual operating statement
| Gross scheduled rent | $33,600 |
| Vacancy @ 6% | ($2,016) |
| Property tax @ 2.00%no homestead exemption | ($8,000) |
| InsuranceHouston wind/hail loading | ($5,000) |
| Maintenance & capex @ 8% | ($2,688) |
| Management @ 8% | ($2,527) |
| Net operating income | $13,369 |
| Debt service @ 6.375% | ($22,459) |
| Cash flow after debt | ($9,090) |
What an investor pays, by target cap
| Cap | Investor pays | vs. ask |
|---|---|---|
| 4.0% | $356,155 | −$43,845 |
| 4.5% | $328,758 | −$71,242 |
| 5.0% | $305,275 | −$94,725 |
| 5.5% | $284,924 | −$115,076 |
| 6.0% | $267,116 | −$132,884 |
| 6.5% | $251,403 | −$148,597 |
| 7.0% | $237,436 | −$162,564 |
Rent is held at your number. A yield buyer prices off NOI, not comps — which is why the investor bid sits below the retail bid in any neighborhood where rent hasn’t kept pace with price.
The Harris County replacement for the 1% rule
| Target cap | Rent-to-price / mo | Rent needed on $400,000 |
|---|---|---|
| 4.0% | 0.77% | $3,079 |
| 4.5% | 0.82% | $3,292 |
| 5.0% | 0.88% | $3,504 |
| 5.5% | 0.93% | $3,716 |
| 6.0% | 0.98% | $3,929 |
| 6.5% | 1.04% | $4,141 |
| 7.0% | 1.09% | $4,354 |
The classic 1% rule was written for markets with ~1% property taxes. In Harris County you’re paying roughly double that with no homestead cap on a non-owner-occupied property, so the bar moves. These are the monthly rent-to-price ratios that actually clear each cap here.
Current rent-to-price on this deal: 0.70% per month. Defaults reflect August 2026 — 10-yr Treasury 4.65%, DSCR loans 6.375%–7.875%. Every assumption is an editable input; check them against today before acting on the verdict.
Why the 1% rule breaks in Harris County
The old rule — monthly rent should be 1% of purchase price — was written for markets where property tax runs about 1% of value. Harris County runs roughly double that, and a rental gets no homestead exemption, so the bar moves. The last table on this page replaces the rule with the rent-to-price ratio that actually clears each cap rate here.
Tax scales with price, maintenance with rent.That is why the investor bid has to be solved for rather than multiplied out, and why a yield buyer’s number sits below the retail number in any neighborhood where price has outrun rent.
DSCR is the financing reality check. Rent divided by principal, interest, taxes and insurance. Most lenders want 1.20. Below 1.00 a leveraged investor cannot buy it as a rental at all, which usually means the house is a retail sale to a family — not a yield play, no matter what the cap rate says.
The risk-free hurdle. The comparison that matters is not zero, it is the 10-year Treasury. A cash investor earning less than that on a house is being paid nothing for the tenants, the roof, and the vacancy risk.
Pairs with the Flip Screener — price the sale, then price the hold, and take whichever the numbers actually support.