Real Estate Investment Philosophy & Analysis: Best Practices

Texas Corporate Homes (TCH) treats every asset it manages like an investment-portfolio holding. Drawing on our backgrounds in real-estate private equity and finance, we drafted this framework so you can make capital-allocation decisions with the same rigor you’d apply to stocks or funds.

TL;DR

Strategy	Typical IRR (Annualized)	What Drives It
TCH Mid-Term	16 – 32 %	1) Positive cash flow (9–12 % rental yield) 2) Principal pay-down (2-5% per year of equity gain by paying mortgage) 3) Leveraged appreciation (5 % market gain ÷ equity %)
Long-Term Rental	6 – 12 %	Smaller/negative cash flow (4.5–6.5 % rental yield) + same equity/appreciation math
S&P 500	≈ 10 %	Price growth & dividends, high volatility
House Flips / Development	20 – 25 % (target)	One-off profit on resale, high capital risk, hands-on

Why the outperformance? TCH’s higher nightly rates result in 2x NOI on avg and cap rates (≈ 6 % vs. ≈ 3 %) . After debt service (70 % LTV @ 5.5 %) you still keep more cash, and leveraged appreciation is identical—so total IRR is dramatically higher.

Leveraged Home-Price Appreciation – 5 % market lift becomes 16.7 % on 30 % equity.
Principal Pay-down – each mortgage payment quietly increases equity.
Positive Cash Flow – TCH excels here; even if cash flow shrinks, #1 + #2 keep IRR solid.

Article Road-map

Why time horizon & no credit risk matter for Class A suburbs
Metric definitions (Net Rental Yield, Cap Rate, Cash-on-Cash, IRR) plus a $500k home case study
IRR sensitivity tables for TCH vs. long-term at multiple rates/LTVs
Risk-return matrix (vacancy, delinquency, wear-and-tear)

1. Think Long Term: Horizon, Downside Protection & No Credit Risk

Five- to Ten-Year Lens — Real-estate investing should be done with at least a 5-year horizon to achieve annualized returns and offset high transaction costs.

Across DFW, Austin, Houston, and San Antonio, Class A suburbs have appreciated 3 – 8 % per year when held 5–10 years. Apply the same lens to occupancy: discount < 24-month data points.

Downside Protection

Uncorrelated demand: insurance claims are economy-agnostic.
Supply limits: infill suburbs rarely add large land tracts.
Commercial partnerships: 40 + partnerships feed first-look placements.

No Credit Risk — Rents are paid by insurers or corporates, so delinquency ≈ 0.4 % (vs. 5–10 % in long-term rentals).

2. Key Metrics & $500k Single-Family Example

Metric	Why It Matters / Definition	Typical TCH	Typical LTR	Example TCH Home
Gross Rental Income	Top-line revenue; basis for every other metric	—	—	$73 000 / yr ( $250 × 365 × 80 % occ. )
Net Rental Yield	(Gross × 75 %) ÷ Value – after TCH’s 25 % fee	9–12 %	4.5–6.5 %	10.9 %
NOI – Net Operating Income	Revenue − Operating Expenses (taxes, insurance, utilities, lawn + pest, 1 % reserve)	—	—	$48 152 / yr
Cap Rate	NOI ÷ Value × 100 % (un-levered earning power)	5–8 %	2–3 %	9.6 %
Cash-on-Cash Return	(NOI − Debt Service) ÷ Equity × 100 %	10–15 %	6–8 %	16.2 %
IRR (Annualized)	Cash-on-Cash + Leveraged Appreciation (5 % ÷ Equity %)	16–32 %	6–12 %	≈ 32.9 %

Math recap (Value = $500 k): NOI = $73 000 − $24 848 = $48 152. Debt Service (70 % LTV, 5.5 %, 30 yr) ≈ $23 870 / yr. Cash-on-Cash ≈ 16.2 %. Leveraged appreciation = 5 % ÷ 30 % equity = 16.7 %. IRR ≈ 32.9 %.

3. Projected IRR Sensitivity

A. TCH Mid-Term Rentals
(Cap Rate 6 %, 5 % appreciation, 30-yr amort)

LTV \ Rate	4 %	5 %	6 %	7 %
50 %	16.2 %	15.5 %	14.7 %	13.9 %
60 %	18.8 %	17.7 %	16.6 %	15.4 %
70 %	23.2 %	21.5 %	19.7 %	17.9 %
80 %	31.9 %	29.0 %	25.9 %	22.8 %

B. Long-Term Rentals
(Cap Rate 3 %, 5 % appreciation, 30-yr amort)

LTV \ Rate	4 %	5 %	6 %	7 %
50 %	10.2 %	9.5 %	8.7 %	7.9 %
60 %	11.3 %	10.2 %	9.1 %	7.9 %
70 %	13.2 %	11.5 %	9.7 %	7.9 %
80 %	16.9 %	14.0 %	10.9 %	7.8 %

4. Risk / Return Snapshot

Investment	Annualized Return	Main Risks
TCH Mid-Term	16–32 %	1–3 mo vacancy / yr; 0.4 % delinquency; lower wear-and-tear (pro renters, inspections every 3-4 mo)
Long-Term Rental	6–12 %	1–2 mo vacancy / yr; 5–10 % delinquency & eviction; higher wear-and-tear
S&P 500	≈ 10 %	Price swings ± 10 % any year; no leverage or principal pay-down
House Flip / Development	20–25 % (target)	Active project management; cost overrun; sale-price risk; potential total capital loss

5. Need a Personalized Investment Analysis?

Have a TCH specialist run the numbers—request yours here.
Already have properties at Texas Corporate Homes? Email ownerprogram@staytch.com.

6. Further Reading

Questions? Reach out any time—TCH keeps your investment data clear, actionable, and aligned with long-term goals.

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