After years of investing success in San Antonio wholesale properties, some random thoughts:
#1 I would much rather make $5000 on 50 deals than $50,000 on one deal.
Many real estate investors spend far too much time chasing the big score on investment properties. That’s why after five years, they’ve done 2 deals. After a few years in the business, many of our investors have done dozens or hundreds of deals. It can make more sense to do more deals for less money on each one than trying to hit a home run on a handful of deals each year.
#2 We embrace the ugly deals that most investors don’t want.
An early mentor told me to go LOOKING for houses with ‘foundation problems.’ Most investors won’t even look at a house with a ‘foundation problem.’ It turns out that many of those problems are $5000 or less fixes. You can make a lot of money on houses with foundation issues, especially on pier and beam homes.
We also will buy many burned out homes, if the price is right.
#3 You do not have to be a landlord to be a successful investor.
Many investors do well with rental properties, and there’s nothing wrong with that. But many of our investors only do owner finance properties. We do maybe $10,000 or $20,000 in repairs, then resell it with owner financing at 10% interest.
The buyer fixes up the property himself and the neighborhood improves. And we investors make money, so everyone wins.
#4 Keep a positive attitude in real estate
You can always find pessimists in the real estate industry. It’s wise to only associate with positive, successful, can-do people in this industry. If you do that, you’re more likely to succeed.
#5 Over rehabbing properties destroys many real estate careers.
When you walk into a run down house, it is very tempting to spend $50,000. This often isn’t a good idea.
Do enough rehab to sell the house with owner financing, and leave the rest to the buyer. I recommend making sure the plumbing and electrical work, roof doesn’t leak, and give everything a fresh coat of paint, perhaps put in new vinyl flooring, but that’s usually all.
Doing just enough rehab to resell the house is the secret. Don’t do more than that.
#6 What the house was worth last year is meaningless.
Real estate markets change overnight. What matters is what the house is worth compared to similar houses in the same neighborhood – right now!
Some investors won’t buy a house that can make them 12% a year because the house costs $10,000 more than a year ago.
It’s best to not worry about what the house was worth yesterday. Focus on getting a good under market value deal in today’s market.
#7 Cheap, steady real estate markets beat the big boom/bust markets.
Austin TX is going crazy these days, with median house prices over $270,000 and climbing. We have bought in Austin, but it’s pricey.
San Antonio properties are always less expensive than Austin and Dallas. Prices are up a good deal in 2021 so you have to do some shopping. But deals are there!
#8 We never charge top price for a real estate investment.
We have had properties that I sold for $55,000 that we could have sold for $70,000. I sold it for $55,000. Why? Because we want the investor to get an incredible first deal, and then come back and buy 10 more.
If you want to do well in real estate investments, focus on the long game, make some money, but be sure you treat everyone right.
#9 Buy real estate for monthly cash flow, not for long term appreciation.
If our investment properties appreciate, that’s great. But most of our investors buy for cash flow.
Investing for appreciation CAN work, but it’s complicated and often depends upon things outside the investor’s control. It’s like this – why risk the low percentage/high reward trick shot in billiards if you can make the straight shot in the left corner pocket every single time? That’s how I look at real estate.
Many of our real estate investors in San Antonio own dozens of houses that produce $300 or $400 a month in cash flow. That’s what they care about the most, not appreciation.
#10 Always buy your houses under market value or don’t buy.
We never pay market value for any property we buy. If we cannot buy it for at least 20% less than market value, we move on. Buying under market value protects the investor in a down market, and makes it easier to turn a profit.
Many real estate investing careers are gutted by rookies buying houses at or above market value. If you can’t get a deal, move on.
#11 We often buy distressed houses in cash, no mortgages.
Buying in all cash means no stress if we have a foreclosure or vacancy. It also means that we can buy any house we like; you can’t finance houses under $50,000, and it gets very complex getting financing on many houses under $75,000.
#12 We make a buy or no buy decision immediately and stick to it.
One of the most important parts of our success is our local reputation. People know we’re serious investors and if we say we will buy a house, we do it and pay within two weeks.
Guard your reputation in your city like gold, and it will pay you back for decades.