Most San Antonio real estate investors buy under market value San Antonio properties, rehab them and then rent them out.
I have several rental properties in my San Antonio investment portfolio, but I have found in the last year or two that construction costs are eating too much into my bottom line.
As the San Antonio real estate market is heating up, construction costs have gone up on some of my fixer uppers by as much as 50%! Rather than spending $10,000 to repair and rent a property, I was finding that I was spending $20,000 or more, and my net return was under 10% per year.
Because of higher construction costs, I am advocating more owner financing my San Antonio properties. Here’s how it works in a nutshell:
- I buy the under market value San Antonio fixer upper for $50,000.
- I do approximately $5000 in repairs on the property, which may include painting, cleaning, minor plumbing and electrical. Basically, I am doing enough repairs on the property so that I can sell it with owner financing to a blue collar worker and his family. They will be able to complete most of the remaining repairs.
- By only doing $5000 or so in repairs on the property, I am able to save at least $10,000 in most cases in construction and rehab costs. This often will push my ROI to 14-15%.
- Typical terms for the end buyer are 10% interest, $5000 down, no prepayment penalty, 30 year note.
The owner financing exit strategy has the added benefit of not having any ongoing repair costs, which is great for peace of mind and my bottom line.
In summary, the foundation of my buy and hold San Antonio property portfolio is properties owned in cash and owner financed to qualified buyers. It is the primary strategy I recommend to new investors who want to build passive cash flow.
Here’s a good property that will return 14-15% per year with $5000 only in rehab:
- Address: 224 Avondale Ave., San Antonio, TX 78223
- Year Built: 1957
- Description: San Antonio buy and hold investors – Happy New Year! Excellent cash flow opportunity with central AC/Heat. This is a big plus as you don’t need to spend to add it. Has car port and tool shed. The neighborhood is in high demand, booming south San Antonio Market, 2 beds, 1 bath, 866 sqft, lot size: .16 acres, estimated repairs: 5K, clean/lawn maintenance/exterior paint. Max After Repair Value: 85K.
- Cash Price on San Antonio Fixer Upper: $49,900 CASH
- Exit Strategy: Owner Finance with 5k in repairs: 5K down payment, $850.00 monthly PI/TI, 30 year amortization, 10% interest, Sales Price: 85K. NOTE: We recommend owner financing this property rather than renting; you will be able to save your cash outlays on the repairs by owner financing it rather than renting. Renting out this San Antonio investment property is possible, but at least another $10,000 of repairs will be needed.