Why It Is So Hard to Find Affordable San Francisco Investment Property?

Many of my out of state property investors come to San Antonio TX from San Francisco. They find it is very difficult to find affordable San Francisco investment property that will produce passive cash flow.

According to Forbes, 2016 is an excellent time to pick up under market value properties for cash flow in many undervalued markets. One of the most undervalued investor markets is San Antonio, which comes in at #6 on their list with a median price of only $189,000. It also is rated as their #4 boom town.

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San Antonio is a much more affordable place than San Francisco to buy under market value properties.

San Antonio is where I have bought hundreds of under market value properties since 2000. I have made millions of dollars off of below market value, $50,000 houses that many investors would laugh at.

It’s much easier to make real estate cash flow on investment properties in the undervalued market of San Antonio. It is IMHO one of the best cities to invest in real estate given its growing population, affordable real estate, low taxes, and strong economy.

San Francisco Investment Property Hugely Overvalued = No Cash Flow

Meanwhile, San Francisco houses and San Francisco investment property is among the most overvalued in the US, according to Forbes. That magazine states that five of the most overvalued investment property markets are in California: San Francisco, San Diego, San Jose, and Los Angeles.

What is driving the lack of affordable investment property in San Francisco? There simply is not enough supply of market value properties for home buyers, which means that California investment property is just too expensive to produce real estate cash flow.

One of the reasons for that, Forbes says, is that many Chinese buyers have come into San Francisco and bought up San Francisco investment properties, paying full cash offers.

Another source says that San Francisco price to rent and price to income ratios have gone up by 25% from 2012 until 2015. The median price for a San Francisco house is $548,000 and is up 24% from a year ago.

In fact, San Francisco investment property houses are getting near to levels that were during the bubble years of 2006 and 2007. That was when prices in San Francisco were near $665,000.

I do not know how San Francisco investment property buyers can survive in that market, or California investment property generally. If you buy for appreciation, maybe you can do well, but that is far too risky for me.

I am an under market value, buy and hold, real estate cash flow investor.

A Good Example of Under Market Value, Cash Flow Property

Like I said earlier, I buy and sell under market value properties that many wealthy investors laugh at.

For example, this below market value San Antonio investment property was sold to my investor for only $25,000:

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No one wanted this ‘junk house.’ I did! I saw the $100,000 houses next door lived in by the owners, and all of the revitalization going on in this area of San Antonio on the near west side.

Many out of state investment property buyers looking for real estate cash flow would never buy this house. My investor did for $25k, and then I did $27k in rehab:

  • Electrical update
  • New flooring (float new floor over that minor foundation issue after it’s repaired)
  • Clean out
  • Update bath and kitchen with tile and granite
  • New light fixtures
  • Paint in and out
  • Finish second bedroom

1a

The ARV on this below market value property is $79,900. We just finished the rehab in the middle of January 2016. And guess what? By early February, we already had an owner finance buyer for it: $5000 down, $850 per month, $79,000 final price, 10% interest, 30 year note.

That is what you can do with investment properties in an under valued market here with San Antonio investment property. Anyone who buys San Francisco investment property or Los Angeles investment property or Seattle investment property will never see these types of returns or prices.

 

Forbes: San Antonio TX Is #3 Best City to Invest in Real Estate, Beating Austin TX!

According to a recent survey by Forbes magazine, San Antonio TX is one of the best cities to invest in real estate. According to Forbes, San Antonio has all of the features of a good city to invest in real estate, or to buy a home to live in:

  • Strong job growth
  • Strong growth in population
  • Home price appreciation

San Antonio also is still considered to be under valued. Forbes stated that Texas has three cities on the list. Note that the average home price in San Antonio is only $201,000. Of course, the under market value properties that I buy are usually from $25,000 to $70,000.

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Also, the cities in Texas that get more play than San Antonio – Dallas and Austin – are #6 and #7 on the list respectively, with much higher housing prices. Austin’s average home price is a high $281,000, which makes it not as good a city to invest in real estate. I avoided investing in Austin years ago and found San Antonio much more affordable with good cash flow.

One of the big benefits of investing in under market value property in San Antonio TX as an out of state property investor is that this area does not experience major booms and busts like other cities. The last recession hit much of the country hard, but the downturn here was quite shallow. Texas has rebounded strongly in the last five years, and most of the jobs created in the US have been in TX.

The energy boom with higher oil prices helped to fuel San Antonio growth, but even with cheap oil now, San Antonio still is doing well as we have a very diverse economy. San Antonio is home to many financial firms and data centers, Forbes adds. And, the year over year job growth in San Antonio is higher than Austin 3.7% vs. 3.3%.

Forbes thinks that Texas will be a good place to invest for years for out of state property investors , especially San Antonio, until houses are over market value. However, I always buy my investment properties under market value, and I see no sign that this is going to change.

What kind of under market value property do I buy? Here’s a great example:

Front

  • Address: 1609 W Travis St, San Antonio, Texas 78207
  • Year Built: 1950
  • Description: Booming San Antonio Market out of state investment property, very popular location west of downtown, 1609 W Travis St, San Antonio, Texas 78207-3567, 3 beds, 1 bath, 1100 sqft, estimated repairs: 38K, includes paint in/out, new HVAC, flooring, foundation, update kitchen/bath, etc.
  • Max After Repair Value: $89,900
  • Cash Price: $35,000 firm.
  • Exit Strategy: Owner Finance with 35K repairs: 5-10k down, $895 monthly P/I, 30 year amortization, 10% interest, Price: 89.9K, can sell note after 1 year; or rent: $900 monthly with 38K in repairs.
  • Notes: We recommend that you owner finance this out of state investment property because you will have no maintenance expenses. ROI will be ~10%.
  • Contact us for more information or to make offer.
  • Sold and Rental Comps: Rental Comps 1609 W Travis Sold Comps 1609 W Travis St

This type of under market value property in San Antonio is exactly what helped me to financially retire at 28 years old. It really is the best city to invest in real estate.

 

Five Big Mistakes To Avoid When Investing in Under Market Value Property

Investing in under market value properties wisely can bring you passive income year after year. It’s such an attractive notion that many real estate investors end up getting overeager and jump into real estate investing too quickly without enough thought, and they make big mistakes.

I see a lot of new real estate investors make major mistakes especially when the market gets hot, such as it is now in San Antonio TX where I invest in below market value properties. New investors jump in when things are ‘hot’ and they make a lot of errors, and many get out quickly.

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I have made millions of dollars in under market value property in San Antonio TX, but there are lots of mistakes rookies can make.

Here are some of the biggest mistakes I see real estate investors making when investing in under market value properties:

#1 Listening to Someone Who Has Never Invested in Under Market Value Property

There are plenty of people out there who have never invested outside of their 401k and will tell you how awful it is to invest in real estate. Or, if they have invested in under market value real estate, they probably made some of the errors you will see here. You should ignore people who just generally bad mouth investing in real estate. I financially retired with distressed properties in San Antonio TX at age 28, so I know investing in real estate can work!

There also are people who are actively investing in real estate who just trash the business. They must have made a lot of mistakes and are losing money. You should ignore them too.

#2 Listening to a Person Who Wants to Sell You a $30,000 Real Estate Investing Program

On the other end of the spectrum, you have people who are overly enthusiastic about investing in below market value properties. If you will only buy their expensive training program, they will show you how to make a million dollars in real estate this year. Most of those programs are taught by ‘gurus’ who do not actively invest in real estate.

In most cases, there is nothing in that $30,000 program that you cannot find out mostly for free online or from free mentors. If you must spend some money to learn the business, consider paying a local expert investor a few thousand dollars to teach you how to invest in under market value property.

I have personally spent thousands of hours learning my local market in 78207, 78210, 78201 and a few other zip codes in San Antonio. No one knows my under market value neighborhoods better than I do. It is that knowledge that allows me to find really good distressed property deals.

The key to being successful in real estate investing is learning your local market so you get good deals under market value in areas that people want to live in. You also need to be able to build an expert team of contractors, agents, investors, real estate attorney, title company, etc. That’s the key to success in real estate investing, not an expensive program.

The other option is to partner with an expert wholesale property team in your city who finds you the best under market value properties. There are plenty of good ones out there. In my case, I buy the distressed properties for cash after doing careful research on the house and the area.

Then I resell the house to an investor, do the $30,000 in repairs for them, and resell it with owner financing. This is a good strategy for the out of state property investor who does not have the time to be a landlord or to become an expert in the market.

Here’s a great example of the kind of under market value investing I do. 

#3 Buying Under Market Value Property for Appreciation

When you buy real estate and wait for it to appreciate, you aren’t really a real estate investor. You are a speculator. Now there is nothing wrong with speculating in real estate; I have bought some land outside San Antonio before and waited for it to appreciate and I did ok.

I also bought a car dealership at 1/2 price and waited a year and then resold it for a 100% profit. But buying for appreciation is not my main business. And here’s the key – I have passive income coming in from my investment properties, so I can afford to speculate.

Many under market value real estate investors will get into the business without a lot of cash and will buy a property waiting for it to appreciate in value. This is big trouble waiting to happen. That property may be producing negative cash flow, that is, costing you money every month, while you wait for it to appreciate.

Listen to what my mascot Teddy has to say –

speculate teddy

I do not care if my under market value properties appreciate or not. If they do, fine, if not, fine. I still am making 12% per year on my properties without maintenance (I owner finance everything I own).

The bottom line on appreciation is you never know exactly when house values are going to go up or down. Betting the farm on that is a risk I am not interested in.

It also is not a good idea to buy a fix/flip house and hope for appreciation. The market has to keep going up in value for you to turn a profit. A ton of flippers went bankrupt in the last crash doing this.

I mostly buy and hold my investment properties in San Antonio, truly one of the best cities to invest in real estate (strong economy, cheap under market value properties, growing population). But when I do buy a flip property, I buy it 20% under market value or more so I am well protected from a downturn in the market.

#4 Underestimating Repairs on Under Market Value Property

This is one of the killers of new real estate investors – they spend too much on repairing the house. It is easy for even experts to underestimate the repairs needed on a property. I own a construction company and I usually do about $20,000 of rehab on an under market value property.

But sometimes when I get in there, I see that the foundation needs more work than I thought. Fortunately, I can afford it and I always add about $5000 or $7000 to the cost of the rehab to be safe.

New investors will very often vastly under estimate repair costs, and overpay a retail priced contracting crew for the work. There goes your profit. I’ve done nearly 1000 deals in my career with thousands of properties, so I know what a rehab is going to cost.

I also owner finance my houses to blue collar workers, so I repair the house enough to get it sold, and leave the rest of the work to the end buyer.

Remember to not over improve the house. People tend to want to make the house as nice as where they live. You do not want to make the house any nicer than houses on that street.

I do not advise new under market value property investors buy an old house on their own. The older the home, the more fixes it will need. And that old house may eat up all your profits in repair costs. You really should partner with an expert real estate investor in your city to make sure you make money on your first deals.

#5 Overpricing Your Below Market Value Property When You Sell It

A new investor often will pay too much for the house, under estimate the repairs, spend too much on the rehab, and then overprice the house when they sell it on a flip. That house could sit for months and be difficult to sell.

I am not a regular flipper as it gets harder and harder to make a profit when the market is appreciating, such as it is now in Texas. I find that I can make more money in more real estate market situations with buy and hold, owner finance.

 

How Do You Buy Under Market Value Properties in Another Market?

Buying under market value properties can be a wonderful investment, whether you decide to rent them out or owner finance them (as I do in my 100+ property portfolio).

Of course, the major advantage of buying under market value properties is the cash flow that they generate each month. On my below market value properties in San Antonio TX, I earn approximately $700 per month on my owner financed properties owned in cash. Here is an example:

new front
$65,000 cash price, $15,000 rehab, resold for $99,900 owner finance, $1041 per month, 7 DOM, 12.9% ROI.

This under market value property was purchased by a CA cash buyer in July 2015 at 1622 Alametos St. This house is in 78201, and is north of downtown. This region is seeing rapid growth and appreciation.

The investor bought cash on this below market value property, and we completed $10,000 in repairs in 3 weeks:

  • $65,000 cash price
  • $1500 carpet removal and adding wood vinyl in 3 bedrooms
  • $3500 HVAC
  • $750 for third bedroom conversion.
  • $750 for dumpster – clean out
  • $1500 two tone interior paint
  • $500 update five light fixtures
  • $1500 level front bedroom
  • $1500 closing costs

Total Investment: $76,500

Repairs were complete on July 31, 2015 and property was put on MLS. By Aug. 3, we had two full owner finance, price offers as follows:

  • $1041 per month
  • 30 year note
  • 10% interest rate
  • $5000 down payment
  • $99,900 final price
  • $216/mo. taxes/insurance

Investor’s total monthly income after taxes/insurance is $825.

Final ROI: 12.9%

Now that is some nice passive cash flow, isn’t it?

Many under market value investors are not able to find good properties with cash flow in their home markets. So, they may be looking outside of their home market at out of state investment properties.

But where should you buy your under market value properties in another state? Hopefully I can shed some light on that key question here.

I have been fortunate that I do not need to consider buying out of state investment property because my returns in San Antonio TX are still over 11% per year, even with housing prices up a lot in the last year. Two years ago, a typical below market value property I bought was $40,000, now it is more around $55,000.

I continue to invest here in San Antonio, one of the best cities to invest in real estate, because the return is good and I have many advantages:

  • I have a real estate license in TX, which saves me big when I buy under market value properties.
  • I have a large network of contractors, fellow investors, lenders, agents, title companies etc.
  • I know my neighborhoods very well, which means I know how much to pay for a house and how much to resell it for. I also know how much to rehab a house without overspending.

But if you are an out of state investor looking for best cities to invest in real estate, what should you consider?

  • Before you start to look for out of state investment properties, I suggest that you increase the area that you are looking for under market value properties in your home state. If you only need to drive 90 minutes to find a good area to buy under market value properties, then that might have more appeal than looking 1000 miles away. If you are a California investor, this may not work for you though.
  • If you cannot invest in under market value property near you, think about areas that you know. Did you grow up in another state? Do you have any family or friends in a good state you can buy out of state investment property? The better you know that area, the easier it is to find below market value properties in decent areas.
  • If you cannot find a good out of state investment property where you know people, do you have time to research a new market? It is usually a good idea to visit a new investment property area and you can have a bit of a vacation while yo do so.
  • Look at lists online for the best places to buy under market value properties this year. You can find excellent resources online that tell you the cities with the best rent to value ratios. I personally prefer to owner finance my properties and not rent them, however.

How to Know If An Area Will Be a Good Under Market Value Investment

Once you have located a good potential below market value investment market, you want to know if you will be able to produce good cash flow. You want to make sure that the economy is strong and stable above all else. Getting the cheapest real estate is NOT the only consideration!

  • Is the population growing or shrinking? A growing population is a very good sign of a strong job market. Here in Texas, we are seeing major population and job growth as of 2016, even with lower oil prices.
  • Are housing prices going up or down? If housing prices are dropping, this is not always bad. During the 2008 crash, the values of under market value properties in San Antonio dropped, and it was awesome! I could buy houses for $30,000 again, and I did – more than 25 of them. However, if housing prices are crashing and the population is leaving, this could be trouble.
  • What kind of risk is in the area? Is it a part of the country that has a lot of tornadoes or floods? Are there crazy swings in housing prices? In San Antonio, we are pretty steady here. The market didn’t go too high in the boom, so didn’t fall that far in the crash.
  • What about property taxes? We have no state income tax here in TX but we have higher property taxes. Still, I’ve managed to financially retire at 28 years old with my owner finance portfolio of under market value houses.

If you are thinking about buying out of state investment property after you investigate the local market, you will need to have a good team to rely on in that area.

One way to minimize problems with property management in an out of state market is to owner finance your properties rather than rent them out. You can have a buyer live in your house and pay you mortgage payments each month. The buyer maintains the house, and if they don’t pay, you foreclose just as a bank would. This can work very well in Texas, which is an easy foreclosure state.

In summary, there are many excellent below market value property markets to invest in. Just because you don’t live in one does not mean you can’t invest. If you are thinking about investing in another area for under market value property and have questions, contact me and I’ll try to help.

 

 

 

 

 

 

 

How You Can Earn 12% ROI on An Under Market Value Property Without Repairs

Most under market value or wholesale property investors I know buy houses with mortgages and rent them out. I used to heavily purchase under market value properties and rent them out, as well.

However, about 10 years ago, one of my real estate investing mentors pointed something critical out to me: John, you’re in San Antonio TX. You have all these blue collar workers you are renting houses to. Why not just owner finance the under market value property to them and let them do most of the repairs?

Wow, what a great idea, I thought! Most of the time, when you purchase a whole sale under market value investment property, you spend $30,000 or more doing the rehab and then you have to work to find good tenants. And we all know some of the disadvantages of rental properties:

  • Leaking roofs, electrical problems, broken hot water heaters, busted toilets.
  • Damage by tenants
  • Tenants that don’t pay and stay in the property
  • Vacancies
  • Problems with property managers, not to mention the expense

I had all of these problems at one time or another with my 200 rental properties. However, in 2008, I started to convert all of my below market value rental properties to owner financing.

Here’s how I turned my renters into owner finance buyers:

  • I sent each renter a letter asking if they wanted to buy the below market value property.
  • People who wanted to buy it had to send me all of their financial documents so that I could properly qualify them per Dodd Frank rules.
  • People who did not qualify or did not want to buy the property left when their lease was up.
  • Those who wanted to buy the property put $5000 down and agreed to my terms – 10% interest, 30 year note, $600-995 per month PITI.

Once the occupants had bought the properties, they were responsible for all of the maintenance of the under market value whole sale property. I no longer had to be a landlord! What a great deal. Pure passive income every month and no landlording.

If I ever have to foreclose on the below market value property, I’m in TX, and it’s easy to foreclose here – a non-judicial foreclosure state.

And that, my fellow under market value investors, is how you can earn 12% per year on a below market value property and never have to do repairs. That is all I do in my wholesale property business in San Antonio TX now – owner financing. Below is a perfect example of how you can earn a high ROI without maintaining the property:

This distressed property sale was completed in August 2015. The market in San Antonio TX has changed greatly in the last year. The market is booming and prices are up across the board, even in fixer upper homes.

new front
$65,000 cash price, $15,000 rehab, resold for $99,900 owner finance, $1041 per month, 7 DOM, 12.9% ROI.

Still, we have CA investors coming into our fine city and buying property investment homes and making 12-13% ROI annually, with no property maintenance.

This property was purchased by a CA cash buyer in July 2015 at 1622 Alametos St. This house is in 78201, and is north of downtown. This region is seeing rapid growth and appreciation.

The investor bought cash, and we completed $10,000 in repairs in 3 weeks:

  • $65,000 cash price
  • $1500 carpet removal and adding wood vinyl in 3 bedrooms
  • $3500 HVAC
  • $750 for third bedroom conversion.
  • $750 for dumpster – clean out
  • $1500 two tone interior paint
  • $500 update five light fixtures
  • $1500 level front bedroom
  • $1500 closing costs

Total Investment: $76,500

Repairs were complete on July 31, 2015 and property was put on MLS. By Aug. 3, we had two full owner finance, price offers as follows:

  • $1041 per month
  • 30 year note
  • 10% interest rate
  • $5000 down payment
  • $99,900 final price
  • $216/mo. taxes/insurance

Investor’s total monthly income after taxes/insurance is $825.

Final ROI: 12.9%

If you have questions about owner financing property in San Antonio (one of the best cities to invest in real estate) or anywhere else, please contact me.

Which Are the Best Texas Cities to Invest in Real Estate?

If you are considering to purchase under market value, out of state investment property, you probably will be considering the state of Texas as a possibility. Texas generally offers some great benefits for out of state property investors and has some of the best cities to invest in real estate.

Forbes recently recognized Texas as a great place to buy under market value investment properties. In fact, FOUR of its Top 10 Best Buy Cities in 2015 for real estate were in Texas. Forbes analyzed more than 300 housing markets and Texas turned out to be a great place to invest in real estate. Let’s take a look at each one:

#1 Austin

Forbes rated Austin #1 in its Top 10 Best Cities to Invest in for 2015 with its impressive population growth of 8.9% and job growth of 3.6%, which is far better than the national average of 2%.

Milken Institute’s Growth Comparison for Austin, 2nd Best-Performing City in US in 2014

austin

More figures about Austin to consider for out of state property investors:

  • MSA is Austin/Round Rock TX
  • Population is 1.8 million
  • Average home price is $261,000
  • Population growth from 2010-13 was 8.9%
  • Job growth annually is 3.6%
  • Unemployment is 4.2%
  • Home price to rent ratio is 19

Of course all this growth is driving housing prices higher. Austin house prices are 8% over the typical income for the region. But under market value investors  should take heart because the higher house prices in this area are due the demand, not a housing bubble and over inflation.

Austin is not reliant upon energy for most of its economy so the oil crash should not be a major factor here.

#3 Houston

MSA is Houston-Bayton-Sugarland TX. As is the case in Texas generally, Houston has a business friendly environment, no state income tax for people or corporations and a very educated population.

Houston investors made gross returns of 18% in 2015.

Houston also has strong growth in jobs, a booming population and low housing prices. The average price here currently is $214,000. Some experts say the housing market in Houston is still undervalued, so if you are looking for under market value property to invest in, you could do well in Houston.

Remember, in every real estate investment market, there is a strong correlation between the price of homes and the median income. When prices go high above that level, the market is overpriced and you will have a hard time finding under market value property that will produce passive income. If houses are under valued, you should feel confident that you will make a solid rate of return with investment property. Houston is a solid out of state property investment option.

Also note that the median age of inventory in 2015 for Houston was only 54 days.

I would watch to see what is going to happen to the Houston market in 2016 as oil prices continue to drop. Houston’s economy has a lot to do with energy exploration. The rental market is driven largely by transient oil and gas workers, so we’ll see how the Houston market responds to lower oil prices this year.

#5 Dallas

MSA is Dallas-Plano-Irving TX. The population of Dallas is growing at at least 6% per year and will continue for the next few years at least. It also has a job growth rate of 3%, and this is being driven by a boom in high tech companies. One of these is One Technologies LP, which is an online credit monitoring service that was ranked in 2014 as the quickest growing private firm in Dallas.

Investors made almost a 20% return here before expenses in 2015, which is due to strong appreciation in prices and high rents.

Under market value property investors should note that 13 privately held corporations worth $1 billion or more are in the Dallas metro area, such as Dean Foods, Exxon Mobil, Kimberly Clark, Neiman Marcus, Southwest Airlines and Texas Instruments.

In 2015, new home closings rose 20% in Dallas from a year earlier.

#6 San Antonio

MSA is San Antonio TX. San Antonio is where I have invested for most of my below market value investment career since 2001. I continue to invest in under market value properties here, rehab them and resell with owner financing. Here’s why I continue to believe that San Antonio is one of the best cities to invest in real estate:

  • Prices are still low, even with the economic boom. The average home price here is $189,000. Even with higher prices, I still buy below market value properties for $50,000, do $25,000 in rehab and sell with owner financing for $99,000. That still makes me an 11% return, which is excellent passive income.
  • Booming economy, with the biggest growth in construction employment from 2014 to 15. Even though oil prices have effectively crashed in the last year, I have no shortage of buyers for my under market value properties. Only 2-3% of our economy depends upon oil and gas. My workers may get laid off from oil work, but they find other blue collar employment.
  • Strong job outlook, with a 3.5% job growth rate in 2015.
  • Growing population – San Antonio is the #9 fastest growing city, according to Forbes. This means strong demand for owner finance and rental properties, and is a great option for out of state property investment.

If you want a good example of how good under market value investment properties can be in San Antonio, here is one:

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$62,000 cash purchase, $10,000 rehab, 50 DOM, sold for $89,900 owner finance, $937 per month, 12.3% ROI.

This 3 BR 1.5 bath property investment with positive cash flow north of downtown San Antonio TX is in a heavily revitalizing area. It was bought by the investor for $62,000.

It only needed approximately $10,000 of rehab, including new flooring, paint in and out, and minor foundation work.

The total project cost to the investor was $72,000.

Within 50 days of the completion of rehab, it was sold with owner financing with the following terms:

  • $5000 down
  • $89,900 final price
  • 10% interest
  • 30 year note
  • $937/month PITI
  • Cap rate 12.3%

I have invested in hundreds of these under market value properties in San Antonio and that is what retired me at the age of 28. 🙂

 

 

 

 

Why I Chose San Antonio As My Out of State Investment City

Whether you are a new below market value real estate investor or an experienced hand, a very important part of your investing success is to select the best out of state investment property. For many investors, the best place to invest in below market value property is not where they live.

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When I started investing in under market value real estate in 2001, I first considered investing in Massachusetts, where I graduated from college. However, I only had about $50,000 to invest, and clearly I could not buy a dog house for that amount in Boston!

So, I did a lot of careful research about the best cities to invest in real estate, and after a few months of searching, I settled on San Antonio TX.  I chose San Antonio for my below market value property investing because of the following factors:

  • Incredibly low prices: I could buy under market value houses in San Antonio for $25,000, do $10,000 in rehab, and resell with owner financing for $49,900. That’s an amazing return. Even today, with prices higher, I still can make 11% ROI on these under market value houses with a price of $50,000.
  • Strong economy. Bizjournal.com recently stated that San Antonio had the largest growth in construction employment from 2014 to 2015. This reflects the strong job and population growth that has shown no signs of slowing.
  • Growing population – Forbes has ranked it as the 9th fastest growing city in the US. This of course means there will be strong demand for houses for sale and houses for rent. From 2011-2012, San Antonio’s population grew almost 2%!
  • Strong job outlook: Even though there is less growth than previously because of the slump in oil prices, San Antonio is still leading Texas for job growth as of early 2016. The city job growth rate still is a healthy 3.5%. One of the reasons I chose San Antonio as a city to invest in below market value property is that only 2-3% of its job base is involved in energy production.

Here is a fine example of the type of under market value property I buy in San Antonio:

l20b61845-m0xd-w640_h480_q80
$62,000 cash purchase, $10,000 rehab, 50 DOM, sold for $89,900 owner finance, $937 per month, 12.3% ROI.

This 3 BR 1.5 bath property investment with positive cash flow north of downtown San Antonio TX is in a heavily revitalizing area. It was bought by the investor for $62,000.

It only needed approximately $10,000 of rehab, including new flooring, paint in and out, and minor foundation work.

The total project cost to the investor was $72,000.

Within 50 days of the completion of rehab, it was sold with owner financing with the following terms:

  • $5000 down
  • $89,900 final price
  • 10% interest
  • 30 year note
  • $937/month PITI
  • Cap rate 12.3%

If you choose San Antonio as your out of state investment property location, you will need to find a good Realtor and/or wholesaler to locate quality properties for you. My advice on that is to find a good wholesaler who has been working in the city for more than 10 years and has done several hundred transactions.

The wholesaler will make a 2-3% profit when he sells the under market value house to you, but the best wholesalers will leave you plenty of meat on the bone to make strong passive income. With a good team in place San Antonio is really the best out of state investment city, in my view.

 

Should I Pay for a Real Estate Investing Coach?

Key Takeaways

This article appears on Inman News.

  • Many times, the first free class offered by an investing coach is just to lure you into more classes.
  • It’s better to find an investor who has been in the business for a decade or more and has done 500 or more deals.
  • You must study the market constantly and stick to your niche.

Many beginners in real estate investing in under market value properties are lured into hiring a real estate coach or guru who promises to teach them how to be a successful investor — for a price.

Most often, these real estate coaches or gurus offer a lower-cost first seminar about flipping houses, which is just selling the next part of the program — the full real estate coaching system that might cost $10,000, $20,000 or more.

Is one of these real estate coaching programs worth it? Generally, beginning investors should use caution when paying thousands of dollars for any type of coaching or guru program. In my view, much of that money would be better spent on buying a good under market value, out of state investment property!

The bottom line on these programs is that a lot more goes into being a successful real estate investor than learning a slick system from an expert.
A lot more goes into being a successful RE investor than learning a slick system from an expert.

These real estate investing coaching programs don’t usually teach you the truth of real estate investing:

  • Becoming successful in this business takes a lot of work — a lot of work.
  • Most aspiring real estate investors never even do a below market value deal, let alone make any money at it.
  • A huge part of being a successful long-term investor comes from developing a stellar reputation in your market.
  • Being successful in investing comes from establishing a proven team of real estate professionals at affordable prices, including rehabbers, closers, agents, title companies and more.
  • The vast majority of successful investors are experts in their local area, and that takes years of work in under market value properties.

None of the above can be taught in a five or 10 day class by a real estate investing coach.
How I became a successful investor

I have developed a successful investing system of owner financing in Texas that allowed me to financially retire at a young age. I did gain much knowledge and support from free mentors in real estate, but I never paid any coach to teach me anything.

Over the years, I have spent thousands of hours studying my local real estate market. I know exactly what is going on in my zip codes, such as 78201, 78210 and 78207. My knowledge means I know exactly how much to pay for a house and how much to rehab it. That knowledge takes years to develop in the best cities to invest in real estate.

My reputation in my town also took a long time to nurture. People know who I am because I close fast on deals — in 10 days or less — with cash. The best deals often find me because I have spent years becoming a respected expert in distressed houses in my city, and I always do what I say I am going to do.

I discuss my success only to point out that getting to this level took a lot of work, and didn’t come through paying a coach or guru a wad of money to teach me the secrets of investing.
Tips to succeed in real estate investing

Here are a few tips to help you succeed at real estate investing:

  • Partner with an experienced investor to teach you the ropes in your city. Offer to help him or her with business to learn how to become successful. You should never pay someone to teach you.
  • Ask your investor friends who taught them to be successful.
  • Focus on a niche. There are many ways to succeed, and fail, in real estate investing. Focus on one or two areas of real estate investing and never deviate. My niche is owner-financed houses from $60,000 to $100,000. That is the only type of property I buy and sell.
  • If you are in an expensive area, consider buying an out of state investment property in a cheaper area with a team you totally trust.
  • Find a free mentor who has done at least 500 deals and been in business more than 10 years. Those are the people who can teach you what you need to know — but don’t pay for it.

So in summation: no, don’t hire a real estate investing coach. It’s likely that your money is more valuable to that coach than any knowledge he or she might impart upon you.

What Are Some Considerations When Buying Under Market Value Property?

As an experienced under market value property investor in San Antonio, I love to get a great bargain. Of course, just because the house is being sold below market value does not mean it is a great buy.

When I find a potential under market value property that I may buy, I keep in mind why people usually sell houses for less than they are worth:

  • The under market value property needs a lot of rehab. This is usually one of the reasons the property is being sold so inexpensively. Most of the houses that I buy under market value need at least $20,000 in repairs. Buying below market value property that needs rehab is fine, as long as you are able to do the work cost effectively. I own a construction company, so I can usually do the $40,000 rehab for a fraction of that amount.
  • Divorce – people split up and will sell a house for less than it is worth.
  • Foreclosure – Mortgage companies may repossess a property and will often sell the properties at auctions. I always advise new under market value property investors to be wary of auctions. Many of the buyers at these events are retail buyers, and they will drive up the price on that below market value property. If you pay too much, you will never make any positive cash flow.
  • Estate sales – I get most of my below market value properties through estate sales. Usually there are several heirs and they are willing to accept a low price to just get the house sold. Of course, my offer on the below market value property takes into consideration the repairs that must be performed.
Front
An under market value property before my rehab.
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After rehab – being sold for $119,900.

When you are considering buying an under market value, out of state investment property, be certain that you do very careful due diligence. Newer investors routinely pay too much and under estimate expenses. So long, cash flow!

Remember:

  • Do a careful personal inspection of the under market value property, and look around the neighborhood as well. Check the condition of most of the other houses around it. Is it the ugliest house in the neighborhood? It could be expensive to rehab to get it up to par.
  • Check comps for houses that have sold in the area in the last six months. The best way to do this is to have a real estate agent investor who can help you compare house values. I’m a real estate agent myself so checking comps is easy.
  • Check the rental and mortgage prices in the area of the below market value property. Your real estate agent can run rental comps in the MLS. Personally, I do owner finance on my under market value properties, and I try to keep the monthly payment around the rents in that area.
  • Get a really good idea of what the rehab expenses will be. I have seen so many investors lose money because the costs of rehabbing the property doubled.
  • If you are concerned about the expenses of owning rental property, consider owner financing your under market value investment properties like I do. This is an especially good move for an under market value investor who wants an out of state investment property.  You have no worries about expenses as your buyer take care of the asset.

Also be certain to research which city you are going to invest in. Some of the best cities to invest in real estate include Kansas City, Indianapolis, San Antonio, and Charlotte.

Why San Antonio Is One of The Best Cities to Invest in Real Estate

I first came to San Antonio as an under market value property investor back in 2001, and it has been a great decision. Buying inexpensive, below market value investment property has enabled me to live a great, rewarding life. I financially retired at 28, and I continue to invest in under market value property today, which helps to revitalize San Antonio, one of the best cities to invest in real estate. In fact, I know many investors who used to buy only California investment property who now buy here.

Overall, San Antonio is one of the best cities to invest in real estate because of:

  • A rapidly growing population attracted to San Antonio and Texas low tax, pro business environment
  • Strong job growth even in down real estate markets. Even in the big downturn in 2008, San Antonio unemployment never went above 7% and now is down under 5%.
  • Diverse job base. San Antonio is not just about gas and oil. We also have a lot of manufacturing jobs, including Toyota, high tech employment and military bases.
  • Large population of hardworking blue collar workers, which drivers demand for owner finance properties and rental properties.

Coming into 2016, experts think that we will eclipse total home sales in 2015, which was 24,948, according to the San Antonio Board of Realtors.

sabor

Those three key drivers of home purchases – growth in jobs, steady mortgage prices and increasing home value, are not showing any signs of slowing in San Antonio real estate.

In fact, we actually are seeing not enough new homes being built to meet the demand. This is good news for the out of state investment property buyer – it increases demand and prices for our under market value investment properties!

I can definitely tell you that this is true about San Antonio real estate: My below market value investment properties that were $40,000 two years ago are now $60,000, and I usually sell my owner finance houses in under 60 days. Still, my many out of state investment property buyers earn 12% ROI on these under market value houses. Anyone considering, say, California investment property, would be happy with these numbers.

As of now, the median home price in San Antonio, one of the best cities to invest in real estate, is up 6.8% from 2014, but still is only $192,000. Try to buy a house for $192,000 in California!

My best guess is that property values will continue to climb in San Antonio for at least two more years. It is a great time to buy San Antonio investment properties!