Do You Have a $200,000 Salary and Hate Your Life? Buy Under Market Value Properties

I can’t tell you how many people I run into in my under market value  properties career who have good jobs and hate their lives.

That is, they make $200,000 or more per year and yet, they work 60 hours per week, sit in dull cubicles for years and years, and wish they had the time to do what they want to do.

The truth is, most of us have been conned into thinking that the ONLY way to live in America is to trade time for money.

And you know what Teddy our mascot says?

time for money

That’s right. If Teddy knows that trading time for money sucks, you should be able to figure it out too. Passive income is the way to go – with under market value properties – at least 20% below market value. Who wants to sit bored in a cubicle or office for most of their working life? It’s a form of slavery, even if you are well paid.

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I stopped trading my time for money at a very young age – 23 in fact. That was the year I bought my first under market investment properties in San Antonio (I’m 38 now). I financially retired at 28, in San Antonio, one of the best cities to invest in real estate.

And I probably had it a lot tougher than you do….by this I mean, I didn’t have a lot of capital to start with. I actually had to borrow capital at 8% from a private investor to buy much of my early portfolio in fixer upper houses. Yet I had plenty of passive income in under market value properties within a year of starting.

But a guy or gal like you…..you make $200,000 per year or more out there in California or Washington….you most likely have some capital stored up so that you can buy under market value investment properties, and STOP trading your time for money. This type of out of state investment property is perfect for you. Passive income fast.

Here is a quick plan to stop trading your time for money TODAY. I am going to assume you have some capital to work with (if you don’t, go find some private investors to borrow money from like I did).

If you live in a high cost area, strongly consider buying an out of state investment property.

This under market value investment property is one that I have scouted out carefully in a very hot part of 78201, which is north of down town San Antonio. It is seeing a lot of young professionals moving in and property values are shooting up. There is a good chance you could get a young professional buying this under market value property from you, or a hardworking blue collar family:

edison front

 

  • Address: 2229 W Hermosa Dr. San Antonio, TX 78201
  • Year Built: 1948
  • Description: Distressed property sale, 2 beds 1 bath, 769 sqft, lot size: .14 acres yearly taxes: estimated repairs: 35K (convert to 3 BR).
  • Max After Repair Value: $129,000.00.
  • Cash Price: $69,900 firm.
  • Exit Strategy: Owner finance 10% interest rate, $5000 down, 30 year note, $1100 per month PITI. Plenty of positive cash flow.
  • 10% ROI no maintenance.

Here’s how I was able to financially retire at 28 in one of the best cities to invest in real estate – I bought under market value properties just like these with cash or with borrowed cash. I do $35,000 in rehab (I now have a professional construction company that does this for me – no more getting my hands dirty). Then I resell the house with owner financing to a qualified buyer. What I do is super simple, and yet, so many people cannot see it !

The above out of state investment property will make you $1000-1100 per month, assuming you fund the deal with cash from your $200,000 or whatever job. In time you will be able to financially retire.

That’s it. Buy, rehab, resell, and collect the cash flow. It IS that simple. Lather, rinse and repeat. If I did it, Teddy says you can become financially retired too:

teddy2
I’m tired after all the rehab work today!

Earning 11% ROI on Under Market Value Property for Building Wealth

New and even experienced investors often ask me how I was able to build monthly positive cash flow of more than $40,000 per month – without starting with much capital.

There are many factors involved, but at the end of the day, my strategy is very simple for real estate cash flow:

  • I buy 20% under market value investment properties in San Antonio, Texas.
  • I perform about $25,000 in rehab in 45 days, and then resell with owner financing to earn a 10-12% ROI.

I also have a great good luck charm named Teddy, which you will learn about if you stick around long 🙂

teddy5

Now these are not very expensive houses; after all, this is San Antonio TX. My typical property is $60,000 or so wholesale, which is then resold with owner financing for $100,000 or so.

Each one of my below market value properties earns me ‘only’ $400 or $700 per month in positive cash flow. Some investors – especially those on the West Coast – might snicker at such a ‘small’ return.

However, one thing I have learned over 15 years in real estate investing in under market value properties is this: I would much rather do 100 ‘small’ deals per year, than 1 or 2 ‘big’ deals.

My little, bitty 3 bedroom houses for $100,000 or less may not look like much, but when you have 50 of them owned in cash, you are talking serious, positive cash flow. And that is what allowed me to financially retire at 28.

These little houses are becoming even more valuable in San Antonio these days, given how the economy is growing. The north side of downtown, especially 78201 zip code, is appreciating very well. I love to buy fixer upper distressed properties in this area – under market value.

edison front

This house 2229 W Hermosa, San Antonio TX 78201 is a typical hot deal north of downtown that will do very well for the savvy investor.

After I do $35,000 in rehab on this below market value property, I will resell it for the investor with owner financing. I’ve bought and sold hundreds of houses in this area, and I know that I can resell this property with owner financing for $129,000. That will generate approximately $1,000 per month in positive, long term cash flow for the investor.

It is on under market value deals just like this one that I have built a large nest egg of real estate cash flow that made me financially retire so young.

 

How I Buy Investment Properties in Texas Below Market Value

I financially retired at 28 with more than $20,000 per month in cash flow. The most important factor in my success in buying the best San Antonio investment property is every house I buy is under market value. That is, I buy under market value properties that require rehab. It also helps that I invest in one of the best cities to invest in real estate.

I have more than 50 buy and hold, owner finance properties that I own in cash that I purchased under market value between 2001-2012.

I also have a great dog and mascot named Teddy, which you will learn about if you stick around TexasCashFlow.com 🙂

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How I Determine Market Value

One of the biggest reasons I became a real estate agent was so I could determine market value of the best below market value San Antonio investment property on my own. It is never a good idea to use Zillow to determine market value of a property. Zillow is notoriously off base, especially when you are dealing with off market properties or an out of state investment property that are not in the MLS.

Also, bear carefully in mind that the value that you come up with will largely depend upon the repairs your under market value properties need. I like to buy properties that are at least 20% under market value. So if the house is worth $90,000 and needs $25,000 in rehab, buying the house at $115,000 is a waste of time and money. I will not make any money. I want to buy that house for at least 20% under $90,000, or about $72,000, so I can make a good profit.

How I Buy Under Market Value Properties

There are several ways that I use to buy under market value properties in San Antonio TX:

  • Buying fair market sale houses: These are houses that are owned by a private person who has equity in the house and there is no bank involved. Most of these sellers are in no rush to sell, so this can be tough. But I have bought many under market value properties in estate sales; that is where I get the bulk of my deals. Often times, there are several children involved and they just want to be rid of the house that needs repair.
  • Buy off market properties: Given my level of success in real estate investing, I tend to find many good deals that are not in the MLS. Agents and investors in the business send me below market value deals. Of course, you need to get experience in the business to work this way, but know that if you do become successful, good deals often find you. I have many of my below market value properties for sale on this website that will make you a good profit.
  • Buy REOs under market value: These are Real Estate Owned properties, and these are houses that the banks have foreclosed on. REOs are usually in the MLS, and some of them will be repaired and some will not. Of course, REOs are tougher to find now and many of them need a lot of work. To make your offer more attractive, you may want to tell the seller you don’t need to do an inspection. Pay all cash if you can – cash is king!
  • However you buy your under market value investment property or out of state investment property, do not spend too much money on the rehab. Rehabs are where many investors lose their rears. Spend too much on your rehab and you will never make any money. I own a construction company and I am able to do rehabs for 50% less than most contractors on the best San Antonio investment properties.

That in short is how I buy below market value properties in Texas. The big thing to remember is to stick to your guns on your numbers – if you need to buy that house 20% under market value to make money, don’t go over it. Move on to the next under market value property deal if you have to – there are lots of them out there!

 

 

What Is the Worst Mistake in Buying Investment Properties?

I buy under market value properties in San Antonio TX. As the real estate market continues to heat up in San Antonio, more people are jumping into the real estate investment business.

Many people who start to invest in under market value investment property in San Antonio end up never making money or losing a lot of money. That goes the same for people looking for out of state investment property.

Most often, people run into real estate investment problems because they are impatient or do not have a good, long term plan for good cash flow on below market value property.

I have been successful with my San Antonio investment properties (I financially retired at 28) because I have a very simple plan that I always stick to:

I buy distressed San Antonio homes for 20% or more under market value, and resell them with owner or seller financing to make a 20% return long term. The vast majority of my portfolio is long term buy and hold in the best San Antonio investment property.

dude

That’s my mascot Teddy there, chiming in! Of course, buying good distressed properties under market value in San Antonio is not easy. If it were, everyone would be buying them and retiring early!

Here is the most common mistake I see by far in people who buy distressed real estate properties and out of state investment property: They pay too much for the house and have very little cash flow!

They buy the house often at the top of the market, and the only way they make cash flow each month is if the property is always occupied, and there are no maintenance issues.

As soon as something goes amiss, they end up losing money each month and have no cash flow in their under market value San Antonio investment properties.

The biggest piece of advice I can give you is to always pay as little as possible for the investment property in the best cities to invest in real estate. If you are not skilled in negotiation or are just a beginner, you need to work with a skilled investor who can help you to get a low price on that below market value house.

If you have questions about investing for cash flow in under market value San Antonio houses, please contact me! I always can use cash partners and both of us will make a good profit in the best San Antonio investment property.

 

 

Buy and Hold or Flip Out of State Investment Properties?

Anyone who is involved in real estate investing for long will eventually ask him or herself a critical question:

Should I buy and hold or flip San Antonio investment properties?

Flipping houses has become very popular in the last decade, probably due to all the Flip That House type shows on TV. On the other hand is buy and hold investing, which is probably the oldest way to make money in real estate investing.

So which should you do? Well, it depends!

Overview of Flipping Houses

The basic definition of flipping a house is buying a property under market value (20-50% usually), improving it, and then reselling it for a profit. To gain maximum financial advantage, the goal is to sell the house as quickly as possible after the rehab.

A good house flipper in under market value houses will try to buy, rehab and resell the under market value property as quickly as he can. The reason is that holding a piece of real estate without any income coming in costs money. Some of ‘soft costs’ of holding a flip property include:

  • Property taxes
  • Utilities
  • Hard money finance charges
  • Any repair and maintenance

House flippers try to hold the property as little as possible. In the flips I have done in the last year, I held my San Antonio investment properties for about three months each.

Overview of Buy and Hold Investing with Out of State Investment Properties

This type of investing with below market value properties involves purchasing the under market value house, making some amount of improvements, and then keeping the house for rental or owner finance income. To pay for the monthly costs of holding the property in most cases, the house will be rented to a tenant. Typical holding costs for a buy and hold property are:

  • Financing
  • Taxes
  • Utilities
  • Property taxes
  • Maintenance costs

It should be noted here that there are other forms of buy and hold investing, which is the type we usually do. That is, we buy and hold the property in cash, and owner finance the under market value house to a qualified buyer.

The advantage of this type of buy and hold investing with out of state investment properties is that there are no maintenance costs. Also, without a mortgage, this type of under market value investing is usually less risky, especially in a downturn.

Pros of Flipping

  • Short term profits: You can, ideally, realize your profits in a few weeks or months. Your cash will not be tied up in an under market value property for very long, and you can move on to another deal.
  • If you can flip a house in under six months and make at least 15% profit, you have done very well.
  • Good ROI, if you know how to rehab an under market value property without overdoing it.
  • No renters or landlord headaches.

Cons of Flipping

  • Making money at it takes a lot of work. The reality shows make it look easy. Flipping a house and making money isn’t as easy as it looks.
  • Unexpected costs: Anyone who rehabs under market value houses for a living will run into unexpected additional costs. This can be especially damaging when you are trying to make quick profits.
  • Rehab problems: You might think it will take a week to do that roof, but it takes six weeks. That adds to your time line and when you will be able to make a profit.
  • In an appreciating market, you may have trouble finding under market value houses that are truly flippable.

Pros of Buying and Holding

  • Creating wealth: You can really build wealth over time with buy and hold investing, especially with owner financing rather than renting under market value property. Real estate also will generally increase in value over time, which can make you very well off.
  • Steady cash flow: If you own several properties that each make $800 per month, this is a nice way to earn a living.
  • No worry about selling short term: You can usually wait out the inevitable downturn in the market as you are enjoying the cash flow from the property. A flipper could end up in trouble if the market crashes in the middle of a project.

Cons of Buying and Holding

  • Market changes: If you need cash fast, you could need to sell your under market value property but the market dipped so you lose money.
  • Legal problems: Tenants can be a pain in the neck, which is why we mostly owner finance our houses. We only carry the note on our houses, so we have no tenant issues at all.
  • Struggles with being a landlord: A buy and hold rental property can turn into a negative cash flow situation easily if you do not buy the property at the right price, and if there are expensive repairs. Vacancies are another big problem in bad markets. Again, that is the plus of investing with owner financing and buying cash – no mortgages and no tenants.
  • Property management responsibilities for rentals

Overall, in our experience, we prefer buying and holding with owner finance over flipping. Flipping is great if we need to get more cash to buy and hold more houses, but it is not a long term wealth creation solution for us for Texas cash flow.

 

 

228 Yucca, San Antonio TX 78203

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  • Address: 228 Yucca, San Antonio, Texas 78203
  • Year Built: 1950
  • Description: 3 beds, 1 bath, 1056 sqft, large lot: .17 acres. Property sits on a beautiful large lot, plenty of room for growth or a wonderful playground and garden.
  • Max After Repair Value: $99,900
  • Cash Price: $34,800
  • Exit Strategies: Retail sale w/40k in repairs: 99K with FHA, VA, Conventional; owner finance w/40K in repairs: 5k down, $995 monthly P/I, 30 year amortization, 10% interest, Price: 99K; rent: $995 monthly with 40K in repairs.
  • Notes: We recommend that you owner finance this house because you will have no maintenance expenses. ROI will be ~10%.
  • Contact us for more information or to make offer.
  • Sold and Rental Comps: Rented Comps 228 Yucca sold comps 228 Yucca

More Pictures:

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3 ways to stay positive in the midst of a storm

Key Takeaways

  • Listening to positive and inspiring people keeps your spirits up in rough times.
  • Staying positive can lead to new business opportunities.
  • Stay away from negative real estate investors especially online forums.

This article now appears in Inman Select.

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Maintaining a positive attitude in San Antonio investment properties has been key to my long-term success since 2001. My mentors taught me that staying relentlessly positive in my investing would propel me through rough waters.

And have I ever been through some rough Class-4 rapids in my day.

But let’s back up for a second. Before the real estate crash of 2008, I focused largely on $1 million homes in San Antonio, Texas, which I rehabbed and resold for a 30 percent profit. Those were the days — rehab a house in four months and sell it for a $325,000 profit.
Learn from tough times

Then one morning in 2008, I called my local bank to borrow an additional $250,000 for two rehabs. The voice on the other end of the phone said, sorry — we aren’t loaning money on under market value San Antonio investment properties anymore.

What? And that was when it all started to fall apart. It was nearly impossible to borrow money, though I owned 100 houses free and clear and had an eight-year success record.

But I had a bigger problem. I was stuck with $1 million worth of under market value houses that I couldn’t sell. No one could qualify for mortgages, and the market crash had dropped their value to under $800,000.

I had many sleepless nights. Despair crept up on me as my bank account shrank.
Focus on positive speakers

Even though I was losing money left and right at this time, I still managed to keep a positive, can-do attitude with my out of state investment properties.

That’s easy to say, but how did I do it? I listened every day to positive speeches and sermons from famous speakers and pastors.

Being a Christian, I listened every day to Joel Osteen; I found his uplifting sermons about prosperity in all aspects of life to be a huge lift for me.

Also, I listened daily to the leader of Christian Business Leaders International, Bob Harrison, who is also known as the No. 1 increase authority in America.

Harrison has been through trying financial times as well. But his optimism has carried him through, and he is now one of the leading business speakers in the world.
Lead with optimism and find new opportunities

Maintaining an optimistic outlook didn’t just get me through the market crash. It also opened new horizons for me in real estate investing.

I discovered something shocking: the expensive $1-million houses are the riskiest investments. When the market dips, the demand for those homes plummets, as do the prices.

On the other hand, my little, bitty $50,000 three-bedroom, one-bathroom out of state investment property sells just the same no matter what’s happening in the market.

The demand was always there for these small under-market-value houses, and each one made — and continues to make — me $600 to $800 per month on owner financing.

So, the crash and staying positive throughout it led me to an amazing new business opportunity — buying and selling distressed homes and owner-financing them. Even better, the crash allowed me to snatch up 100 of these houses for about $20,000 each, and they now sell for $50,000 each or more.
The crash and staying positive throughout it led me to an amazing new business opportunity.
3 tips for staying positive

It’s vital to maintain a positive, can-do spirit in your real estate investing, no matter what. This is what makes you stick to it when other investors give up. Here’s my advice:

1. When things are bad, listen to uplifting and motivational speakers

Find positive business mentors online that can inspire you and keep you motivated. Zig Ziglar is another great one.

2. Remove yourself from negative environments, especially online forums

I love the Internet, but there is a lot of negativity on some real estate investing websites. Many people just want to moan about how bad things are — it makes them feel better.

I don’t have even one second of time for this kind of talk. Associate with positive, can-do real estate investors only. And by the way, I made plenty of money in real estate without a website or ever being online at all.

3. Shadow a successful, positive mentor

Whatever city you are in, you can locate a good real estate mentor to inspire you. Why would he or she talk to you? Because you have something to offer.

Offer to help them with hanging signs, making calls or doing office work in exchange for learning from them. I met most of my mentors at real estate meetings in San Antonio, and their positive attitude rubbed off on me.

Maintaining an optimistic outlook in down times led me to even better real estate success in under market value  properties, so always keep your chin up.

 

Turn 3 Properties Into 6 or More in 5 Years With Your IRA

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I am a strong believer of investing in under market value real estate property with all cash and owner financing them. When you buy distressed properties with all cash and finance them to qualified buyers, there is one overwhelming advantage with these below market value investments:

  • You have no mortgage on your property investment, so if the property is ever vacant for any reason, you do not have overwhelming financial pressure bearing on you. Over leveraged real estate investors were a major factor in the real estate meltdown five years ago.

Of course, on the other side of the ledger, you cannot purchase as many distressed sale properties as you could if you leveraged your capital and use 20% down conventional financing. This is always a valid concern for people with limited capital to invest in the best San Antonio investment property.

Still I would like to illustrate how the smart and patient investor can take three fixer upper homes and turn it into 6 and possibly more in 5 years, assuming you have no additional cash to invest after the initial investments. The illustration below assumes you owner finance the houses, so you do not have any maintenance costs. This is our tried and true positive cash flow model!

That $275,000 in Your IRA

I run across many aspiring investors that have savings and IRA assets of $275,000 or so. In current market conditions in San Antonio TX, that $275,000 can fund approximately three solid distressed sale properties in cash. Let’s illustrate with three houses we have right now:

  • Property 1 – 262 Bogle St., 78207: $50,000 + $30,000 rehab = $84,500 investment + $2500 closing costs, $2000 commissions = $89,000 total investment.

Total Owner Finance Cash Flow Per Year: $8940 ($745 per month after tax/ins.)

  • Property 2 – 109 Llano, 78223: $29,900 + $40,000 rehab = $69,900 investment + $2100 closing costs, $2000 commissions = $74,000 total investment.

Total Owner Finance Cash Flow Per Year: $9,000 ($750 per month after tax/ins.)

  • Property 3 – 1027 Sams Dr., 78221: $59,900 + $40,000 rehab = $109,000 investment + $3000 closing costs, $3000 commissions = $115,000 total investment.

Total Owner Finance Cash Flow Per Year: $12,000 ($1095 per month after tax/ins.)

Total Income from 3 Properties Per Year: $29,940

The next step would be to bank that positive cash flow from your three properties for up to five years. At the five year mark, you will have approximately $149,700 in your tax deferred IRA.

At this point, how many property investments you can buy depends upon the state of the San Antonio real estate market. Right now, the prices are higher because unemployment is lower, and more rehab is necessary to sell the houses. However, there is a high probability that in the next five years, there will be a substantial downturn in real estate prices.

In the last crash from 2008-11, the price of my distressed houses dropped from $50,000 median to $30,000 median. I was able to purchase many more homes during the downturn.

If the prices go down to approximately $35,000 per property plus $10,000 in rehab (possible in a slower economy given people simply want any house to live in), you could buy at least 3 more houses, and possibly 4. With three more houses, you would have approximately $45,000 in total cash flow from your grand total of six houses!

If the prices stay the same five years from now (which in my 15 year experience is very unlikely), you could purchase at worst two more properties, with a total cash flow from your five properties of $40,000 or so.

In either case, that cash can be banked in your IRA to buy more of the best San Antonio investment property whenever market conditions warrant buying more.

I am waiting until the next downturn to take my banked cash flow from my current portfolio to buy at least another 20 houses. You can and should do the same thing!

 

 

 

 

 

Converting My Rentals to Owner Finance Was the Best Decision Ever

Before the market crash, I owned more than 100 rental properties. Like many investors, I once thought that owning rental properties was the only way to make money in real estate investing.

What I found was, I always was dealing with some sort of problem with the distressed property. It didn’t matter that I had property managers. When you own 100 houses, you always have to deal with a repair, a late bill, a vacancy, paperwork and so on.

I also found it was hard to know what my cash flow on each house was each month. Writing checks for new water heaters and fridges gets old fast!

It was around 2009 that one of my mentors talked to me about how he had retired with millions in real estate: He only owner finances his fixer upper homes.

Rather than being a landlord responsible for property upkeep and repairs, there are more efficient ways to generate monthly cash flow.

Be the Bank!

Think about your own house. Each month you send an electronic payment (or check) to your mortgage company or bank. Your bank doesn’t have to maintain the property – you do. Since you are buying the property from the bank on terms, it is naturally to your benefit to maintain the property. The bank knows that statistically, homeowners are much more likely to keep their houses in good repair than renters. That’s what makes holding mortgage notes so attractive.

My mentor taught me that I could be the bank for people who do not have the credit history to qualify for a regular mortgage loan. I carry the loan on the distressed property for 30 years just like the bank, and the new owner of the house simply pays me a mortgage payment each month that includes taxes and insurance.

My mentor told me, why should you spend $10s of thousands on rehabbing a property when you can have the end buyer do most of it? Owner finance investment property is smart.

The end buyer usually has a vested interest in maintaining their property, as they own it.

How a Typical Owner Finance Property Deal Looks:

$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.

The under market value property 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 for this under market value property 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 positive cash flow
  • Cap rate 12.3%

After I converted most of my under market value properties to owner finance, most of my worries about my properties disappeared. The owner maintains it and I simply enjoy the monthly cash flow from each property into my bank account.

Most people don’t seem to ever consider owner financing their property investment, probably because they don’t know about it.

The keys to success in owner finance property are simple:

  • Carefully documenting the income of the potential buyer and verifying their work history
  • Follow the Dodd Frank law, which mandates that you must collect proof of their income and document their work history.
  • You can have a Texas licensed loan originator do this for you for a $750 or so fee (we have one on staff).

The bottom line on owner finance investment property  is you enjoy cash flow without maintenance and the buyer enjoys buying their own home at last – a true win-win for everyone.

2513 W Poplar St, San Antonio, Texas 78207

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  • Address: 2513 W Poplar St, San Antonio, Texas 78207
  • Description: Fixer upper home, great opportunity to own cash flow property, Booming Texas Market, 3 beds, 1 bath, 1000 sqft.
  • Estimated Repairs on Distressed Property Sale:10K, includes interior texture/paint, new HVAC, minor flooring, minor foundation, plumbing/electrical up to code. Max ARV 79K with owner financing, Price: 45K cash.
    Exit Strategy: Owner Finance for positive cash flow with 10K repairs: 5k down, $800 monthly P/I, 30 year amortization, 10% interest, Price: 79K, can sell note after 1 year.
  • Positive Cash Flow: $700 per month with no maintenance. Consider this investment in property!