How to Invest in Under Market Value Real Estate for Retirement

I have always invested in my San Antonio investment properties in cash, but more and more of my out of state investment property investors are buying my houses with their IRAs and 401ks.

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Investing in under market value properties can be an excellent way to invest with your IRA or 401k.

If you are interested in investing in under market value properties for retirement, one of your options is a self-directed IRA. A self directed IRA allows you to make your own investment decisions and to invest in real estate, precious metals and almost anything, with some restrictions of course.

With your self directed IRA, you need to have a qualified trustee or custodian managing it. Usually, the trustee will provide a variety of administrative functions, such as keeping records of contributions and investment purchases. Also, they will file IRS reports, issue statements to you and so on.

Self-directed IRAs allow for a much higher diversification of assets than a traditional IRA or work based 401k. Note that not all IRA custodians will allow you to invest in real estate, so you need to make sure you open a self-directed IRA with the right company.

Also, remember, your custodian will not vet whether or not your investment complies with regulatory requirements, so you need to do your homework on anything that you invest in, real estate or otherwise.

Remember that you cannot engage in self-dealing. This is where you buy a property in your IRA where you will live or do business in. The self-directed IRA also cannot purchase property owned where you or some family members have a part of the ownership.

A nice part of investing with a self-directed IRA is that you usually have checkbook control. This is where you can write checks on behalf of your IRA. These transactions occur through an LLC that the IRA owns. Setting up an LLC to do your investing with your self-directed IRA will give you more control over your assets and cut down on fees.

In short, investing in under market value real estate with your self-directed IRA or 401k can make a lot of sense, if you are investing in real estate that produces excellent real estate cash flow and has low risk.

Many of my investors used to buy California investment property and San Francisco investment property with their IRA or 401k, but this year, I have several new out of state investment property buyers who are using their retirement accounts to buy my properties.

The way I work is very simple: I put a San Antonio investment property under market value under contract. I sell it to you the investor, and do about $10,000 in rehab. Then, I resell it for you with owner financing at 10% interest, 30 year note, and about $800 per month. Below is an excellent example of what I do.

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    • Address: 820 South San Manuel St., San Antonio TX
    • Year Built: 1950
    • Description: Under market value investment property, three bedroom, one bath that has 928 square feet. Beautiful home with TWO exterior storage units – this is a MAJOR selling point for the end buyer; most buyers are blue collar contractors, and they need their tools to be completely secure.
    • Max After Repair Value: $89,000.
    • Cash Price: $59,000.
    • Exit Strategy: Owner finance this out of state investment property with positive cash flow with only $10,000 in repairs completed in 30 days – $900 per month, $5000 down, 30 year note, 10% interest. This San Antonio investment property offers passive cash flow with no maintenance.
    • Notes: We recommend that you owner finance this out of state investment property because you will have no maintenance expenses. ROI will be ~13.7%.

This San Antonio investment property is an excellent vehicle for real estate cash flow and investing with an IRA or 401k. Let me know if you have questions.

5 Common Problems With Buying Rental Properties (Which Is Why I Don’t!)

Are you a wanna-be real estate investor? Many people do indeed dream of owning under market value rental properties and someday earning positive real estate cash flow from them.

However, before you consider buying under market value investment properties, you really should think about what you are getting into. Being a part time landlord is usually a lot more hassle than many realize.

I am a full time real estate investor in San Antonio investment properties. At one time, I owned more than 100 San Antonio rental properties. I have deal with rental property problems many times and I have since stopped renting out properties and now I make real estate cash flow in another way without maintenance…..

But I am getting ahead of myself! Here are the common issues I’ve seen with rental investment properties:

  • Repair costs: If you are going to rent out your California investment property or Texas investment property (or wherever it is), you will most likely need to spend a good deal of money to make it ready to rent. Any damage to the roof, plumbing, foundation or electrical systems could cost a lot to repair.

This can especially trip up the part time landlord who has a full time job and has bought rental properties for real estate cash flow. Odds are you are not an expert in rehabs and you could easily overspend on fixing up the house.

Depending on which state you are buying your investment properties, you could have landlord and tenant laws that mandate that you add safety features to the house, such as handrails, peephole in the front door, adding a firewall, and a lot more.

  • Getting repairs done: As a rental property investor, you are going to have repairs that have to be done fast. Back when I was a landlord 10 years ago, I had water heaters go bad. Sometimes the house got flooded and I had to spend a couple thousand dollars to clean it up. Of course, the after hours plumber can cost you $100 per hour or more.
  • Collecting your rent: If you are lucky, you will have good tenants who always pay on time. But oftentimes, you have tenants who are late. This is an especially big problem if you buy your rental properties with mortgages. I never buy my under market value properties with mortgages, only cash.
  • Dealing with pain in the neck tenants: Eventually you are going to have to deal with tenants who damage your house or cause problems with other tenants. I once had a tenant who almost burned the house down. Of course, you will also have to deal with evictions at times, which can be problematic depending upon your state. In some states, the tenant can stay in the house 60 days or more without paying rent!
  • Keeping the property safe: If you rent out properties, you could be at risk of being sued if someone is injured on your property. You must keep the home maintained so that there are not potential accidents.

The bottom line on rental properties for me is to not invest in rental properties. There is simply too much hassle involved in them to make it worth my time. Been there, done that!

How I Invest in Below Market Value Properties Without Repairs

The way that I invest in San Antonio investment properties today is to buy my under market value property in cash, do $10,000 or so in rehab, and then seller finance it. This type of investing has four big advantages:

  • I have no mortgage. Yay!
  • My occupant is buying the house on terms from me. That means they maintain the property and do all of the repairs. Double yay! If they choose to not repair it, that isn’t my problem. I merely hold the note on the house.
  • I enjoy pure real estate cash flow in my under market value San Antonio properties. No expenses! Is this cool or what?
  • Because I buy investment property in Texas, foreclosing is very easy. I get the house back in 60 days and resell it again. I have resold the same house three times before: $5000 down, $800 per month.

Of course, this type of real estate investing takes CASH. But if you have an IRA or a 401k, you can often invest in these under market value houses.

Below is a great example of the type of investing my out of state investment property investors and I do.

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The house above in on West Poplar Ave. in 78207 in San Antonio. It is a newly completed San Antonio investment property that was bought the the California investor for $44,000 in October 2015.

We conducted $10,000 of rehab on the property and put it on the market in December 2015. Total cost to investor was $54,000. It was resold in late January 2016 with the following terms:

  • $83,000 sales price
  • $5000 down
  • $627.61 per month ($800 per month PITI)
  • 9% interest
  • 30 year note

Total return for out of state property investor is 14% ROI. If you are interested in out of state investment property that earns 10-15% ROI with no maintenance, please contact us.

Below are more rehab pictures:

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Based upon this 14% ROI return, I think you can understand why many of my investors from out of state USED to buy San Francisco investment property, San Diego investment property, Seattle investment property, and Los Angeles investment property. Now they mostly buy San Antonio investment property.

John’s Guidelines for Out of State Property Investors

Thanks for coming by. Here’s what you need to know about me right now: I’m a financially retired real estate investor in San Antonio TX who is dedicated to transforming the city into all homeowners.

In 2006, I hit $20,000 per month in cash flow at 28 and said, I’m retired. My cash flow is way more than that now though.

I’m an expert in under market value real estate investing in my town. I like to say I’m a brain surgeon of real estate investing. Does that sound arrogant? Hope not, but it’s the truth.

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I tell you this not to show off, but to make this point: I am a serious, very accomplished and wealthy investor.  I’m not an amateur. So, if I say a house will sell for such and such, or the rehab will cost such and such, you need to believe me and not question me. I do deals in my San Antonio neighborhoods every week, and I know what things cost.

You wouldn’t question your brain surgeon about the type of craniotomy he is going to do on you, right? So please don’t question my expertise on San Antonio investment property.

I know what you may want to ask:

If you’re such a big shot, why are you still working huh?

🙂 The reason is that while I have my own portfolio and am set for life, I still have ambitions and a Mission: I want to transform the entire city of San Antonio TX into home owners.

And to do that, I need  serious out of state property investors to buy 10+ under market value houses in the next 10 years.  So, I want to keep you happy with high cash flow San Antonio houses that have accurate ARVs, accurate rehab numbers, and quick resale time. It does me no good if you buy 1 deal and are unhappy and leave.

If you are going to do 10+ deals here, I need you to understand a few things about how I work. Whether you are a rookie or an experienced investor, I do things a certain way and want us to be on the same wavelength from the start.

So without further ado……

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  • $50,000 capital required. You need to have capital or the ability to obtain capital to talk to me. $50,000 is a good starter – ideally in a bank account but 401k and IRA money works too. I simply do not have time with my schedule to talk to people with no money. If you do not have capital, that’s fine. Hey, I’ve been there! But I raised money from private investors to get rolling. You need to find private sources of capital at reasonable rates so that you can make monthly cash flow on my deals of $200 to $300, and pay those guys off in 1-2 years.
  • Reread the above please. This is an advanced investing system in under market value San Antonio properties. IT TAKES CASH. This is not an investing system for the house hacking, 3.5% down rental property investor on Biggerpockets.com who is  just starting out.

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  • Zillow values are crap – PLEASE don’t bring them up. Nothing screams ‘clueless amateur’ more than using Zillow property values to evaluate my deals. Honestly, it’s annoying when an out of state investor who knows nothing about San Antonio challenges my ARVs. Look: I have completed nearly 1000 deals involving thousands of houses in San Antonio TX. I have done hundreds of rehabs. If anyone knows the ARVs of these under market value properties, it’s me.

Zillow will always lowball what my houses resell for. If you are going to look up property values in Zillow and challenge my ARVs, please find someone else to work with. It’s amateur hour to question an expert investor about resale values; serious investors understand a 15 year real estate expert in one specific city knows 1000 times more about local ARVs than a freaking national real estate database.

  • My owner finance deals are off market. My under market value deals are usually sold with owner financing, which means they are off market, which means that Zillow and other public websites are totally worthless for evaluating my deals.
  • My ARVs are accurate. I didn’t get to where I am in life by overestimating what houses will resell for – to scam you into buying 1 house. If you don’t trust my numbers, try Detroit. We need to trust each other to work together.
  • Pseudo investorsdo not apply.
  • 10 houses! Remember: My goal is to transform San Antonio entirely into property owners. I do not need you to buy 1 house so I can make a small commission. I need you to buy 10+ under market value deals from me so I can transform this city. That won’t happen if your first deal sells for less than what I stated. BTW, finding a single cash buyer these days is a LOT of work. Does it make sense for us to overestimate a house’s resale value, piss you off, and you walk after 1 lousy deal? Heck no! We want happy investors here that buy long term.
  • Cash buyer references available for serious buyers. I have many references who are cash buyers in California. I’m happy to provide those references to investors with capital who are serious about investing.
  • I own a construction company. I do rehabs at 2/3 to 1/2 the price of your typical rehabber, and I do good work. Insured, bonded, all permits included in my price. I do enough to get the house resold and more more than that. This saves you money and boosts ROI. Honestly, I make little money on my rehabs. I am totally dedicated to my Mission and to making you money. So I am willing to sacrifice rehab profits to get you to buy 10+ houses in 10 years.
  • All deals close with my real estate attorney. I have used West & West Attorney at Law for more than 10 years to close my deals. They know me well. Not a penny of your investing dollars go to me. It all goes through the title company.

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  • Come visit San Antonio, but it’s not free. If you want to come to visit us before you invest, you’re welcome to, but I usually charge a non-refundable $2000 fee to spend a day with you. This is not because I need the $2000, but because my time is valuable, as is yours. I will not waste a day of my precious time to have an investor come here, kick tires, use me for a free guided tour, and leave. No thanks. You need to pay for a professional guided tour, and I’m no different. The $2000 would be credited towards your first purchase.
  • Patience on rehab. If you do buy an under market value property from me, I will get it rehabbed ASAP. Usual turnaround is 30-45 days. But stuff happens. The roof could need more work than I thought, or the foundation may need more work, or the weather turns bad and it rains for a week. All of this delays the project. BE PATIENT.

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  • One and done. If you call me twice per day asking me when the house is going to get finished, that will probably be the last deal we do together. No joke – on a work day, my cell phone is clogged with dozens of text messages, a dozen voice mails and 100+ emails. I cannot babysit you. Please, be patient. I will call you and email you as soon as it’s done and will send pictures.
  • Patience on resale. Once it is rehabbed, I will get it resold ASAP with the MLS and bandit signs. Please do not call every day wondering when it will sell. It’s real estate, not McDonalds. When I have a serious buyer with a contract, I will inform you immediately.
  • I don’t do Sundays. On Sunday, the cell phone and the computer are off, so it has to wait until Monday.

In short, I love working with out of state investors….investors who used to buy California investment property, San Francisco investment property, Seattle investment property and Los Angeles investment property. But please – reread the points above before we talk. This will make our relationship work smoother. Thanks.

How to Invest in Under Market Value Properties with Your IRA

I have long advocated investing in under market value properties in cash, rather than investing in the stock market. I once had nearly $100,000 invested in the stock market, and lost almost half of it during the crash after 9/11.

As soon as that happened, I pulled my money out of the stock market, moved to Texas, and began to invest in San Antonio investment properties.

My under market value strategy is as follows:

  • Buy a house in cash for $25,000.
  • Perform $25,000 or so in rehab.
  • Resell with owner financing at 10% interest, at a price of $79,000 or so.
  • Typical rate of return is 14-16% per year, with no maintenance costs.

Here is a great case study of exactly how I invest in San Antonio investment properties. 

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14% ROI return for the investor, $41,000 cash price.

What do you think, investors? Does making 14% per year steadily sound like a good proposition? Can you do that in the stock market every year for 10 years or more? And can you enjoy regular cash flow from your stock market portfolio? Many investors only realize their gains if they cash out – if the market does not tank and they lose half of their portfolio as I did!

My distressed properties may look like a risky investment, but looks can be deceiving! When you invest all cash in a piece of real estate property, you do not have a mortgage. And, when you owner finance the property, you get steady real estate cash flow each month, and you do not need to do landlording repairs either.

Here in San Antonio, my below market value properties always make a steady rate of return no matter what the larger economy is doing.

How to Invest in Real Estate with a Self-Directed IRA 

I always buy my houses in cash, but many investors have cash in their IRA and they want to learn how to invest in real estate with IRA. This can be a great strategy, if you buy the right kind of real estate. More investors than ever are deciding to invest in real estate with self directed IRA – Kiplinger’s says that there has been an 82% increase in the purchase of real estate investments from inside an IRA.

But, funny, many people with IRAs still do not realize that they can invest in real estate. The ERISA statute only states that IRAs cannot be invested in collectibles, some precious metals and life insurance. But other than that, you can invest in almost anything you want.

Investing in real estate with a self directed IRA is still a rather ‘niche’ business. As of 2012, there was about $95 billion in self  directed IRAs. But many investors in the middle class are now getting in on the act.

There are some things to keep in mind if you want to invest in real estate with an IRA:

  • No self dealing: This is where the IRA owner cannot invest in something that benefits themselves certain members of their family. If you make this mistake, the entire IRA could be taxed!
  • You cannot mingle non retirement funds and your IRA funds. So, if you buy one of my houses for $25,000 cash, you cannot write a check from your personal bank account that your IRA is going to purchase. The money must be in your self directed IRA.
  • Note that you cannot deduct expenses of owning real estate from inside your IRA. However, your real estate cash flow will collect over time tax deferred. Personally, all I care about is cash flow, not deductions, but your preferences may differ.
  • If you rent out the property, all expenses must be paid from your IRA, but with owner financed properties, which is what I do, this is not an issue.

Note that the custodian for your self-directed IRA cannot give you any advice about the investment in real estate. They just take directions from you, the real estate investor.

Also note that the title to all assets in your IRA are vested in the name of your custodian, for the benefit of your IRA. All proceeds from asset sales or any real estate cash flow must go back into your IRA. You can set up an LLC if you like, but some experts say it is not necessary.

An IRA is actually a trust and it has its own set of rules and protection of assets.

In the  end, investing in real estate with an IRA can be a great choice for retirement….if you invest in the right sort of under market value properties.

Many of my cash buyers who used to invest in California investment property, San Francisco investment property, San Diego investment property and Los Angeles investment property now invest in San Antonio investment properties using their IRAs. Imagine – earn 14-15% ROI every single year with your self-directed IRA, and never have to repair a house! That’s what my investing system in San Antonio investment properties offers.

 

What’s Happening with California Investment Property?

As late as 2014, many California investment property firms were buying up dozens of single family homes in Los Angeles, San Francisco and Seattle and then leasing them out.

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This was a true flood of cash into California investment property, and helped to push many working families out of the real estate market in California.

But as of 2015, many California investment property companies stopped buying in California, both northern and southern. These investors found that the prices had hit a ceiling and there were no more bargains to be had. In short, there were no more under market value properties; everything was over market value.

Blackstone Group, a major California investment property buyer, cut its purchases of California properties by 90% in 2015. And Oaktree Capital in Los Angeles has been trying to sell off its portfolio of 500 California investment properties.

That is a big changed from 2014, when all buyers of California properties were in bidding wars. The median home price in Los Angeles was a high $385,000, which makes buying properties that produce real estate cash flow a real challenge.

According to Blackstone, prices in California investment properties reached a point where they could not buy a home, rehab it and rent it and make any kind of return.

Among the twenty companies that buy up the most California investment property since 2012, purchases have declined more than 70% in the last year.

One of the places that I see many San Francisco investment property buyers, San Diego investment property buyers and Los Angeles investment property buyers coming is to San Antonio TX. I have several new cash buyers for real estate cash flow so far in 2016.

Here you can buy my under market value houses for $25,000 to $50,000 and make excellent real estate cash flow. Here is a great example.

A Good Example of Under Market Value, Cash Flow Property

This property was sold to my investor for only $25,000:

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No one wanted this ‘junk house’ San Antonio investment property. 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

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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 San Antonio investment property in an under valued market such as San Antonio. 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.

$41,000 ‘Junk’ House Now Makes Out of State Investor 14.6% ROI

It has been a very busy 2016 in our under market value investment property business in San Antonio TX! The housing market and economy here in South Texas is strong, even with the cheap oil prices.

We have just rehabbed and resold another of our out of state property investor’s distressed houses that I wanted to share with you.  This was another of those ‘junk houses’ that so many investors pass by but I always buy.

Note: I like to lovingly refer to my properties as ‘junk houses.’ I love that most investors see them as ‘junk’ and run away from them. I have made millions off of ‘junk houses’ that other investors are scared of.

The smart investor just has to look beyond the exterior ugliness and see the potential of the house and the neighborhood.

These San Antonio investment properties are a bit run down, but are in up and coming neighborhoods where there is a great deal of revitalization occurring. All they need is some rehab and they can be resold with owner financing to a hard working, blue collar family.

The under market value investment property address is 166 North San Horacio, 78207. Here are the before images of this distressed property:

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This below market value investment property is on a large lot for this part of west San Antonio with large mature trees in the front yard.

I sold this San Antonio investment property to a San Francisco investment property investor for $41,000. We then performed $10,000 of rehab on the property, which included paint in and out, minor foundation work, bathroom touch up, plumbing and electrical work, and new light fixtures.

Note that this is a seller financed property, not a rental property.

After rehab pictures:

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REHAB 3 REHAB 4 REHAB 5 REHAB!

The rehab was completed in December 2015. We got an owner finance contract on this under market value investment property in February 2016 for the following terms:

  • $76,000 price
  • $5000 down payment
  • $622 per month
  • 30 year note
  • 10% interest
  • Total ROI: 14.6%
  • Note can be resold after 1 year

This under market value investment property cost the San Francisco investment property investor $51,000 total and has an annual ROI of 14.6% – without any maintenance or repairs.

This is the type of real estate cash flow that you can make with out of state investment property in San Antonio TX! Most of my investors used to buy California investment property, San Francisco investment property, Los Angeles investment property, or San Diego investment property, and now they only buy here 🙂

Under Market Value Real Estate Investing Prospectus

Is investing in under market value distressed homes in San Antonio, TX right for you? Make a decision after you review our full Investment Prospectus or Manual below.

This document tells you exactly who we are, what we do, how we do it, and proof of our success.

You can read the entire prospectus on this page, or download it as a PDF:

Investor Prospectus – TexasCashFlow.com V 2.05

Also, please view our Investor Guidelines, or “I Just Bought a House. Now What?!”

Once you are finished with your due diligence, please:

Thank you for your interest in our under market value properties, which often make good out of state investment property.

TexasCashFlow.com Investment Prospectus – Affordable Home Investing – San Antonio TX

Address: 604 West Hollywood Ave., San Antonio TX 78212

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Before: $51,000 Purchase Price

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After – 12% ROI, $125,000 Market Value

I. Strategy – Invest in Below Market Value Affordable Homes in San Antonio, TX USA
TexasCashFlow.com (John Majalca – Principal, Licensed TX Realtor) is a Texas real estate investment company that buys, sells, rehabs and markets affordable homes in San Antonio TX. These are positive real estate cash flow property investments, and are excellent San Antonio investment properties.

Highlights:

  • Strategy is long term buy and hold of affordable homes 20-30% under market value ($40,000-$80,000 wholesale), with owner financing and no maintenance expenses. Superior cash flow.
  • The under market value property investor owner finances the property to a qualified buyer we find for them – 30 year term, 10% interest, full amortization, no pre-payment penalty.
  • Typical annual ROI will be ~10%. with no additional maintenance expenses.
  • We prioritize positive real estate cash flow over property appreciation in distressed houses. Unlike Seattle investment property and San Francisco investment property, real estate cash flow is our goal.
  • Our neighborhoods and end buyers are mostly blue collar, Hispanic families who work hard and earn $3000-$6000 per month. They are family oriented and have a strong work ethic.
  • Most live their whole lives in these neighborhoods and have strong family ties there.
  • These affordable houses are strong performers in real estate downturns (see page 3 for more details).
  • Active in San Antonio market since 2001, nearly 1000 transactions completed and more than 300 rehabs. We have dozens of cash investors around the US and the world (references available for serious investors with POF).
  • Our principal, John Majalca, financially retired in 2008 with a large portfolio of these fixer upper homes.

We Understand the San Antonio TX Real Estate Market
Since 2001, we have developed a deep grasp of the metro San Antonio area. The affordable homes that we transform are well known for their value and investor return.

These affordable, under market value distressed homes with positive cash flow are available to us under market value for several reasons; the most common source is estate sales. Our principal, John Majalca, has an excellent, 15 year reputation in this market as an ethical, serious and reliable cash buyer of real estate, and is well connected in the investing community. This means good deals often find him, so he can access under market value deals that many investors cannot, netting higher returns for our investors.

San Antonio TX USA — An Excellent, Long Term, Stable Growth Market

San Antonio TX is a fast-growing, booming city, recently cited by Forbes magazine as the fastest-growing city in the US for millennials (ages 20-29). The Alamo City is blessed with a diverse industrial base, hard working immigrant population, low real estate costs, no state income tax, good weather, and a generally pro-business regulatory environment. It also was ranked #3 by Forbes in 2013 in fastest-growing tech spots in the US.

Many out of state investment property investors invest with us, especially investors who have bought Seattle investment property and San Francisco investment property in the past.

About the 2007-10 Real Estate Downturn

While the most recent real estate downturn affected San Antonio as it did most areas, the impact was less pronounced here. In fact, the Brookings Institution ranked San Antonio in 2009 as the top economic performer in the US after the recession. This confirms our experience as investors here. The city’s real estate prices tend to be stable and less volatile than many other metro areas of the USA.

We noticed that the primary negative effect of the recession in San Antonio was in the higher end, consumer retail real estate market, particularly homes from $200,000+. Buying wholesale, under market value – what we advocate – offers protection in a downturn.

It is true that during the height of the downturn, RETAIL buyers were harder to find for a time for our houses, but the owner finance market (our major focus) was unaffected. And, the values of our existing housing portfolio didn’t decline at all. We also found that for a time, we were able to buy some affordable homes for 30% less than before the downturn. This was actually a very profitable time for buying our affordable homes.

Bottom line – our portfolio saw little depreciation in the downturn. And monthly cash flow on owner finance properties was unaffected.

Also, we have at our disposal many competitive hard money lenders that we have work with for more than a decade. Please inquire with us if you need a hard money loan.

III. Our Values

As noted above, we invest in under market value homes in San Antonio TX. The main purpose of this is to provide a superior rate of return for our investors.

However, it is vital to note that we view our affordable housing model as a philanthropic enterprise, as well. Using our owner finance model, we are privileged to offer affordable homes in our area to hard-working, blue collar workers with steady work history and documented income. You can feel satisfied that not only are you earning an excellent ROI – you are contributing to the revitalization of our city and helping a family live the American Dream.

Our company has contributed to this process by rehabbing and reselling hundreds of houses with owner financing to hardworking families. This increases the tax revenues flowing into the city, which in turn is used to build new infrastructure in our neighborhoods. We are thrilled and honored to be a part of this revitalization process.

IV. Our Process

Our real estate investing company handles the entire cash real estate investment process for you with fixer upper properties. All you need to do is to purchase the property, and enjoy the return. We handle all of the details:

  • Property acquisition (title is guaranteed to be lien-free and clear at closing)
  • Property rehab (you receive a detailed, itemized bid; 30 day or less completion)
  • Resale – whether owner finance or retail
  • All closings are handled by West & West Attorneys at Law, P. C., 2929 Mossrock, Suite 204, San Antonio, TX 78230.
  • Closing documents can be Docusigned by email or delivered by mail.
  • We are available to manage your owner finance or rental portfolio. Please inquire.
  • Investor is regularly updated weekly on rehab and resale progress (includes photos).
  • Houses are marketed on MLS, Craig’s List, word of mouth, and with signs posted in the neighborhoods.

About Rehab

Our principal, John Majalca, owns a full time construction company, and all contractors are highly experienced, licensed and insured. We handle the entire rehab project in 21-30 days maximum. All required permits and engineering reports are included in your rehab price. Your detailed rehab bid will be sent to you after closing.
Rehab costs rarely exceed the stated budget; however, if something unexpected arises during the project, we will contact you to discuss options.

Most of our properties have ‘foundation’ problems, but the vast majority are minor and can be fixed for $5000 or less. Most are pier and beam foundation and are quite easy to fix.

V. Record and Returns

Over the last 10 years, we have bought and sold approximately 75 houses per year, the vast majority of which have been owner financed by the investor with ROI ~10%. The rest were either flipped for a 20-30% return or rented out for a 10% rate of return. Several of these projects are located later in this prospectus.

We are able to achieve these returns primarily through the following ways in our fixer upper homes with positive cash flow.

  • Buying affordable homes for 20-30% under market value. We never purchase houses at market value. This offers you better returns, and safety in a downturn.
  • Performing property rehabs at wholesale prices, saving the investor thousands of dollars off of traditional rehab costs.
  • The expert knowledge of John Majalca in our neighborhoods – knowing how much rehab to complete. The common error in rehabbing affordable homes is spending too much. We do not.
  • Our goal is to complete just enough rehab to resell the house.
  • Our end buyers complete the rehab at their expense.
  • Please see specific deal returns at the end of this prospectus.

VI. Fees

Our real estate investing company is a large volume wholesaler, and our fees are reasonable. Our only profits are standard real estate commissions and a small management fee on rehabs in our investment properties.

When we sell the investor a property, we earn a standard real estate commission of 3%. The house usually is under contract (we don’t own it), so it has not been marked up to make us a profit on the front end. When we facilitate the sale of the house to an owner finance buyer, we also earn a 3% commission.

Also, our construction company will perform your rehab of $5000-$20,000 done in less than 21 days in most cases. There is a project management fee of 10%.

Closing Costs

Closing costs on these houses are approximately 3-4%% of the wholesale price, and of the final price on the owner finance resale. On the latter, the closing costs normally are paid out of the buyer’s down payment.

Foreclosures

Vacancies are part of the rental property business, as are repairs and damages by tenants. And in owner finance, foreclosures are part of the business (but repairs and damages expenses are not).

Foreclosures are rare but they do happen. In five years, we may get 10-20% of our houses back. Total foreclosure costs are $1000 to $1500. The house is vacated in 60 days or less and resold. You also get $5000 down again. Foreclosures are usually quite profitable for the investor. We have a real estate attorney available to handle this for you if it ever occurs. We will help you to find a new buyer.

VII. About Us

Founding Principal:John Majalca, Financially Retired Real Estate Investor, Licensed Realtor

john majalca

John Majalca, Licensed TX Realtor, has invested in San Antonio TX since 2001, completing nearly 1,000 real estate deals. He financially retired in 2007 and holds a large portfolio of owner financed affordable homes in San Antonio, but continues to invest aggressively in our city. John was born and bred in Ballenger TX, but relocated to Boston MA to complete his undergraduate work in computer science. After college, he had $40,000 in college debt and little capital.

He made some money in the stock market, and then he returned to Texas and began to invest in San Antonio. He was attracted to the low real estate prices in our city as well as the strong economy in all market conditions. John carefully selects under value properties in rising neighborhoods north, west and south of downtown, and wholesales them to cash investors. He personally inspects every property he sells.

John knows his neighborhoods, and you can and should trust his judgment on the value of a property, his opinion on its condition, how to rehab it and how to make money with it.

He strongly believes in community service, and is dedicated to the revitalization of blue collar sections of San Antonio. John has been delighted to see the transformation of the city in the last decade, as billions of investor and tax dollars are being poured into construction projects across the area. Also, more blue collar workers are becoming homeowners through programs such as ours, which leads to better, safer neighborhoods and a sense of community.

VIII. Past Projects

Below are completed projects that are now generating positive cash flow for our investors. Wholesale and end buyer prices are supported by sold and rental comps (available upon request). For new, available projects, please visit our new website, www.TexasCashFlow.com, or contact Joseph Pickett (210) 816-4280, jmpickett@gmail.com.

Buy and Hold – 604 West Hollywood, San Antonio TX 78212

This distressed sale property was done in March 2014, and is a two bedroom, one bath affordable home located in a hot area north of downtown San Antonio called Beacon Hill. It is 900 square feet, on .15 of an acre built in 1945. It was an estate sale, and as the original photos show below, it was in rough shape. The house was not rehabbed, and was resold with owner financing to a blue collar worker with two good jobs.

Before Buyer Rehab:

hollywood 2013 4 20140215_121144 2013 2

  • Wholesale Price: $51,000 cash
  • Rehab cost: Zero
  • Owner Finance Price: $80,000
    Down Payment: $5,000
  • DOM: 60
  • Monthly Payment: $806
  • ROI: 12%

After Buyer Rehab:

dasdf 20140403_080937 20140727_134732 - Copy - Copy 20141017_121747 - Copy 20140727_134826

Buy and Hold – 1629 Santa Anna St., San Antonio TX 78201

This property investment was completed in spring 2015. It also is located north of downtown in an in demand, revitalizing area, only about 10 easy minutes from downtown. It is a three bedroom, 1.5 bath (the extra half bath is unusual in this price range), 1074 square feet, built in 1946, hot Los Angeles Heights subdivision. The house had $10,000 of rehab completed in three weeks: paint in and out, flooring, minor foundation repair. It was resold with owner financing to a two income family.

  • Wholesale Price: $62,000
  • Rehab Cost: $10,000
  • Owner Finance Price: $89,900
  • Down Payment: $5,000
  • DOM: 45
  • Monthly Payment: $937
  • ROI: 10%

Before Rehab:

SantaAnnaNew IMG_0004_2 IMG_0005_2

After Rehab:

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Buy and Hold – 1622 Alametos, San Antonio TX 78201

This positive cash flow fixer upper home was completed in September 2015. It is a lovely home centrally located north of downtown, near I-10, with brand new roof and granite counter tops. It was a two bedroom, one bath, which was converted by our team into a three bedroom. It has .14 acres, built in 1947, 966 square feet, Los Angeles Heights subdivision, a hot area. It had $10,000 of rehab completed in three weeks: central heat and air, carpet removed, interior paint, light fixtures, front bedroom leveled, third bedroom conversion. It was sold with owner financing to a teacher with a steady job.

  • Wholesale Price: $65,000 cash
  • Rehab Cost: $10,000
  • Owner Finance Price: $99,900
    Down Payment: $5000
  • DOM: 7
  • Monthly Payment: $1041
  • ROI: 11%

Before Rehab:

Bath kitchen living Bedroom 2

After Rehab:

new ac new bath 2 new door new front room new kitch 2 new front new bath

Buy and Hold – 3711 Southport Drive, San Antonio TX 78223

This distressed property sale was completed in fall 2014. This three bedroom, one bath affordable home has a one car garage, .15 acres, and was built in 1957. It is located on the south side of San Antonio, which is rapidly growing and being revitalized. Central air was added, inside paint, and kitchen and bath rehabbed. It was owner financed to a working family.

  • Wholesale Price: $49,500 cash
  • Rehab Cost: $11,000
  • Owner Finance Price: $89,900
    Down Payment: $5,000
  • DOM: 120
  • Monthly Payment: $895
  • ROI: 10%

Before Rehab:

Bathroom.275145712_std Cabinets.275145650_std Front

After Rehab:

bath2 halls 2 kitch light lr 2

Flip – 503 Lovera Blvd., San Antonio TX 78212

This positive cash flow property investment was completed in June 2015. It is a three bedroom, one bath north of downtown in a very in demand area. It was built in 1951 and was completely rehabbed. Rehab included paint in and out, kitchen granite, electric fixtures, new flooring, new deck, bathroom upgrades, old deck removal, concrete stain, new sod and deck stain. It was sold retail.

  • Wholesale Price: $72,000 Cash
  • Rehab Cost: $18,000
  • Retail Price: $125,000
    Down Payment: $25,000
  • DOM: 120
  • Investor Profit: $15,000

Before Rehab:

8f2df7_47c9251e850f49b39e8ac6855ec4b172.jpg_srz_p_284_213_75_22_0.50_1.20_0.00_jpg_srz 8f2df7_6245703aad1448a1be8d6a531a896331.jpg_srz_p_283_212_75_22_0.50_1.20_0.00_jpg_srz 8f2df7_a270a2a6b74c4c9f9655463eb9586a67.jpg_srz_p_284_213_75_22_0.50_1.20_0.00_jpg_srz

After Rehab:

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Note: The following two projects are our more value-priced deals under $40,000 wholesale. They may not appear to be houses that will sell quickly, given the limited rehab. But these houses do sell and produce good cash flow in 90 days or less.

Houses with affordably payments under $600 such as these are in demand in our areas, regardless of how they may look personally to the investor. The house payment is comparable to area rents. These houses are great opportunities for lower income, blue collar contractors to own a home affordably and repair it themselves.

Buy and Hold – 415 Frio City Rd., San Antonio TX 78207

This distressed sale was completed in October 2015. It is a small two bedroom, one bath west of downtown in a revitalizing area. It has 648 square feet, built 1950, only a few minutes from the San Antonio Riverwalk. This is one of our lower priced homes that had minimal repairs: paint, touched up flooring, cleaned. This is a good example of how we do not over rehab a home. This area is in less demand and has a lower income than areas, say, north of downtown. So less rehab is required. It is a good value investment, and the new owners are delighted with their first home.

  • Wholesale Price: $35,000 cash Rehab Cost: $1000 Owner
  • Finance Price: $54,000
  • Down Payment: $5,000
  • DOM: 45
  • Monthly Payment: $550
  • ROI: 11%

Pictures: Simple Clean Out, Minor Touch Ups Only

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Buy and Hold – 1219 Perez, San Antonio TX 78207

This distressed property sale was completed in June 2015. This is a three bedroom, one bath house of 950 square feet located at the end of a quiet street near an elementary school, west of downtown. It is approximately three miles from the Riverwalk and Alamo. This house also is a good example of a lower cost house in a lower cost area but one that is still rising. This house did not require high quality finish work to resell it, such as granite and tile and flooring. Instead, the rehab budget of $10,000 was spent on leveling the foundation, inside and outside paint, painting the floor (rather than adding new flooring), finishing the plumbing and clearing trash.

  • Wholesale Price: $30,000 cash
  • Rehab Cost: $10,000
  • Owner Finance Price: $55,000
  • Down Payment: $3000
  • DOM: 90
  • Monthly Payment: $550
  • ROI: 11%

Pictures:

1 pe new LR new room 2 new kitchen

Flip – 650 Canyon Springs Drive, Canyon Lake TX 78133

This investment in property was completed in August 2015. It is a two bed room, one bath manufactured home just a few minutes from Canyon Lake, 1114 square feet and built in 1979. It is about 30 miles north of San Antonio.
The home was purchased by a team of rehabbers in San Antonio. They fixed up the house per our recommendations and flipped it for a very nice profit. They upgraded kitchen, HVAC, painted in and out, upgraded floors and bathroom, added new appliances, repaired deck and added new windows.

  • Wholesale Price: $50,000 cash
  • Rehab Cost: $25,000
  • Resale Price: $99,970
  • Total Profit: $18,000
  • DOM: 160

Before Rehab:

1 - Copy Bath Kitchen1

After Rehab:

8f2df7_6565525ada894468b58fa35672169550.jpg_srz_p_373_249_75_22_0.50_1.20_0.00_jpg_srz 8f2df7_ba65e210f1874c13a08cc33d467ee41c.jpg_srz_p_339_226_75_22_0.50_1.20_0.00_jpg_srz kings
For current fixer upper homes and cash investor references, kindly contact Joseph Pickett (210) 816-4280, or use our Contact Us form. www.TexasCashFlow.com.

Remember, these San Antonio investment properties offer real estate cash flow of 10-15% per year without repairs or maintenance, once the rehab is completed. They are an ideal out of state investment property, especially for people used to buying California investment property and other states investment properties that are sold at over market value.

How I Generate $30,000+ Per Month in Real Estate Cash Flow

I have been investing in under market value properties in San Antonio TX for more than 15 years. Unlike many real estate investors, I did not start off with much cash, nor did I have a rich aunt who would loan me money at 8%.

After I finished college, I tried to buy Boston investment property, Seattle investment property and San Francisco investment property, among others, but it was too expensive.

So I returned to Texas and started to invest in below market value properties that cost $20,000 to $30,000. I was amazed when I discovered San Antonio TX, and how one could generate substantial real estate cash flow each month on such inexpensive distressed properties.

I did make some money in the stock market, so in 2001, I was able to purchased my first under market value Texas property for only $30,000 cash. After I spend $5000 on rehab, I then made real estate cash flow of $600 per month on it as I rented it out. That was my first San Antonio investment property.

After that first under market value investment property, I didn’t have much capital left. So, I had to hunt for private money to borrow. It took a lot of phone calls, but I eventually tracked down an investor allowed me to borrow more than $1.5 million over three years to rehab and rent out under market value properties.

I would borrow $30,000 to $50,000 from my investor every few months to do a new deal, and I made about 10% in real estate cash flow on those deals.

After about five years, I was doing very well and had more than $10,000 per month in real estate cash flow, but I was getting weary of doing full rehabs and maintaining properties. That is when I started to use my current under market value investment model:

  • I buy $30,000 to $60,000 below market value San Antonio investment property for cash.
  • I do $10,000 to $30,000 in rehab (sometimes I will not repair the house at all).
  • I resell the property to a blue collar worker with a $5000 down payment and a steady job.
  • Typical terms on the below market value property are $5000 down, $800 per month PITI, $79,900 final price, 10% interest.

Investing in this way gives me real estate cash flow of 12% per year or more without doing the typical landlord repairs that most investors deal with.

I also give my end buyers the opportunity to own their own home. This type of investing has been my main method for almost 10 years. It is by buying under market value properties for cash in this way, and then owner financing them, that i have been able to generate more than $30,000 per month in real estate cash flow.

To give you a good example of how I do these types of under market value deals with San Antonio investment property, here is a great case study we just completed:

My out of state investment property investor bought this ‘junk’ house for $25,000 in November:

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It had sat empty for years and was part of an estate sale. Now this house was ugly, no question about it. But it is located in an up and coming neighborhood in 78207, where the city of San Antonio has spent millions of dollars putting in running trails, parks, shopping plazas, green space and so on. This ‘junk’ house is only 2 miles from downtown and all the tourist attractions of the city.

Yet this under market value house sat for months and no investor wanted it. I grabbed it and quickly resold it to an out of state investment property investor.

Right next door to this ‘junk’ house were these owner occupied homes:

tampico-6-300x169 tampico-5-300x169

Those houses right next door are worth more than $100,000, but no one wants my under market value ‘junk’ house because it’s temporarily ugly:

Living_DiningKitchen

The conventional investor wanting real estate cash flow cannot see past the ugliness, but I saw the potential here because of the neighborhood revitalization and the nice houses around it.

So, I sold this house for $25,000 to an out of state investment property investor who did $27,000 in rehab (which I did for him in 30 days), which included:

  • 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

Note that I own a construction company, and my rehabs are typically 2/3 of the price of most companies’ rehabs.

Below are the after rehab pics:

1a55

1 3 6 7

The ARV on this below market value property is $79,900. We just finished the rehab in the middle of January 2016. And, 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.

The house was on the market for less than a month. So on a $52,000 investment, the out of state property investor will earn about 16% ROI with no more repairs because we owner financed the house.

This is the kind of under market value investing I do – I buy ‘junk’ houses that other investors reject and turn them into little gold mines.

This type of property is great for real estate cash flow, and is far superior to what is available to most investors looking for Seattle investment property or San Francisco investment property. That’s probably why most of my out of state investors are from Seattle and San Francisco! I also have many former buyers of California investment property generally who only buy my San Antonio investment property now.

 

 

A $25,000 ‘Junk House’ Case Study – 15% ROI for Out of State Investor

I have made my real estate investing career in buying and selling under market value properties in San Antonio TX.

I like to lovingly refer to my properties as ‘junk houses.’ I love that most investors see them as ‘junk’ and run away from them. I have made millions off of ‘junk houses’ that other investors are scared of.

The smart investor just has to look beyond the exterior ugliness and see the potential of the house and the neighborhood.

I just had yet another under market value success story I wanted to share with you. My out of state investment property investor bought this ‘junk’ house for $25,000 in November:

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It had sat empty for years and was part of an estate sale. Now this house was ugly, no question about it. But it is located in an up and coming neighborhood in 78207, where the city of San Antonio has spent millions of dollars putting in running trails, parks, shopping plazas, green space and so on. This ‘junk’ house is only 2 miles from downtown and all the tourist attractions of the city.

Yet this under market value house sat for months and no investor wanted it. I grabbed it and quickly resold it to an out of state investment property investor.

Right next door to this ‘junk’ house were these owner occupied homes:

tampico-6-300x169 tampico-5-300x169

Those houses right next door are worth more than $100,000, but no one wants my under market value ‘junk’ house because it’s temporarily ugly:

Living_DiningKitchen

The conventional investor wanting real estate cash flow cannot see past the ugliness, but I saw the potential here because of the neighborhood revitalization and the nice houses around it.

So, I sold this house for $25,000 to an out of state investment property investor who did $27,000 in rehab (which I did for him in 30 days), which included:

  • 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

Note that I own a construction company, and my rehabs are typically 2/3 of the price of most companies’ rehabs.

Note that this is a seller financed property, not a rental property.

Below are the after rehab pics of this San Antonio investment property:

1a55

1 3 6 7

The ARV on this below market value property is $79,900. We just finished the rehab in the middle of January 2016. And, by early February, we already had an owner finance buyer for it: $5000 down, $800 per month, $79,000 final price, 10% interest, 30 year note.

The house was on the market for less than a month. So on a $52,000 investment, the out of state property investor will earn about 15% ROI with no more repairs because we owner financed the house.

This is the kind of under market value investing I do – I buy ‘junk’ houses that other investors reject and turn them into little gold mines.

Most of my investors wanting real estate cash flow usually buy Seattle investment property California investment property, San Diego investment property, Los Angeles investment property,  or San Francisco investment property, and are shocked at the type of returns you can get here in San Antonio TX with San Antonio investment property – with no repairs!

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.

sa2
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.