Out of state investment property investors, this San Antonio investment property has two houses on one lot and offers you a quick $7000-$8000 on a clean and resell flip, or 13-14% ROI on a buy and hold.
Address: 3230 LaVioleta St., San Antonio, TX 78211-3728
Year Built: 1950
Description: 2 homes for the price of one; Home #1, 3 beds 2 bath, 928 sqft, built: 1950, lot size: .15 acres, home needs minor plumbing, carpentry, paint, cleaning, estimated rehab cost 10K, Home #2, 2 beds, 1 bath, 600 sqft, has been remodeled no repairs needed
Cash Price: $69,000
Exit Strategy: Owner Finance with 10K repairs: 5-10k down, $900.00 monthly P/I, 30 year amortization, 10% interest, Price: 89K, ROI will be 13-14% per year. ; or do $1500 in quick clean up and flip to another investor at $69,900. This is a 2 for 1 deal and will resell quickly.
Additional Costs: $1500 commission to me on wholesale, $2000 in closing costs, $1500 commission to me on resale, $2000 in closing costs on resale (taken out of $5000 down payment from buyer).
Profit Year 1: 12% ROI
Profit Subsequent Years: 13% ROI
Flip Profits: $7000 to $8000 after expenses (I recommend doing at least 1 of these per quarter to build cash base and then do 1 buy and hold for every 2-3 flips).
Investors, you will never see a San Francisco investment property, Los Angeles or a Seattle investment property at this price point and rate of return! This under market value property is a good option to invest in real estate with IRA, or invest in real estate with 401k.
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.
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.
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.
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.
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.