Why Investors Who Obsess About Interest Rates and ROI Lose Money

Obviously it is important in San Antonio real estate investing to make a good return on your investment dollar. In my 15 years of investing in San Antonio investment property, I have averaged about $8000 profit on flips on under market value properties, and approximately 12% ROI on San Antonio buy and hold deals.

However, if you as an out of state property investor obsess too much on ROI, how much you will make on that flip, or the interest rate that you are paying on your borrowed capital, it can talk you out of doing profitable deals, and that is a big mistake.

In the last month, I have seen investors talk themselves out of doing profitable deals – I am talking about clearing $10,000 on a flip in particular. This under market value San Antonio property is a good example:

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    • Address: 2229 W Hermosa Dr.  San Antonio, TX 78201
    • Year Built: 1948
    • Description: Under market value property sale in hot north of downtown neighborhood, 2 beds 1 bath, 769 sqft, built: 1948, lot size: .14 acres yearly taxes: $1,200.00, estimated yearly insurance: $800.00, estimated repairs on this distressed sale.
    • Rehab Option#1: 35K, includes new HVAC, converting to 3 BR, updated kitchen, flooring, paint in/out, exterior skirt, roof, room addition, appliances, paint out door storage exterior, trash, lawn maintenance.
    • Max After Repair Value: $139,000.00 on this fixer upper with owner financing, comps are for 3/1.
    • Rehab Option #2: 15k  with Owner Finance ONLY – AC, flooring paint in and out $109,000 ARV.
    • Cash Price: $69,900 firm.

On this San Antonio flip deal, the investor will make in the area of $10,000 on a flip, or maybe $6000 or $7000 if they have to borrow hard money. Now some people think that is too little to bother with. Oh my goodness! They are so  wrong. When I first started in San Antonio real estate investing, I did 50 houses in my first year.

I borrowed over $1 million from a local doctor, and we split the profits 50/50 when each project was completed. Now I only ended up making $3000 or $5000 per flip when I sold them. But I didn’t worry about such a ‘small’ amount of profit, because I made – get this – $100,000 in my first year in San Antonio wholesale property investing! And I re-invested 80% of that profit.

Let me be clear: Investors who laugh off making $5000 or $10,000 on a San Antonio flip are being foolish. True, if you only do 1 flip a year, you are not going to be able to build capital very quickly. So, you need to do at least 4 per year, or ideally, 10 or more. Then you take that $5000 or $10,000 per deal and invest it again into San Antonio flips or San  Antonio buy and holds.

I have dealt with well meaning but short sighted investors who actually were going to scuttle $10,000 profit flip deals because they were going to possibly have to borrow 14% rate hard money. Of course it is smart to borrow the cheapest capital that you can – ideally private money or a line of credit on a piece of property you own.

Failing that, hard money is often the only option. While it is true that you will pay high interest and fees – possibly up to $4000 per deal – why on earth would you nix doing deals if you still stand to profit? Which is better, making $6000 or making zero? I know what I’ll go with!

At the end of the day in San Antonio real estate investing, focus on your total profit, not on the interest rate and fees you are paying. If you are making $5000 on a flip, I’d be happy with it and do 10 more this year.

Update: This week we had a buyer walk away from a deal that would have made her $8000 or so because she refuses to use hard money. So, rather than make $8000, she makes nothing.

How To Build Wealth Through San Antonio Real Estate Investments

If you are a potential out of state property investor and want to build wealth through San Antonio real estate investments, there are a few things that I think might give you some guidance and reassurance:

#1 San Antonio Is a Great Market for Under Market Value Real Estate Investing

This is a pretty unique market:

  • Real estate is still inexpensive, with San Antonio real estate investments in my areas going for $40,000 or $50,000 wholesale.
  • The economy is strong, with annual job growth in the 3-4% range.
  • The local market is not oil dependent, so San Antonio real estate investors do not have to worry about a boom/bust cycle.
  • The population is growing here year after year as is the number of jobs.

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All in all, San Antonio is really good for real estate investors. It is a stable, growing market, and I did very well here in the last downturn.

#2 There Are Still Many Excellent San Antonio Real Estate Investment Deals

Another unique thing about San Antonio for real estate investors is that it is an old city, with a large stock of older homes built in the 1920s to 1940s. I have been investing here for 15 years, and I still drive down streets in my area that I have never been down before.

If you are a new San Antonio real estate investor, you may have trouble finding deals in all the normal places new investors look. One advantage of working with me is that I am at the level where I hire wholesaling companies to work for me and to find potential deals for me. My job is pretty easy when I have people send me San Antonio wholesale property. I just have to inspect the best deals and make offers.

You could spend hours and hours on your own trying to find your own San Antonio wholesale deals, or you could just buy mine.

I also have other real estate investors in San Antonio and agents send me deals because they know who I am, and they also know I close with cash in 10 days.

#3 I Recommend Flipping Properties to Build Capital and Then Buy and Hold

Some people like to flip and some like to buy and hold. My personal portfolio is mostly San Antonio buy and hold properties with owner financing, and a few rentals.

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However, I do believe in this model for people who have limited capital:

  • Buy a $50,000 San Antonio wholesale property either cash or with hard money; do $25,000 or so in rehab, and flip it for a $10,000 to $12,000 profit. You will need to have $20,000 to $30,000 cash to get rolling in this plan.
  • Do 3-4 of those per year, or more if you can.
  • After two years, you could have $100,000 or more. Use that money to buy San Antonio real estate investments to buy and hold – either buy in cash or do 20% down conventional finance.

This is a great, basic blueprint to build wealth in San Antonio real estate investing.

#4 San Antonio Wholesale Property Deals Are Profitable But…

I see many San Antonio real estate investors never do more than a deal a year because they are trying to make too much money on a single deal.

I have made millions of dollars in my San Antonio wholesale property career by doing San Antonio property flips for $5000 or $7000. I never understand why so many real estate investors get greedy and want to make $20,000 or $30,000 on a flip. I do 50 San Antoniio property flips per year and make $7000 each. That’s $350,000! Works for me!

Or, I do San Antonio buy and hold deals for $600 per month. When I do 10 more of those per year, that’s another $70,000 of income. I have no problem with that.

You have to have realistic expectations when you are buying and selling San Antonio investment properties. The prices are low, but you only are going to make so much money on one $60,000 house. Don’t get greedy, and you can do very well.

I have had several out of state property investors walk away from this fantastic San Antonio flip or buy and hold deal. They want to make too much money. You can make $15,000 on this flip in 60 days. Or, 13% per year on a San Antonio buy and hold.

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    • Address: 1723 W Ashby Pl  San Antonio, TX 78201,
    • Year Built: 1925
    • Description:  Under market value property, investors dream north of downtown, 3 beds 1 bath, 1000 sqft, built: 1925, lot size: .19 acres, yearly taxes: $1,700.00, estimated yearly insurance: $800.00; estimated repairs: 35K, includes new HVAC, updated kitchen/bath, flooring, paint in/out, exterior skirt, appliances, plumbing/electric up to code, paint out door storage exterior, trash, lawn maintenance.
    • Max After Repair Value: $129,000.00
    • Cash Price: $65,900 firm.

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

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

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

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

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

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

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

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

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

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

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