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San Antonio TX Economy Still Strong, Even With Oil and Gas Slowdown

Personal income growth since 2011 in Texas ranks #2 in the US, with only North Dakota ahead. Some San Antonio real estate investors think that crashing oil and natural gas prices would have slowed down the Texas economy, but the Lone Star State continues to do well. And San Antonio buy and hold properties continue to sell and rise in value.

Note: I don’t personally worry much about what the economy does in San Antonio anyway. In the 2007-9 crash, I bought and sold $2 million in real estate and still had my San Antonio buy and hold houses rented out with no problem. San Antonio affordable homes are always in demand. 

Economic experts in Texas this month stated that several areas of the Texas and San Antonio economies continue to keep job growth going and wages rising. For example, health care is very strong, and San Antonio has a very strong military presence with several Air Force and Army bases.

Even with low oil prices, Texas still created 1.7 million jobs from 2010-15, which is the best in the US. In the same time frame, the entire US economy lost 400,000 jobs.

The oil and gas slow down has had some impact in Houston, but San Antonio is continuing to see low unemployment and wage growth. San Antonio is seeing economic growth in the 3-4% range.

Even though oil prices are low for the time being, research shows that oil production has only dropped marginally in Texas. There are 2.5 million barrels per day produced in this state, down from 2.8 million two years ago. The small production decrease has come even though there are only 200 or so active rigs in the state, which is down from 900 two years ago.

This means good news for San Antonio buy and hold investors, and San Antonio flip investors. I continue to buy and sell real estate investments, although the prices are up 20% from two years ago.

I recommend doing Section 8 rental property for a good San Antonio buy and hold investment, as the rental market is very strong:

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  • Address: 804 S San Eduardo Ave, San  Antonio, TX
  • Year Built: 1949
  • Description: Fixer upper, under market value 4 beds 1 bath, 816 sqft, built: 1949, lot size: .1 acres, yearly taxes: $1,200.00, estimated yearly insurance: $750,
  • Estimated Repairs: 30K, roof, central hvac, windows, plumbing, electrical, kitchen/bath update, interior/exterior finish.
  • Cash Price: $48,000
  • Exit Strategies: Rent San Antonio investment property with 30K in repairs: $1,095.00 with section 8, no need to chase the monthly payment, San Antonio Housing Authority pays direct deposit to your account.
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Positives and Negatives of Section 8 Real Estate Investments in San Antonio

Section 8 rental property in San Antonio is a controversial topic in some quarters. Section 8 housing came to be during the Great Depression, when the federal government wanted to provide public housing for lower income people. Today, the purpose of section 8 is to offer subsidized housing to certain lower income citizens.

But is San Antonio section 8 property a good real estate investment? Generally, I say yes; I like to deal with the San Antonio Housing Authority and section 8 renters. That said, it depends on the property and a few other things. Let’s look at section 8 rental property pluses and minuses:

Pluses

  • Your income is stable and guaranteed each month. You receive your payment each month electronically. After a person applies and passes the background check and other screening, the section 8 voucher gives them up to 100% assistance for their rent.
  • Higher rent. You can reassess the rent you charge each year and increase it by up to 8%. So, if you rent your San Antonio investment property for $800 monthly, you could raise it to $1175 in five years.
  • Incentive to keep up the San Antonio rental property: There is an annual inspection, so if the renter trashes the house, they can lose their voucher. Note: I do serious rehab on the San Antonio fixer upper before I rent it, and pictures are taken. So if there is a lot of wear and tear, I can show the tenant did it.
  • Large number of possible tenants: The GoSection8.com website has thousands of prospective San Antonio renters and it is quite easy to get a house rented.
  • Long term rent: I find that most section 8 renters rent for many years, so you will have fewer vacancies with your San Antonio rental property.

Minuses

  • Government bureaucrats: You have to deal with the red tape of the Section 8 bureaucracy and this can cause some delays. However, I find that the San Antonio Housing Authority is pretty good to work with.
  • Slow payments: It can take longer than I like to get a renter in my San Antonio buy and hold property due to delays with the government. But, once the tenant is in, the rent comes in every 30 days on time.
  • Inspections: Section 8 has fairly strict inspections, but I do complete rehabs and I know what Section 8 looks for, so I do not have major problems here.
  • More repairs: The renter does not own the San Antonio property so it is possible that more wear can happen.
  • Late payments: I have had a few tenants over the years pay late, and reporting them can take some time.

Generally, I find section 8 rental property in San Antonio to be a good bet. I am able to get good renters into my investment properties by carefully screening potential renters.

Here is a good potential San Antonio section 8 rental property:

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Address: 4907 Waycross Ln., San Antonio, Texas 78220-1840
Year Built: 1971
Description: Under market value fixer upper 4 beds 2 bath, 1078 sqft,  lot size: .13 acres, yearly taxes: $1,200.00, estimated insurance: $750.00, estimated repairs: 30K; central hvac, flooring, update kitchen/bath, roof, interior/exterior finish.
Price: $49,000 Cash
ARV: 109-115K
Exit Strategy:

  • Owner Finance with 30K repairs: 5k down, $1,095.00 monthly P/I, 30 year amortization, 10% interest, Price: 109k
  • Rent with 30K in repairs: $1,095.00 with section 8, no need to chase the monthly payment, San Antonio Housing Authority pays direct deposit to your account.
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5 Simple Tips for Better High Cash Flow Investment Properties

The San Antonio real estate market is quite hot in 2016, and I am seeing many new San Antonio real estate investors trying to get into the game.

If you want to get rolling in San Antonio buy and hold or flip properties, there are a few things that I can advise that will maximize your chances of great cash flow success!

  • Focus on the type of investing you want to do. Many newer real estate investors want to get involved in too many types of real estate investing in San Antonio. Lack of focus can lead to problems, as you never really become an expert in any particular area. My focus as a San Antonio real estate investor and licensed agent is on affordable, under market value single family homes. I buy San Antonio fixer uppers for $50,000, do $20,000 in rehab, and either owner finance them or rent them out section 8.

I advise focusing on buying and holding investment properties over the long term for the most part. Flipping San Antonio houses is fine for building capital, but flipping carries more risk, and there is no way of telling when that house will sell.

I can usually rent out a house section 8 in 30 days for good San Antonio real estate cash flow, or sell with owner financing in 30-60 days.

  • Work with experienced investors and partners. Real estate investing groups in San Antonio and elsewhere are full of people who talk a good game but have actually done very few deals. I strongly advise that you partner with a San Antonio real estate investor who has done several hundred deals, and ideally, is a licensed real estate agent. That way he can offer you under market value properties that have a good chance of producing positive cash flow. I’m happy to mentor new San Antonio real estate investors – who have capital to invest in buy and hold real estate. Note, you can buy a fixer upper from 100 San Antonio property wholesalers, but how many of them have built a portfolio of investment properties themselves? I have.
  • Buy in the right location. As an experienced San Antonio buy and hold investor, I typically buy a bit north of downtown, west of downtown, and south of downtown. I buy in up and coming areas, on the edge of more expensive neighborhoods. This is a great buy and hold deal in such an area for just $45,000.
  • Get finances in order. To get rolling in buy and hold real estate investing, you want to have at least $50,000 in the bank for investing in San Antonio in 2016. This could change as the market changes over time, but $50,000 is a good rule of thumb. It helps if you have good credit as well so that you can put 20% down on a rental property, rehab it, and then rent section 8.
  • Build a strong real estate investing team. Most new real estate investors try to go it alone and that is tough. To be successful in buy and hold real estate investing, you want to work with an expert real estate investor, a real estate agent who invests himself, a good property manager, full time construction crew, lenders, attorney and CPA. The better your team, the more chances you will be successful. I have my team in place and will help serious investors to invest in San Antonio real estate, if you have capital:).
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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.

We’ve had investors borrow millions from private investors and they 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.