Forbes magazine reported this month that Texas is one of the best real estate investment property states in the country. In fact, it called it the United States of Texas because of the various attractive real estate markets in the state that are very different from one another. While the oil business is synonymous with the Lone Star State, the article notes that oil exploration, pumping, processing and financing occur in various real estate markets in the state, and there also are other industries in some Texas cities that are more important than ‘black gold.’
Houston is a difficult market for some real estate investors right now because it is hard to know what the long term effects of flood damage are. However, the possibility for future flooding could encourage more people in Houston to rent and not buy, which could lead to more rental property demand.
Dallas has been a popular place for real estate investors but prices have been climbing 10% per year lately. The higher prices mean more people turning to rentals, so this could be a good fit for many rental property investors. But prices are high and going higher, so some landlords could be priced out of the market.
Probably the most difficult market in Texas right now is Austin. It is a more challenging investment market right now because prices are so high. Rapid growth of the population led to a doubing of home prices in the last 10 years. The growing tourist and tech industries have really increased economic growth which is good, but prices are quite high. Investors who do buy here often find that the best path forward is to subdivide a large house into several units.
The good news for San Antonio real estate investors is this local market is one of the best in the states. Population growth has been solid but not so high to overwhelm the real estate market. Job growth is strong and tourism is more important in this city than oil. The strong military presence here leads to a strong demand for rental property. Home prices are generally in balance with incomes and rents, although home prices most recently did rise in some parts of the city by 10%. The rental property market in San Antonio is quite large, with 40% of people renting at this time.
Forbes reports the currentl population of San Antonio is 2.3 million, with 6% population growth over three years and 3.1% job growth rate. Home prices went up 8% from last year and the average home price is $235,000.
Most of my real estate investment properties have been in San Antonio over the years and I have done very well. Prices are higher today, but it is still possible to make at least 10% per year on your real estate investments here.
The San Antonio housing market has gotten tighter in the last several months as prices are rising and supply of home on the market is getting tighter. For March 2018, there were 2012 homes sold in San Antonio, which was an increase of 3% over last year. The market has gotten stronger and bigger every year since 2012, and is being fueld by the strong local economy and a growing population.
The median home price for San Antonio was $215,000 in February 2018, which was a 6% increase from $202,000 a year ago. There has been a shortage of construction workers and a low supply of affordable homes for sale that have caused prices to rise. Still, prices in the area are still more affordable than many parts of the country, and San Antonio real estate investors can pick up homes in blue collar areas of the city for $70,000 or so that will produce 12% ROI, such as this one:
Excellent investment with tremendous potential. 307 Golodrina Ave., 3 beds 2 bath, 1370 sqft. Lot size: .11 acres, estimated rehab to make new and flip 50K, Max ARV: 169k, asking price: 75K.
Max ARV: $169k
Asking Price: $75,000
Exit strategy: Recommended exit strategy with 20K rehab: 5-10K down payment, sales price: 129K, $1,295.00 PI/TI 30 year amortization, 10% interest or rent $1200 monthly.
The San Antonio area’s inventory of homes on the market, which is measured by the time it takes for a house to be sold if no new homes go on the market, was 3.3 months, which is very tight. The record low was December 2017 at 3.1 months. An inventory of six months shows a balance between sellers and buyers. The last time the San Antonio market was balanced was Nov. 2012.
Interestingly, the San Antonio real estate market has continued to get stronger even as interest rates rise. The national average for a 30 yar loan fixed is around 4.5%, which is nearly 1% higher than early 2017. Still, interest rates are historically low, and the economy is strong, so people’s rising wages may be helping them to deal with the the higher debt costs.
This under market value property is only $46,900 with $6000 in repairs. We will do the repairs needed to get it resold with owner financing. Expect an ROI of ~13-14%. It has a huge yard and 4 bedrooms, which is a rarity in this price range!
Address: 549 N San Bernardo Ave, San Antonio, Texas 78228
Year Built: 1958
Description: Under market value property and another cash flow opportunity for San Antonio real estate investors, large beautiful lot, 4 beds 1 bath, 1000 square feet, lot size: .30 acres, subdivision: Memorial Heights, 6K repairs, lawn maintenance, interior paint, clean trash in/out, After Repair Value: 73K,
Cash Price: $46,900 CASH ONLY.
Exit Strategy: Owner Finance with 6k in repairs: 5K down payment, $750.00 monthly PI/TI, 30 year amortization, 10% interest, Sales Price: $73,000.00, See attached sold/rental comps.
Notes: This San Antonio owner finance, under market value property has a very large lot, which will appeal to many families. It features FOUR bedrooms, rare in this price range. Also, we advise owner financing this house rather than renting, with just $6k in repairs – boosts your ROI.
Most San Antonio real estate investors buy under market value San Antonio properties, rehab them and then rent them out.
I have several rental properties in my San Antonio investment portfolio, but I have found in the last year or two that construction costs are eating too much into my bottom line.
As the San Antonio real estate market is heating up, construction costs have gone up on some of my fixer uppers by as much as 50%! Rather than spending $10,000 to repair and rent a property, I was finding that I was spending $20,000 or more, and my net return was under 10% per year.
Because of higher construction costs, I am advocating more owner financing my San Antonio properties. Here’s how it works in a nutshell:
I buy the under market value San Antonio fixer upper for $50,000.
I do approximately $5000 in repairs on the property, which may include painting, cleaning, minor plumbing and electrical. Basically, I am doing enough repairs on the property so that I can sell it with owner financing to a blue collar worker and his family. They will be able to complete most of the remaining repairs.
By only doing $5000 or so in repairs on the property, I am able to save at least $10,000 in most cases in construction and rehab costs. This often will push my ROI to 14-15%.
Typical terms for the end buyer are 10% interest, $5000 down, no prepayment penalty, 30 year note.
The owner financing exit strategy has the added benefit of not having any ongoing repair costs, which is great for peace of mind and my bottom line.
In summary, the foundation of my buy and hold San Antonio property portfolio is properties owned in cash and owner financed to qualified buyers. It is the primary strategy I recommend to new investors who want to build passive cash flow.
Here’s a good property that will return 14-15% per year with $5000 only in rehab:
Address: 224 Avondale Ave., San Antonio, TX 78223
Year Built: 1957
Description: San Antonio buy and hold investors – Happy New Year! Excellent cash flow opportunity with central AC/Heat. This is a big plus as you don’t need to spend to add it. Has car port and tool shed. The neighborhood is in high demand, booming south San Antonio Market, 2 beds, 1 bath, 866 sqft, lot size: .16 acres, estimated repairs: 5K, clean/lawn maintenance/exterior paint. Max After Repair Value: 85K.
Cash Price on San Antonio Fixer Upper: $49,900 CASH
Exit Strategy: Owner Finance with 5k in repairs: 5K down payment, $850.00 monthly PI/TI, 30 year amortization, 10% interest, Sales Price: 85K. NOTE: We recommend owner financing this property rather than renting; you will be able to save your cash outlays on the repairs by owner financing it rather than renting. Renting out this San Antonio investment property is possible, but at least another $10,000 of repairs will be needed.
One of the challenges of dealing with rental investment properties in San Antonio and other places is that they cost money to rehab and maintain.
When many San Antonio real estate investors purchase under market value properties, the normal scenario is something like the following:
Buy an under market value San Antonio fixer upper for $50,000.
Stick $25,000 into it to get it ready to rent.
Rent it out for $900 per month.
That is a perfectly acceptable way to generate cash flow with buy and hold real estate investments.
But what if you can buy the house cheaper than that, put only a few thousand into it, and get it occupied for about the same monthly payment?
That is what I do on many of my San Antonio investment properties. Take a look at this very nice, incredibly inexpensive $35,000 San Antonio fixer upper deal:
Address: 1707 Gorman, San Antonio, TX 78202
Description: Stunning large lot with positive cash flow, under market value, booming San Antonio Market, very popular location east of downtown, 2 beds, 1 bath, 654 sqft, lot size: .22 acres, estimated repairs: 2K, minor electric, clean/lawn maintenance. After Repair Value: 61K,
Price: $35,000.00 cash firm.
Exit Strategy: Owner Finance San Antonio investment property with 2k in repairs: 3-5K down, $600 monthly PI/TI, 30 year amortization, 10% interest, Price: 61K
On this investment property, I got it under contract for just $39,000 (prices in my areas have been dropping lately). And rather than rent out the property – which would require $25,000 or more of rehab, I just do $2000 to clean it up.
Then, I find an owner finance buyer interested in buying the property from me on terms of 30 years, 10% interest, $5000 down. That way, I leave most of the rehab to the end buyer, and I can enjoy a very high rate of return without doing any repairs.
Owner financing a house successfully requires me to do my homework. I need to make sure of the following:
The buyer has enough income to afford the payment and to live with the other normal life expenses.
They have a stable job for at least the last two years.
They have a $5000 down payment.
Most of these buyers have poor credit, so it is up to me to find good buyers who can pay me on time. If they don’t, we foreclose and get them out in 60 days, and get another buyer in there.
That’s the cornerstone of my San Antonio investment property portfolio – buy and hold with owner financing with limited repairs of $2000 to $5000. What do you think?
Most San Antonio real estate investors are afraid of ‘foundation problems’ on their fixer upper properties. I understand why that is:
A serious foundation issue on a property can kill the profits on a buy and hold deal. If you have a $25,000 budget to rehab a San Antonio wholesale property, a $10,000 foundation repair can turn it into a negative cash flow situation.
However, one of my millionaire mentors in real estate investing taught me many years ago to not usually worry about foundation problems on buy and hold investments. Actually, I tend to be attracted these days to foundation problems.
The reason? Because most other investors are scared of foundation issues and the competition for these distressed properties is lower. Meanwhile, if you try to buy an old fixer upper for $50k in San Antonio with no foundation problems, you will probably be fighting off a lot of investor competition, which drives up the price.
By buying a foundation problem fixer upper, you often find that you can get the house 5k cheaper, which you can then put into fixing the foundation.
When I am looking at San Antonio wholesale property to buy, I keep these ideas in mind about the foundation:
Uneven floor is not a big problem in an old house in San Antonio
Most of the buyers of my properties are accustomed to being in a house with a foundation that is not perfect, so a floor that slopes a bit is not a deal killer.
Some investors in San Antonio will see that minor sloping floor and freak out. However, my experience with the houses I buy between 1900 and 1950 usually have a somewhat uneven floor with a pier and beam foundation.
This can be caused by rotting floor joists, ground settling over the decades or shoddy construction.
When I do my inspection, I usually get under the house and see how serious the problem looks. For many of the houses I buy, all that needs to be done is to replace some floor joists for a few thousand dollars.
It is unusual for me to buy a pier and beam foundation house in San Antonio that needs more than 5k of repairs.
Wholesale prices on foundation work
Going to a regular foundation contractor could leave you with a deal busting foundation bill. I have workers who can fix a foundation for half of that price. This includes permits and the engineering report.
That’s why it may be a good idea for you to work with an experienced investor who has the network to get a foundation repaired affordably.
Foundation problems can mean profits
I have bought houses for $25k that had foundation problems, but all they needed was about $3000 in repairs for the foundation. On one of these deals, I fixed the foundation and sold it to an investor for a 5k profit.
She then did 5k more in repairs and owner financed that 25k house for $50k and $550 per month. She is making 14% a year on that deal.
All on an under market value San Antonio investment property with a foundation problem.
So, don’t always be afraid of dealing with a foundation issue; it can turn out to not be a deal breaker, especially if you work with an expert investor who can help you do repairs affordably.
I am an aggressive investor and built myself a large portfolio of buy and hold properties in San Antonio in about five years of nonstop work. I don’t need more houses myself. Now my goal is to build long term San Antonio real estate investing relationships with like-minded, aggressive investors with capital. I want to help YOU build your portfolio.
I talk to hundreds of investors and potential investors each year. What I have learned is that the successful San Antonio real estate investors that I work with long term have several things in common.
Am I right to work with you? Are you right to work with me? Well, read below, and then decide :).
For us to work successfully together you must have:
Capital – Pretty important! You need to have at least ~$30,000 to do a San Antonio property flip, or ~$75,000 to do a San Antonio buy and hold. It also helps if you have a solid job and good credit so you can borrow cheap money. But it is not a deal breaker if you don’t have either.
Realistic expectations: Current market conditions in San Antonio affordable homes dictate that you can make $10,000 to $12,000 on a flip, and 10-14% per year on a buy and hold. Those are GREAT returns! You can do a ton of damage with those numbers and make fantastic money – do 3, 4, 10, 50 deals per year or whatever your cash situation allows.
Let me be clear: I have made millions in San Antonio real estate investing, and retired before age 30, with those types of returns. If you expect $25,000 flip profits or 20% buy and hold profits on these affordable houses, it will NOT happen in our current real estate market.
San Antonio is a great, low cost market with solid returns. The economy is strong, unemployment low, population growth is booming. Also, this area doesn’t really do crazy boom/bust like oil rich/poor Houston; it’s quite stable.
It IS a hot market right now, but it won’t go too high or ever go too low. It also is not Austin, which is a great place, but really overpriced right now. I like San Antonio because it is cheap and relatively stable, and cash flow is possible in all economic cycles.
That said, 25k flip and 20% ROI isn’t happening in my San Antonio houses in March 2016. The prices have gone up too much for that.
Patience: We work in real estate, not Burger King. You cannot ‘order’ a house to sell in a week. It sells when it sells. Typical DOM is 60-80 days. It can sell faster, but I cannot guarantee that. If you want to sell quick, I recommend buying San Antonio real estate investments north of downtown. That is a very hot area (78201 zip code especially). We also can do a ‘fire sale’ and sell the house at a lower price to get it sold quickly. If you want to get a house producing cash flow fast, I recommend doing a Section 8 rental property; we can rent it out in 30 days in many cases.
Courage: Real estate investing in San Antonio and anywhere is not for the meek who cannot handle uncertainty. You WILL make money on these under market value investment properties, but selling a house takes time.
On a related note, you need to have the guts to make a decision yay or nay on deals I send you in 24 hours. Decide! Don’t be a wimp. Millions of people say they want to get into San Antonio real estate investing or in other cities. Few ever do because they lack courage. I talk to investors who have been mulling investing in real estate for 10 years! 10 years and never bought a deal! I did FIFTY HOUSES in my first year! Run the numbers and DECIDE.
More patience: You also need patience on the rehab. 30-45 days is typical, and it can take longer if difficulties crop up, or if it rains for 10 days. I don’t want investors calling me daily on when the rehab will be done. The answer is always ASAP, but it takes time.
Trust: My comps and ARVs are dead on. I have done hundreds of rehabs, and I know how to do these little houses right. I know exactly what I am doing and what houses in my areas resell for. You of course should do your due diligence on the property and you of course can ask me questions about its resale value.
I just ask you to keep in mind that I do 100 houses in these neighborhoods per year, and I have a high degree of expertise when it comes to affordable home values in San Antonio TX. Just because Zillow says a house was worth $60,000 (pre-rehab) a few months ago does not make it true for today for the same house that has been rehabbed.
Also, note that when you look at wholesale property comps, they may not always tell the whole story. In my neighborhoods, there is a wide spread of homes values: There are junk house fixer uppers worth $30,000, and fixed up, totally rehabbed investment properties or owner occupied properties for $150,000. That can skew the comps and ‘trick’ the layman on the ARV of the investment property in question. I know the neighborhoods after 15 years and hundreds of deals, so I’m very confident of my stated ARVs.
A related note on trust: I’m not here to sell you 1 house. Read my mission statement. I’m here to sell you 10, 20, 100 houses. Would I really BS you on the ARV on a house? Heck no. You will be a one and done investor. I have no interest in that. I want long term investors here to fulfill my Mission. And it’s a lot tougher to do 50 single deals with 50 different investors than 50 with 1 investor!
You can and will make money in San Antonio real estate investing, but the above items are non-negotiable in any out of state investment property investors that work with me.
I have fired investors in the last year who did a deal with me and had unreasonable expectations. I want all potential San Antonio investors to understand each point above before they consider working with me.
So to summarize, to work with me you need:
Realistic expectations: 10-12k flip, 12-14% ROI buy and hold
Anyone involved in San Antonio real estate investing or real estate in general knows that San Antonio real estate has been hot for the last few years. As a San Antonio real estate investor myself, I have done very well here for 15 years, and the market in the last two years has been strong.
There are several factors that make San Antonio real estate investments a good bet for the long term:
Strong job growth of 3.5%
Low cost of living
San Antonio’s relative low reliance on oil revenues
Strong population growth
Pro-business local government
All of these things make San Antonio a solid, long term bet for under market value real estate investing. I have found that even in downturns, the market in San Antonio never drops too much. I always have been able to buy San Antonio real estate investments that produce cash flow.
As for 2016, the news is almost all bright. The San Antonio Board of Realtors reported in February that the San Antonio area had a 10% year over year increase in total sales, as well as a 4% hike in average prices.
Right now, interest rates are low, foreign investors and out of state investment property investors have a strong appetite for real estate investments in Sn Antonio, and job growth is strong. The 3.5% growth rate in jobs in San Antonio bodes well for a continued expansion.
However, on the down side, rising home prices in San Antonio are not always great news. The inventory of available homes is under six months which is quite low considering the growth in population. This could eventually cause a price spike that could lead to a slow down in growth.
That is why I have long believed that as a San Antonio real estate investor, investing in under market value affordable homes is such a smart move. There always is strong demand here for quality homes under $130,000. Usually, the San Antonio real estate investors who get in trouble are investing in more expensive properties above $200,000. Those are the houses that usually decline in value in a downturn and leave flippers in trouble.
I, on the other hand, always buy houses 30% under market value in the $30-75k range, which is very safe even in a downturn.
Given the hot state of San Antonio real estate, now is a good time to flip San Antonio properties, as long as you have realistic expectations of your return. The below property will make you at least a $10,000 return in 60 days.
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: $139,000.00
Cash Price: $65,900 firm.
Exit Strategy: Owner Finance with 35K repairs: 5-10k down or more, $1,295.00 monthly P/I, 30 year amortization, 10% interest. Or 15K rehab, new HVAC, paint in/out, kitchen/bath repairs, plumbing/electric up to code, then FSBO at 109K, 10% interest, $1,100 monthly PI/TI, 30 year amortization.
Alternate Exit Strategy: Flip with $35k in repairs. $10,000-15,000 profit depending if you are all cash or use hard money lender. Rehab completed in 45 days or less.