San Antonio Home Buyers Struggle to Find Homes in Tight Market

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.

Should You Do a Cash-Out Refinance To Buy Investment Property?

Many people hear about cash out refinances that are the main residence of the borrow, and I do know many people who buy San Antonio investment properties and Austin investment properties who pull money out of their home to buy more buy and hold properties.

After all, if you are able to borrow money on your personal residence at a 3% interest rate and are confidant you can invest that money in San Antonio real estate and make 10% reliably, why wouldn’t you do it?

But another cash out refinance to consider is in your investment properties. A few years ago, these types of loans were hard to find after the crash, but now there are many mortgage lenders that offer buy and hold investment property owners the chance to use equity in their investment properties.

Many real estate investors are able to drop their interest rate when they do a cash out, which improves their cash flow too.

If you are thinking about doing a cash out refinance on investment properties to buy more, please keep these thoughts in mind:

Do You Have Equity? 

The more equity in your property, the better position you have when you get a new loan. Most lenders for Austin investment properties, San Antonio investment properties will loan up to 75% of the home’s appraised value. This is the maximum that has been set by Fannie Mae.

So before you opt for an investment property cash out refinance, you have to have good equity in the home. I think the best candidates for this rental property strategy are houses with 30-40% equity in them.

Non-Owner Occupied Cash Out Refi 2016 Rules

  • Maximum LTV is 75% for a one unit property and 70% for a 2-4 unit property.
  • If your buy and hold investment property was listed to sell in the last 1/2 year, the max LTV is 70%.
  • You also cannot do a cash out refinance on an investment property bought in the last 180 days.

Note: Cash out refinance loans on investment properties are riskier for lenders, as you are not living in the house. Expect tougher qualifications and a lot more paperwork than for your own home’s cash out refi.

Expect to need excellent credit scores and six months of cash to handle all of your mortgages.

Some lenders will not allow you to do this if you already have over four financed investment properties.

Is Cash Out Refi the Right Move for You? 

If you have equity, meet all requirements of the lender, and you think a lower interest rate will help, also keep these factors in mind:

  • Look at how much your monthly payment will go up. Can your rental income handle it, when you consider repairs and vacancies?
  • Think about if you are going to buy more rental properties. Taking on more debt could affect if you will be able to get another loan.
  • Do the terms of the refi loan make sense for your goals? Different lenders have all kinds of different terms for refinances for under market value investment properties. If you have an ARM, you want to be sure you can handle change in payment.

 

 

Hot San Antonio Real Estate Investment Market Continues in 2016

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.

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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.

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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: $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.

Why San Antonio Is One of The Best Cities to Invest in Real Estate

I first came to San Antonio as an under market value property investor back in 2001, and it has been a great decision. Buying inexpensive, below market value investment property has enabled me to live a great, rewarding life. I financially retired at 28, and I continue to invest in under market value property today, which helps to revitalize San Antonio, one of the best cities to invest in real estate. In fact, I know many investors who used to buy only California investment property who now buy here.

Overall, San Antonio is one of the best cities to invest in real estate because of:

  • A rapidly growing population attracted to San Antonio and Texas low tax, pro business environment
  • Strong job growth even in down real estate markets. Even in the big downturn in 2008, San Antonio unemployment never went above 7% and now is down under 5%.
  • Diverse job base. San Antonio is not just about gas and oil. We also have a lot of manufacturing jobs, including Toyota, high tech employment and military bases.
  • Large population of hardworking blue collar workers, which drivers demand for owner finance properties and rental properties.

Coming into 2016, experts think that we will eclipse total home sales in 2015, which was 24,948, according to the San Antonio Board of Realtors.

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Those three key drivers of home purchases – growth in jobs, steady mortgage prices and increasing home value, are not showing any signs of slowing in San Antonio real estate.

In fact, we actually are seeing not enough new homes being built to meet the demand. This is good news for the out of state investment property buyer – it increases demand and prices for our under market value investment properties!

I can definitely tell you that this is true about San Antonio real estate: My below market value investment properties that were $40,000 two years ago are now $60,000, and I usually sell my owner finance houses in under 60 days. Still, my many out of state investment property buyers earn 12% ROI on these under market value houses. Anyone considering, say, California investment property, would be happy with these numbers.

As of now, the median home price in San Antonio, one of the best cities to invest in real estate, is up 6.8% from 2014, but still is only $192,000. Try to buy a house for $192,000 in California!

My best guess is that property values will continue to climb in San Antonio for at least two more years. It is a great time to buy San Antonio investment properties!