So You’re Thinking About Real Estate Investing in 2017!

Now that the presidential election is over, I am seeing more new real estate investors who are thinking about getting into cashflowing real estate properties in San Antonio.

Many of these potential investors have good jobs and good incomes, and have so far saved and invested their money mostly in the stock market. But they are nervous about investing in real estate.

I think investing in the stock market is ok in a limited fashion. I was heavily invested in the market back in 2000, and I lost a large chunk of it in the crash after 9/11/01.

That experience taught me something important: Having one’s life savings in the stock market is risky, even if you are well diversified. Since I lost so much money in the stock market at that time, I decided to invest in something solid – specifically, San Antonio under market value properties.

I strongly believe that investing in certain under market value San Antonio fixer uppers is an excellent long term wealth building strategy. My real estate strategy is usually to buy a San Antonio under market value property for $35,000 to $75,000 cash, do $5000 or $10,000 in repairs, and either rent or owner finance it.

Here is a great case study example; this property belongs to a California investor of mine:

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The house above in on West Poplar Ave. in 78207 in San Antonio. It is a newly completed San Antonio investment property that was bought the the California investor for $44,000 in October 2015.

We conducted $10,000 of rehab on the property and put it on the market in December 2015. Total cost to investor was $54,000. It was resold in late January 2016 with the following terms:

  • $83,000 sales price
  • $5000 down
  • $627.61 per month ($800 per month PITI)
  • 9% interest
  • 30 year note

Note that this is a seller finance property, not a rental property.

That property is generating $627 per month in cash flow on a $54,000 investment with no other expenses.

But what if you don’t want to do all cash deals? That’s ok too. You can use your available cash to put a down payment on a property and to do repairs, and then either rent it out or owner finance it (this is called a wrap around mortgage).

In such a case, you should be able to net at least $250 to $350 per month in positive cash flow if you hold a mortgage on the San Antonio investment property.

Here is a current property that I have carefully scouted out that can generate 12-14% ROI after the repairs are done:

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  • Address: 8013 FM 1518, Somerset, TX 78069
  • Year Built: 1955
  • Description: Tremendous cash flow investment opportunity in South San Antonio suburb, excellent school district and low crime rating, 3 beds 2 bath San Antonio investment property under market value, 2150 sqft, land: .16 acres, built: 1955, tax value: 84.9K, yearly taxes: $2,400.00, estimated yearly insurance: $1,000.00, Estimated Repairs:10K, ARV:79-89K
  • Cash Price on San Antonio Fixer Upper:  $49,000
  • Exit Strategy: Owner Finance with 10K in repairs: then resell with: 5K-10K down, $895 monthly PI/TI, 30 year amortization, 10 % interest, Sales Price 89K.

I recommend that a new San Antonio real estate investor work with an expert investor and real estate agent who has a large portfolio of properties. He or she can help you to get a good deal such as the above.

OFF MARKET – 308 Strong Ave, Ballinger TX 76821

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    • Address: 308 Strong Ave, Ballinger TX 76821
    • Year Built: 1900
    • Description:  Texas fixer upper cash flow king – 3 beds 1 bath, 1300 sqft, ¼ acre lot, yearly taxes: $500, yearly insurance: $500,
    • Estimated Repairs: NONE – Resell AS IS.
    • Cash Price: $18,000
    • Exit Strategy: Owner Finance this buy and hold under market value property with ZERO repairs: 2k down, $395.00 monthly P/I, 30 year amortization, 10% interest, Price: 39k. Strong demand for affordable houses under $500 per month here.
    • Contact us for more information or to make offer.

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What Is a House Flipper?

If you are new real estate investor in San Antonio or anywhere else, you may be considering doing San Antonio flips to build up your cash to do more real estate deals.

As an expert San Antonio wholesale property investor for 15 years, I’ve done hundreds of rehabs and have flipped many San Antonio properties. But before I go any further, if you are new to this discussion of real estate investing:

What Is a House Flipper?

This is a type of real estate investing where you buy a property (ideally under market value) with the intention of rehabbing it to a certain degree and reselling it for a profit. The profit is gained either from an appreciation of the price due to a booming real estate market, or from the capital improvements you make.

When I flip houses in San Antonio TX, I always make sure of the following for best results:

  • I buy affordable homes from $30,000 to $75,000.
  • I buy them at least 20% under market value.
  • I do $10,000 to $30,000 in rehab, depending upon the neighborhood. It is critical to fix a San Antonio flip property enough to sell it and get maximum ARV but not to overdo it.
  • I am happy to make $8000 to $10,000 per San Antonio flip as of April 2016.

If you are researching about flipping houses you may also want to know what is the 70% rule in real estate? This is a common rule that you hear in real estate flipping. It means that you should pay 70% of the ARV of the property, minus the repairs. That is the most you can afford to pay for that under market value property.

So, if the ARV of the house is $100,000 and needs $30,000 in repairs, the 70% rule states that you should pay a maximum of about $45,000 for that property. If you overpay for the property, your chances of making much money on a flip are much less.

I do not necessarily follow this rule precisely in all cases, but yes I know the maximum I likely can pay and still make my desired profit on a flip – $8000 to $10000.

Below is a nice flip that we did with a pair of local San Antonio investors. This worked out very nicely for them. If you do not overpay for the house and do not overrehab, your profit margins in San Antonio flips can be excellent!

 

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$50,500 purchase price, $25,000 rehab, resold with $18k profit, DOM 130.

This under market value manufactured home is located near Canyon Lake, about 15 miles NE of San Antonio. It is a peaceful and beautiful part of our area. It was a distressed property sale that worked out well for the investor.

Our principal sold this property to a family of rehabbers in San Antonio for $50,500, who then did the $25,000 of rehab themselves:

  • Kitchen: $2100
  • HVAC repair: $300
  • Electric Fixtures: $900
  • Interior repair and paint: $4500
  • Exterior Repair and Paint: $3250
  • Exterior skirt: $800
  • Tree trimming: $500
  • Roof repair: $300
  • Plumbing: $500
  • New Water Heater: $2010
  • Bathroom: $1000
  • New floors: $2200
  • Dumpster: $1000
  • New Appliances: $1550
  • Rotten wood removal: $895
  • Deck repair and stain: $900
  • New mulch: $250
  • New windows: $2000
  • New Mail box: $100

Their total investment cost was $75,555, with a sold price of $99,970.

After commissions and closing, they had a profit of $18,000. Investors complimented us on providing them with a profitable first deal and accurate rehab numbers.

 

 

 

The Most Important Thing I Tell New San Antonio Investors Is…

I talk to many new San Antonio real estate investors every week, and I am talking to more than ever this past month. San Antonio TX is now on the radar for a lot of out of state property investors.

There are many new San Antonio wholesale property investors coming into the market every month. The reason is that San Antonio is booming.

Real estate prices are up but still affordable. The population is growing, unemployment is low, and wages continue to rise. Houses are selling quickly in the hot parts of town as well.

And while the prices are higher than two years ago, it still is very possible to make positive cash flow on under market value San Antonio properties.

If there is anything I would tell the new San Antonio real estate investor it would be this:

Don’t be greedy, and have realistic expectations!

I often talk to investors from out of state who are used to investing in more expensive areas, and earning $25,000 on a flip. Or I’ll talk to a Midwestern investor who thinks he can make 20% on a buy and hold here.

I’ve been working as a real estate investor in San Antonio real estate since 2001, and I have made many millions of dollars by making $7000 on a flip and $12% per year on a $650 per month buy and hold.

I am very happy to make those types of returns. I basically do lots of these small San Antonio investment property deals each year. Each flip makes me $7000 or $10,000, or each buy and hold makes me 11% or 12% per year, and I am fine with that.

Too many investors focus on doing a few grand slam deals each year. What they should be doing in San Antonio real estate investing is making a solid return on dozens of deals each year!

If you want to make $25,000 or $50,000 on a flip, you need to move into big projects, ones that go for $200,000 or more. And that my friends gets a lot more complicated and expensive than my little $50,000 or $60,000 San Antonio wholesale property deals.

It’s also more risky. In 2008 when the market tanked, I got stuck with a bunch of $1 million San Antonio real estate investments that were no longer worth what I paid for them. That’s what can happen when you are trying to flip expensive homes at or near market value.

Buying little under market value San Antonio houses such as mine is a lot safer. You just have to be happy making $10,000 on a flip.

I currently have several good $10,000  San Antonio flips available, and these are excellent returns that you can make a lot of money on. You should not pass on a deal because you will not make $30,000 on a flip. I advise doing at least 4 per year and making 40-50k. Then use that cash to buy San Antonio buy and hold property.

Below is an excellent 10k San Antonio flip property you should consider:

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    • 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: $99,000.
    • Cash Price: $69,000.
    • 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.
    • Alternative Exit Strategy: $15,000 in repairs and flip/resell retail – maximum ARV is $99,000. Profit $10,000.

 

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.

How You Can Use Hard Money to Make a $20,000 Flip in 60 Days

I am a long time cash buyer and wholesaler of San Antonio investment property. But not every investor can or wants to use all cash for their under market value property purchases.

That is why I have developed a good network of hard money lenders in Texas and California who can help my out of state investment property investors do San Antonio investment deals.

A ‘hard money lender’ is a private lender who loans capital to investors usually for flips, but sometimes for short term buy and hold investments.

Most hard money lenders lend based upon the value of the under market value investment property. It is an asset-based loan. If you have good credit and cash reserves, you may be able to qualify for a better rate.

Whatever your rate, be prepared to pay a high amount of interests, usually 12-15%. Why would you pay such a high rate? Because no traditional lender will lend on under market value properties that have not been rehabbed. Using hard money, while expensive, is a good option for some investors who either lack capital, or want to reserve their capital for other projects.

Hard money lenders will lend anywhere from 65-75% of the after repair value or ARV of the property (pending the lender’s appraisal). That means that you will need to have approximately 25% to 35% of the property price, PLUS the cost of the rehab, in cash.

So, let’s look at a new San Antonio investment property deal I just got:

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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: $69,900 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. OR, flip with $35k in rehab for a 20-25k profit in 60-90 days.

On this deal, let’s assume the hard money lender will lend 75% of the ARV. That is $52,425. So, you will need to have $17,500 of the sales prices in cash up front, plus the rehab of $35,000. So you will need $52,500 cash to do this deal.

Assuming a 13% interest rate, your payment per month during rehab/resale will be $568.

Assuming 3 months to rehab and resell, you will pay interest only payments totaling $1704. Up front fees will be approximately $2500 on this deal. So, your money is going to cost you approximately $4200.

Still, even if you incur those hard money loan costs, you stand to make $20,000 on this flip. Not a bad investment in San Antonio wholesale property!

 

 

SOLD – 1723 West Ashby Place 78201

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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: 50k in repairs to flip, 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: $125,000.00
    • Cash Price: $75,000
    • Exit Strategy: Owner Finance with 35K repairs: 5-10k down or more, ~$1295.00 monthly P/I, 30 year amortization, 10% interest.
    • Or 15K rehab, new HVAC, paint in/out, kitchen/bath repairs,  then FSBO at 119K, 10% interest, $1095 monthly PI/TI, 30 year amortization.
    • Alternate Exit Strategy: Flip with $50k in repairs. $8000 to $10000 profit.
    • Contact us for more information or to make offer.
    • Sold and Rental Comps: Rental Comps 1723 W Ashby Sold Comps 1723 W Ashby

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How I Still Do $12,000 Flips in San Antonio With Under Market Value Properties

The San Antonio investment property market has really heated up in the last 18 months. Back in 2014, it was possible to buy houses for $30,000, do $10,000 in rehab at most, and owner finance them for $59,000.

Or, you could buy an under market value property for $40,000, do $10,000 in rehab, and flip it for cash and make $30,000.

Making money in San Antonio investment property is still very possible and I do it every week, but it is more challenging now. The economy has improved a great deal, and San Antonio TX is a booming market, with great numbers of people moving here every month. With all of the construction going on, there is plenty of blue collar job demand.

Lower gas prices have also put more money in people’s pockets, which leads to more economic growth and spending.

All of this has led to an increase in real state prices in my under market value properties.

But, the good news is that because I have been doing this for 15 years and I know how to rehab properties and negotiate investment property deals, I still am able to make excellent returns on flips.

I mostly am a buy and hold investor with owner financing, but I have been doing some extremely profitable flips these days. My work crew loves when I do flips because they pay well, and I like them because they are profitable for me!

I have a current flip that the investor would make $12,000 on, which is fantastic in this hot market. This house is listed below:

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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 with owner financing, comps are for 3/1.
  • Rehab Option #2: 15k AC, flooring paint in and out $109,000 ARV.
  • Cash Price: $69,900 firm.

This house is located in a hot area north of downtown and is an excellent under market value fixer upper. I was able to get a very reasonable price of $69,900 on this deal.

Of course if I didn’t know what i was doing, this wouldn’t work. Most under market value property investors spend too much on rehab, which kills the deal. I know exactly how much rehab to do on this project – flooring, HVAC, paint in and out, and resell it. By doing that amount of rehab, this will resell for approximately $109,000. Quite a nice flip in this hot San Antonio market!

Try to do this type of flip with San Francisco investment property, Seattle investment property, Los Angeles investment property or San Diego investment property 🙂

 

Pseudo Investors – Do Not Waste My Time

I work with many successful out of state investment property investors in my San Antonio investment property business.

But I also have come across many unsuccessful ‘investors’ who typically never make any money in real estate cash flow investing in under market value properties.

I call them pseudo investors.

When I say ‘pseudo investors,’ I am referring to people who flatter themselves as investors but either rarely or never do a real estate investment deal.

Here are the most typical types of pseudo investors i deal with in under market value properties:

  • The ‘investor’ with zero capital. There are ways to invest in under market value San Antonio investment properties without cash of your own, but most of those methods suck as far as making cash flow each month. The best option you have is to borrow capital from friends or family at a ‘friend rate’ of 7-8%. At that rate, you can buy a $50k house and produce monthly positive cash flow. But if you don’t have capital of your own, I don’t want you to call me yet. You need to go find that capital from a private investor first. I deal ONLY in investors with cash.
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Five investors passed on this deal. ‘Too ugly and run down.’ I sold it AS IS with owner financing and $5000 down myself and will enjoy 14% ROI on it. Pseudo investors.
  • The ‘investor’ with capital but incapable of making an informed decision. I have ‘investors’ on my list with $500,000 or more to invest who never do a single real estate deal. They are simply constitutionally incapable of making decisions. If I send you a below market value deal, I expect a yay or nay in 24 hours. MAX. When I see a hot deal, I make an offer in minutes. Bottom line – if you have cash but are incapable of making decisions, don’t call me please.’
  • The ‘investor’ with capital and can make decisions but is too picky. ‘Oh that neighborhood is too risky, oh that house only has two bedrooms, that property has a cracked foundation…..” Look folks: I have made MILLIONS of dollars on under market value San Antonio investment properties that look like crap with every problem in the book – roof, foundation, too small you name it. Every deal that a pseudo investor turns down – EVERY ONE – I buy it myself with my own cash and make $5000-$15,000. I already have my own cash and portfolio. I really don’t need it. But if you are foolish, fine, I’ll make the money.
  • The ‘investor’ with capital and can make decisions but has absurd expectations and is greedy. I have made a fortune on 10-15% ROI buy and hold deals in San Antonio. But this type of ‘investor’ is never happy with a certain return, they always want more.  Listen, this is San Antonio TX. It has many advantages – real estate is dirt cheap here, we have a great population of blue collar buyers, the economy is stable and taxes are low. But my typical deal is $50,000 and my profit might be $10,000 or $15,000. If that sounds like pennies to you, please don’t call me. I do 50 or 100  of these deals per year. That’s at least $500,000 i my pocket. That’s real money in San Antonio. You might get big profits in San Francisco investment property, but you have to have millions to invest. Here in San Antonio investment property, you can get rolling with $100,000. Have realistic expectations of $10,000 on a quick flip to another investor, or 12-15% per year on a buy and hold.
  • The ‘investor’ from out of state who questions my rehab cost, comps and ARV. Please. Don’t let the door hit you.

If you call me, I expect you to have proof of funds of at least $50,000 liquid or more, with expectations of making $10,000 max on a deal in 60 days or less. Or, 12-15% ROI on a long term buy and hold with owner financing or renting, if you prefer the latter.

Right now, I am seeking private investors – such as a former San Francisco investment property investor – who will buy a $50,000 3 BR 1 bath fixer upper. I do all the work – finding the house, doing the rehab, which you pay for. When the house sells, we split the profits on the San Antonio investment property down the middle.

Remember, I am not interested in a pseudo investor. Only a real investors with cash who can make decisions. Former San Francisco investment property investors especially welcome.

Let me know. Thanks.

 

How to Recognize Value in Junk Homes

Now in Inman News

I have made a good career in San Antonio real estate investing by buying and selling under-market-value properties (“junk” houses) that most investors would never touch. Then, I owner finance them for maintenance-free cash flow, which has the added benefit of giving a hardworking family a chance to own their own home.

Sure, the under-market-value houses that I buy are ugly at first glance, but the smart investor needs to look underneath that ugliness and see the value of the home and the area around it.

Last week, I had yet another junk house success story that I wanted to share with you. Last year, I bought this junk house:

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It sat vacant for several years, and I bought it in an estate sale in September 2015. No question that this house was ugly and run down:

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However, this under-market-value property is located in a booming area a few miles west of downtown San Antonio. The Bexar County government has invested millions of dollars in this area with new running trails, parks, shopping plazas, green space and more. Just two miles from this junk property is the San Antonio Riverwalk, a tourist mecca.

Also, this distressed property has nice, owner-occupied homes right next to it worth $100,000:

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So I snatched up the house and resold it to my out-of-state investor for $25,000 late last year. The regular investor cannot see past the temporary ugliness of the under-market-value house, but I can.

After my investor purchased the home, I did $27,000 in rehab:

  • Electrical update
  • New flooring (float new floor over that minor foundation issue after it’s repaired)
  • Clean out
  • Update bath and kitchen with tile and granite
  • New light fixtures
  • Paint — interior and exterior
  • Finish second bedroom

Now the under-market-value property looks like this:

The ARV on this distressed property is $89,000, and we completed the rehab in mid-January. By the end of January, we already had an owner-finance buyer for it with these terms:

  • $89,000 purchase price
  • $5,000 down
  • $800 per month
  • 10 percent interest
  • 30-year note

So, the investor bought this out of state investment property for a total of $52,000, and is now earning 15 percent per year in real estate cash flow on a property that he will never have to repair. The buyer of the home will take care of it, and eventually, hopefully, pay off the investor and own the home.

That is the type of under market value property investing that you can do — if you have some cash and if you can see beyond surface ugliness in San Antonio investment property.