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.

San Antonio Is An Overvalued Real Estate Market – So What?

Years after the bottoming out of the housing market in Texas, which was in 2012, Texas generally and San Antonio specifically  is one of the to be one of the most overvalued markets in the US, according to Forbes Magazine. But I don’t think this is a bad thing.

Since prices hit rock bottom in San Antonio in January 2012, the San Antonio economy has grown strongly, with gross metro product hitting 9% in San Antonio since the end of 2014. While Austin’s gross metro product is higher at 18%, so are real estate prices. Prices in Austin rose from the end of 2012 until the end of 2015 by 41%, with a median home price of $278,000.

In San Antonio, prices rose just 21% in the same period for a median price of $190,400 as of mid 2016.

Some people would say that an overvalued housing market is not a good thing, but I think it is worth keeping a few things in mind:

  • San Antonio homes are still very affordable, with a median price currently in the $200,000 range. Got that? You can still buy a house here for $200,000 or less!
  • San Antonio under market value fixer uppers are still available for $50,000 or less, and I have seen prices drop recently, actually.
  • Even with higher prices in the last two years, I have many San Antonio fixer uppers that can return 12% or higher returns when all costs are factored in.
  • An overvalued real estate market indicates strong demand and limited supply, which indicates good economic growth. For a real estate investor, strong ecnoomic growth  is a good thing, as you have plenty of renters and buyers to occupy your real estate investment properties.

I can understand where an overvalued real estate market such as San Francisco could be a big problem, as it will price everyone but the super rich out of the market.

But here in San Antonio, prices for my San Antonio real estate investments are still very low, and we have a very low unemployment rate. The strong growth of our area and Texas generally means that many companies are moving in here, such as Maruchan (of instant noodle fame), Chevron, Rackspace and Geekdom among others.

Want to see a good example of a cheap San Antonio fixer? Here you are –

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  • Address: 127 Hopkins St. San Antonio, TX 78221
  • Year Built: 1972
  • Description:  Location Location! Very popular neighborhood with extra-large back yard south of downtown. This is a high ROI, under market value San Antonio investment property ! – 3 beds 1 bath, 850 sqft, built: 1972, Lot Size: .16 acres, Yearly taxes: $1,052.00, Estimated yearly insurance $600.00, Estimated repairs: 5K, landscape tree removal, trash removal interior/exterior. ARV: 69.9K
  • Cash Price on San Antonio Fixer Upper:  $39,900
  • Exit Strategy: Owner Finance this San Antonio investment property with 5K in clean up: 5k down, $695.00 monthly P/I, 30 year amortization, 10% interest, Price: 69.9K.

Why I Buy and Hold Investment Properties with ‘Foundation Problems’

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.

 

 

Great Buy and Hold Cash Flow Deals Still Available for $45k in San Antonio

The San Antonio real estate market is very hot, with the median property sale averaging nearly $200,000 which is a big increase from 2012, according to recent statistics.

This heated up market has had an effect on the San Antonio real estate investing market, too. Back in 2012, I could buy many fixer uppers for $20,000 or $30,000, stick $10,000 into them, and resell with owner financing at $59,900.

Now it is more challenging for me to find cheap San Antonio fixer uppers. It is very rare that I can find an under market value San Antonio property in an acceptable neighborhood for $30,000.

That is the double edged sword of having a strong local economy: People have more money in their pockets and unemployment is low, which is great. On the other hand, San Antonio fixer uppers are more expensive than in the past.

On balance, I like the current market because working people in the city have more money and they have jobs, which is a good thing for them, their families, and the city as a whole.

I have recently been able to find under market value San Antonio properties for under $50,000, which still means that the San Antonio real estate investor can still make 12-14% ROI, which is excellent.

My favorite current strategy is to buy a fixer upper for about $45,000, do $25,000 in rehab, and then rent the property out to a section 8 renter. That way the San Antonio real estate investor does not have to chase rent, and I can usually get the house occupied and producing cash flow in 30 days.

Here is a great fixer upper to consider for this strategy:

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    • Address: 804 Virginia Blvd, San Antonio, TX 78203
    • Year Built: 1900
    • Description: Act fast – hot market and low under market value price! Serious cash flow on this San Antonio fixer upper! San Antonio wholesale property has 3 beds 1 bath, 900 sqft, built: 1900, Lot Size: .07 acres, Yearly taxes: $1,000.00, Estimated yearly insurance $600.00,
    • Estimated Repairs: includes interior paint, plumbing up to code, /bath updates,  Max ARV: 79K.
    • Cash Price: $45,000
    • Alternate Exit Strategy: Rent with 25K in repairs: $995.00 with section 8, no need to chase the monthly payment, San Antonio Housing Authority pays direct deposit to your account.

A Recent 12% ROI Under Market Value Project With No Landlording

This distressed property sale was completed in August 2015. The market in San Antonio TX has changed greatly in the last year. The market is booming and prices are up across the board, even in fixer upper homes.

new front
$65,000 cash price, $15,000 rehab, resold for $99,900 owner finance, $1041 per month, 7 DOM, 12.9% ROI.

Still, we have CA investors coming into our fine city and buying property investment homes and making 12-13% ROI annually, with no property maintenance.

This under market value property was purchased by a CA cash buyer in July 2015 at 1622 Alametos St. This house is in 78201, and is north of downtown. This region is seeing rapid growth and appreciation.

The investor bought cash on this below market value property, and we completed $10,000 in repairs in 3 weeks:

  • $65,000 cash price
  • $1500 carpet removal and adding wood vinyl in 3 bedrooms
  • $3500 HVAC
  • $750 for third bedroom conversion.
  • $750 for dumpster – clean out
  • $1500 two tone interior paint
  • $500 update five light fixtures
  • $1500 level front bedroom
  • $1500 closing costs

Total Investment: $76,500

Repairs were complete on July 31, 2015 and property was put on MLS. By Aug. 3, we had two full owner finance, price offers as follows:

  • $1041 per month
  • 30 year note
  • 10% interest rate
  • $5000 down payment
  • $99,900 final price
  • $216/mo. taxes/insurance

Investor’s total monthly income after taxes/insurance is $825.

Final ROI: 12.9%

 

Do You Have a $200,000 Salary and Hate Your Life? Buy Under Market Value Properties

I can’t tell you how many people I run into in my under market value  properties career who have good jobs and hate their lives.

That is, they make $200,000 or more per year and yet, they work 60 hours per week, sit in dull cubicles for years and years, and wish they had the time to do what they want to do.

The truth is, most of us have been conned into thinking that the ONLY way to live in America is to trade time for money.

And you know what Teddy our mascot says?

time for money

That’s right. If Teddy knows that trading time for money sucks, you should be able to figure it out too. Passive income is the way to go – with under market value properties – at least 20% below market value. Who wants to sit bored in a cubicle or office for most of their working life? It’s a form of slavery, even if you are well paid.

stop

I stopped trading my time for money at a very young age – 23 in fact. That was the year I bought my first under market investment properties in San Antonio (I’m 38 now). I financially retired at 28, in San Antonio, one of the best cities to invest in real estate.

And I probably had it a lot tougher than you do….by this I mean, I didn’t have a lot of capital to start with. I actually had to borrow capital at 8% from a private investor to buy much of my early portfolio in fixer upper houses. Yet I had plenty of passive income in under market value properties within a year of starting.

But a guy or gal like you…..you make $200,000 per year or more out there in California or Washington….you most likely have some capital stored up so that you can buy under market value investment properties, and STOP trading your time for money. This type of out of state investment property is perfect for you. Passive income fast.

Here is a quick plan to stop trading your time for money TODAY. I am going to assume you have some capital to work with (if you don’t, go find some private investors to borrow money from like I did).

If you live in a high cost area, strongly consider buying an out of state investment property.

This under market value investment property is one that I have scouted out carefully in a very hot part of 78201, which is north of down town San Antonio. It is seeing a lot of young professionals moving in and property values are shooting up. There is a good chance you could get a young professional buying this under market value property from you, or a hardworking blue collar family:

edison front

 

  • Address: 2229 W Hermosa Dr. San Antonio, TX 78201
  • Year Built: 1948
  • Description: Distressed property sale, 2 beds 1 bath, 769 sqft, lot size: .14 acres yearly taxes: estimated repairs: 35K (convert to 3 BR).
  • Max After Repair Value: $129,000.00.
  • Cash Price: $69,900 firm.
  • Exit Strategy: Owner finance 10% interest rate, $5000 down, 30 year note, $1100 per month PITI. Plenty of positive cash flow.
  • 10% ROI no maintenance.

Here’s how I was able to financially retire at 28 in one of the best cities to invest in real estate – I bought under market value properties just like these with cash or with borrowed cash. I do $35,000 in rehab (I now have a professional construction company that does this for me – no more getting my hands dirty). Then I resell the house with owner financing to a qualified buyer. What I do is super simple, and yet, so many people cannot see it !

The above out of state investment property will make you $1000-1100 per month, assuming you fund the deal with cash from your $200,000 or whatever job. In time you will be able to financially retire.

That’s it. Buy, rehab, resell, and collect the cash flow. It IS that simple. Lather, rinse and repeat. If I did it, Teddy says you can become financially retired too:

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I’m tired after all the rehab work today!

Earning 11% ROI on Under Market Value Property for Building Wealth

New and even experienced investors often ask me how I was able to build monthly positive cash flow of more than $40,000 per month – without starting with much capital.

There are many factors involved, but at the end of the day, my strategy is very simple for real estate cash flow:

  • I buy 20% under market value investment properties in San Antonio, Texas.
  • I perform about $25,000 in rehab in 45 days, and then resell with owner financing to earn a 10-12% ROI.

I also have a great good luck charm named Teddy, which you will learn about if you stick around long 🙂

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Now these are not very expensive houses; after all, this is San Antonio TX. My typical property is $60,000 or so wholesale, which is then resold with owner financing for $100,000 or so.

Each one of my below market value properties earns me ‘only’ $400 or $700 per month in positive cash flow. Some investors – especially those on the West Coast – might snicker at such a ‘small’ return.

However, one thing I have learned over 15 years in real estate investing in under market value properties is this: I would much rather do 100 ‘small’ deals per year, than 1 or 2 ‘big’ deals.

My little, bitty 3 bedroom houses for $100,000 or less may not look like much, but when you have 50 of them owned in cash, you are talking serious, positive cash flow. And that is what allowed me to financially retire at 28.

These little houses are becoming even more valuable in San Antonio these days, given how the economy is growing. The north side of downtown, especially 78201 zip code, is appreciating very well. I love to buy fixer upper distressed properties in this area – under market value.

edison front

This house 2229 W Hermosa, San Antonio TX 78201 is a typical hot deal north of downtown that will do very well for the savvy investor.

After I do $35,000 in rehab on this below market value property, I will resell it for the investor with owner financing. I’ve bought and sold hundreds of houses in this area, and I know that I can resell this property with owner financing for $129,000. That will generate approximately $1,000 per month in positive, long term cash flow for the investor.

It is on under market value deals just like this one that I have built a large nest egg of real estate cash flow that made me financially retire so young.

 

Should I Become a Real Estate Agent as an Investor?

Investing in under market value properties in San Antonio, Texas has provided me with a fantastic, long term passive income. Before the real estate downturn of 2007-9, I was not a real estate agent, and I relied on several investor friendly agents to show me potential under market value distressed properties in San Antonio TX.

After the crash, many real estate agents got out of the real estate business . I discovered that finding a good, long term real estate agent was harder than before to buy below market value property.

It was in 2010 that I made a fateful decision: I became a real estate agent and investor myself, and it has been a great decision for me. It has made it easier for me to buy under market value properties in San Antonio TX.

Being a licensed Texas real estate agent has really helped me to build my distressed property cash flow in the last five years. Currently I own more than 50 owner financed investment properties in San Antonio TX. On most, I am making at least 10% return, which means I have cash flow of $500 to $800 per property. Most of them I own in cash.

Whenever I buy another distressed real estate property for buy and hold, I am able to save at least $1000 on real estate commissions. If I buy 40 houses a year, that’s more than $40,000! What a deal!

If you are buying more than 1-2 below market value properties per year, I think it is a good idea to go ahead and get your real estate license. If you do absolutely nothing else with it, your real estate license will save you majorly on commissions.

On many of my deals, I as the real estate investor agent buy the under market value property, fix it, and then resell it with owner financing. I am able to save TWO real estate commissions on these deals, which in some cases saves me $5000 or more!

Advantages of Being a Texas Real Estate Investor and Real Estate Agent

  • A real estate investor agent can save on real estate commissions for below market value properties, as I illustrated above.
  • You have access to your area’s MLS and can do your own due diligence on potential investment properties. Having MLS access saves you time, and allows you to get offers in before other investors.
  • As a real estate agent investor, you will be able to network with other agents, who certainly know people who want to invest, or may be investors themselves. I often buy unlisted properties because of my contacts with other agents in San Antonio TX.
  • You can do your own BPOs or Broker Price Opinions. This is a 1-3 page report that a licensed real estate agent can do, for a payment of $50-100. This is a great way to earn extra cash flow as you are getting started in real estate investing.
  • You also can sell retail properties to supplement your income, which has really come in handy for me several times each year as a real estate agent investor. Nothing like earning another $20,000 per year!

Clearly, the advantages of being a real estate agent investor  are many for getting texas cash flow. I believe becoming an agent is really worth it if you buy several under market value investment properties annually. I also have found that being a real estate agent investor makes it easier to work with investor looking for a good out of state investment property.

What Is the Worst Mistake in Buying Investment Properties?

I buy under market value properties in San Antonio TX. As the real estate market continues to heat up in San Antonio, more people are jumping into the real estate investment business.

Many people who start to invest in under market value investment property in San Antonio end up never making money or losing a lot of money. That goes the same for people looking for out of state investment property.

Most often, people run into real estate investment problems because they are impatient or do not have a good, long term plan for good cash flow on below market value property.

I have been successful with my San Antonio investment properties (I financially retired at 28) because I have a very simple plan that I always stick to:

I buy distressed San Antonio homes for 20% or more under market value, and resell them with owner or seller financing to make a 20% return long term. The vast majority of my portfolio is long term buy and hold in the best San Antonio investment property.

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That’s my mascot Teddy there, chiming in! Of course, buying good distressed properties under market value in San Antonio is not easy. If it were, everyone would be buying them and retiring early!

Here is the most common mistake I see by far in people who buy distressed real estate properties and out of state investment property: They pay too much for the house and have very little cash flow!

They buy the house often at the top of the market, and the only way they make cash flow each month is if the property is always occupied, and there are no maintenance issues.

As soon as something goes amiss, they end up losing money each month and have no cash flow in their under market value San Antonio investment properties.

The biggest piece of advice I can give you is to always pay as little as possible for the investment property in the best cities to invest in real estate. If you are not skilled in negotiation or are just a beginner, you need to work with a skilled investor who can help you to get a low price on that below market value house.

If you have questions about investing for cash flow in under market value San Antonio houses, please contact me! I always can use cash partners and both of us will make a good profit in the best San Antonio investment property.

 

 

Buy and Hold or Flip Out of State Investment Properties?

Anyone who is involved in real estate investing for long will eventually ask him or herself a critical question:

Should I buy and hold or flip San Antonio investment properties?

Flipping houses has become very popular in the last decade, probably due to all the Flip That House type shows on TV. On the other hand is buy and hold investing, which is probably the oldest way to make money in real estate investing.

So which should you do? Well, it depends!

Overview of Flipping Houses

The basic definition of flipping a house is buying a property under market value (20-50% usually), improving it, and then reselling it for a profit. To gain maximum financial advantage, the goal is to sell the house as quickly as possible after the rehab.

A good house flipper in under market value houses will try to buy, rehab and resell the under market value property as quickly as he can. The reason is that holding a piece of real estate without any income coming in costs money. Some of ‘soft costs’ of holding a flip property include:

  • Property taxes
  • Utilities
  • Hard money finance charges
  • Any repair and maintenance

House flippers try to hold the property as little as possible. In the flips I have done in the last year, I held my San Antonio investment properties for about three months each.

Overview of Buy and Hold Investing with Out of State Investment Properties

This type of investing with below market value properties involves purchasing the under market value house, making some amount of improvements, and then keeping the house for rental or owner finance income. To pay for the monthly costs of holding the property in most cases, the house will be rented to a tenant. Typical holding costs for a buy and hold property are:

  • Financing
  • Taxes
  • Utilities
  • Property taxes
  • Maintenance costs

It should be noted here that there are other forms of buy and hold investing, which is the type we usually do. That is, we buy and hold the property in cash, and owner finance the under market value house to a qualified buyer.

The advantage of this type of buy and hold investing with out of state investment properties is that there are no maintenance costs. Also, without a mortgage, this type of under market value investing is usually less risky, especially in a downturn.

Pros of Flipping

  • Short term profits: You can, ideally, realize your profits in a few weeks or months. Your cash will not be tied up in an under market value property for very long, and you can move on to another deal.
  • If you can flip a house in under six months and make at least 15% profit, you have done very well.
  • Good ROI, if you know how to rehab an under market value property without overdoing it.
  • No renters or landlord headaches.

Cons of Flipping

  • Making money at it takes a lot of work. The reality shows make it look easy. Flipping a house and making money isn’t as easy as it looks.
  • Unexpected costs: Anyone who rehabs under market value houses for a living will run into unexpected additional costs. This can be especially damaging when you are trying to make quick profits.
  • Rehab problems: You might think it will take a week to do that roof, but it takes six weeks. That adds to your time line and when you will be able to make a profit.
  • In an appreciating market, you may have trouble finding under market value houses that are truly flippable.

Pros of Buying and Holding

  • Creating wealth: You can really build wealth over time with buy and hold investing, especially with owner financing rather than renting under market value property. Real estate also will generally increase in value over time, which can make you very well off.
  • Steady cash flow: If you own several properties that each make $800 per month, this is a nice way to earn a living.
  • No worry about selling short term: You can usually wait out the inevitable downturn in the market as you are enjoying the cash flow from the property. A flipper could end up in trouble if the market crashes in the middle of a project.

Cons of Buying and Holding

  • Market changes: If you need cash fast, you could need to sell your under market value property but the market dipped so you lose money.
  • Legal problems: Tenants can be a pain in the neck, which is why we mostly owner finance our houses. We only carry the note on our houses, so we have no tenant issues at all.
  • Struggles with being a landlord: A buy and hold rental property can turn into a negative cash flow situation easily if you do not buy the property at the right price, and if there are expensive repairs. Vacancies are another big problem in bad markets. Again, that is the plus of investing with owner financing and buying cash – no mortgages and no tenants.
  • Property management responsibilities for rentals

Overall, in our experience, we prefer buying and holding with owner finance over flipping. Flipping is great if we need to get more cash to buy and hold more houses, but it is not a long term wealth creation solution for us for Texas cash flow.