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:
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
$627.61 per month ($800 per month PITI)
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:
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.
A lot of investors in San Antonio do a lot of flipping properties. Flipping homes has worked well for me in some cases in the last 15 years, but flipping San Antonio houses in the under $75,000 range can be challenging.
I deal mostly in affordable San Antonio properties, and with prices going up and construction costs going up, I have found that turning a profit of more than $3000 on a six month flip has been difficult.
Over the long term, I have been a big believe in buying and holding real estate – getting rich slowly rather than quickly. Taking a slower approach to getting wealthy in real estate might not be what you see on TV, but I think buying and holding San Antonio investment property is the key to long term wealth building, more than flips.
What Is Your Exit Strategy?
Most of my under market value properties were bought under market value in San Antonio for $25,000 to $75,000. I usually buy and hold them for more than 10 years. Some of my properties I have held for 15 years!
Generally, I buy my houses in cash, do a few thousand in repairs, and then owner finance the homes instead of renting them out. With owner financing, I get a steady $500-$800 per month in cash flow and I have to do no repairs on the home once I have sold it.
Many buy and hold investors only consider renting out the property, and while I do have some rentals, I will usually prefer to owner finance them.
I also recommend San Antonio owner financing properties for the investor who still has a full time job. You don’t have to concern yourself with fixing leaking roofs or water heaters. The new property owner takes care of it and just pays you each month.
While I buy my homes in cash, you can get a mortgage on an investment property that is in decent condition, and then owner finance it just as you would if you bought it cash. This is called a wrap around mortgage. This is an option for people who do not have the cash to buy a bunch of houses for all cash. As long as you are able to clear $300 or so on the property, this can make sense.
The home I have for sale below would work great as an owner financed property to make you 11% or so per month with no repairs.
Only $5000 in repairs to get it sold.
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.
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.
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
$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
Investor’s total monthly income after taxes/insurance is $825.
If you are an investor or possible investor in California, you probably know the answer to that question! Many of my out of state investors in California cannot believe the sky high cost of investment properties in many of the high population areas of California, such as San Francisco, Los Angeles and San Diego. Great places to live, but for positive cash flow investing? Not so much! California investment property is very expensive.
If you are thinking about buying an out of state investment property for passive income, here is a good simple guide that can help:
How to Select Your Out of State Investing Market for Passive Income
Where you are going to invest in under market value properties depends on your real estate investing goals. Are you a flipper or a buy and hold investor? If you hang around my site long, you’ll learn I retired early with buy and hold investment properties that are owner financed. I’m a big believer in buy and hold long term cash flow – that is how I financially retired at just 28 in San Antonio – one of the best cities to invest in real estate, in my humble opinion.
Anyway, a good buy and hold market for passive income might not be the best flipping market. Here in San Antonio TX, flipping has gotten tough as the economy is booming as of January 2016; it’s hard for flippers to get properties cheap enough to make a good profit. For buy and hold investing though, I still make 10-12% per year, or $500-$700 per month in positive cash flow.
As you think about where to buy out of state investment property and under market value properties, consider:
State law: Is the state friendly to property owners? You want to invest in a state that makes it easy to evict tenants or to foreclose. State that are tenant friendly, such as CA, make it so hard to evict or foreclose, you could lose your shirt.
Price to rent: What does rent cost compared to the price to buy? In my town, it’s 16.90, while in San Francisco it’s 30.05. Whoa! No wonder so many CA investors are investing in out of state investment properties.
These are not all the factors to consider when you are buying an out of state investment property instead of California investment property, but if those three areas look favorable, you probably could do well in that market and financially retire early as I did, in one of the best cities to invest in real estate. San Antonio investment property is excellent for cash flow.
Ok…..so let’s take a quick break from the investing talk. Time for a picture of our TexasCashFlow.com mascot – Teddy!
Ok, back to the program!
How To Find Out Of State Investment Properties and Under Market Value Properties
Now that you know which market to buy your below market value investment properties, how are you going to locate that house? Most investors I know do it two ways:
They find a good real estate agent investor who is hooked up with excellent contractors, property inspectors, title company, real estate attorneys.
They find a good turnkey property provider. The house has been totally rehabbed and usually has tenants or buyers in place.
Which of these routes you go with will depend upon your investing goals again. Some out of state property investors want to have absolutely no headaches or management worries, so they just buy turnkey properties. Other out of state investors think that method is too expensive, so they manage their own rehabs and property management.
If you decide to find your own below market value properties in your chosen market, here’s what you’re looking at:
Buying Below Market Property Yourself
You’ll get the house at a low price
High cap rate or ROI
The house will not be producing income during the rehab and the time it takes to find a renter or an owner finance buyer
Rehab costs could shoot up if you don’t have reliable partners
Harder to manage the rehab and management from a distance
Difficulty in controlling material costs
Buying Turnkey Property
Tenant or buyer may already be in place
No work for you
Cost of material more predictable and stable
You know the quality of work you will get
Whole investment team is in place
Higher initial cost
Lower ROI or cap rate
How big a difference are we looking at between buying a run down under market value house and buying a turnkey? Let’s take a look:
Run down property: Estate sale, $30k purchase, $30k in rehab – will produce 13% ROI with owner financing or renting.
Turnkey property: $80k purchase price, no repairs, will produce 9-10% ROI with owner financing or renting.
So which will it be? Most people would say you obviously go for the better ROI with the under market value property you do yourself. But remember, you are going to have to do a heck of a lot more work – at a distance – with the fixer upper property. A turnkey property will earn lower ROI, but it a lot less stress. At the very least, you might consider a good turnkey property if you are a beginner in real estate investing. That way, you can make some good positive cash flow as you develop your own investment property team.
It all boils down to how you look at investing in real estate. Investing by definition means using something to get some type of return. You just have to decide if you want to use just your money to get a return, or use your time AND money to get a potentially higher return.
Choose wisely based upon your personal investing goals, and you will hopefully be able to be financially retired on your time table.
Personally, if I were a usual buyer of California investment property, San Francisco investment property, Los Angeles investment property or San Diego investment property, I would strongly consider buying out of state investment property. Investment property is all about real estate cash flow…..it’s something you can rely on year in and year out, unlike hoping for appreciation.
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.
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:
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:
Greetings from San Antonio, TX! It is a lovely, sunny and chilly day in south Texas. I just got back from a construction site on the south of town with my friend Ted:
Teddy is our new Cavalier King Charles Spaniel, one of the friendliest and most loving breeds of dogs around. He’s such a happy little guy and loves to play all day !
Anyway, as I was overseeing this $30,000 rehab (which I am converting from a 2 bedroom to a 3 bedroom), I got to thinking about how far I’ve come since I started in under market value real estate investing in 2001.
I was able through a lot of hard work in San Antonio investment properties to retire financially at the young age of 28. Didn’t have much money, had $40,000 in debt from college. But in a few years’ time, I owned dozens of little bitty single family homes in San Antonio. In cash. I have lots of passive income.
Now my life is awesome :). I have plenty of monthly cash flow coming in from my below market value, owner financed houses. I could have listened to my parents and worked in a cubicle for the next 40 years, but I decided to ignore that. I’m sure glad I did and invested in under market value properties.
But what about you? Many people in America toil for decades in jobs where they are bored and listless….just counting down the days when they can retire.
Man. That. Sucks.
It does not have to be that way. The best way to live is how I am living today – with self determination, choices and autonomy, and passive income. I get to choose how to spend my days. If I wanted to, I could sit on a beach and chill for the next 20 years or whatever. I have that kind of cash flow. But I keep investing in under market value, positive cash flow investments in San Antonio because I love it and I want to help others. Buying and selling distressed properties makes my team money, makes me money, and I help people get into a house.
You too can change your life if you are unhappy with it. In my opinion, one of the best ways to change your life is to invest in San Antonio investment properties. If you do it right, you can within a few years have a substantial cash flow that you don’t have to work for.
How to invest? Well, I personally buy cheap houses below market value in San Antonio TX and seller finance them. I’m not a rental guy, not that there is anything wrong with that. Owner finance is just a lot simpler.
Of course, you need to have cash to do what I do. If you don’t have cash, go borrow some from a private investor. That’s really how I got rolling in 2001 – I was able to borrow $2 million from a private investor over two years. It sounds tough, but really, if you go and ask enough people, you can eventually borrow enough capital at a reasonable interest rate to buy your first house.
Many real estate investors with out of state investment property flame out quickly when they buy under market value properties. That’s because they make huge mistakes that either mean they make no money or they lose money.
The things that you should not do when you buy below market value property for real estate cash flow include:
Not doing your research. You don’t usually buy a car without doing a lot of research, right? The due diligence you do when you buy an under market value house should be even more rigorous. When I buy the best San Antonio investment property, I do my research about the neighborhood down to the street level. I also do a thorough inspection of the property before I make an offer. This is one reason you might consider becoming a real estate agent, as I am. That way you can search for your own deals in the MLS and view the houses yourself.
Doing it all yourself. I’ve been doing real estate investing in below market value properties for 15 years, but I don’t try to do everything myself. I have on my team a good inspector, full construction crew, real estate attorney, CPA, insurance professional and closer. I have seen many investors buy a house on their own and they end up with losing their investment.
Paying too much. This of course will turn your under market value property investment into a real mess. Finding a good house to invest in takes time, so it is tempting to make a high offer that will be accepted quickly. Overbidding means that you will have too much debt, if you are buying with financing. This creates big problems when repairs and vacancies crop up.
Spending too much on rehab. A classic mistake of the under market value property investor is to spend too much on fixing the property. I have been investing in San Antonio distressed houses for 15 years, and I know how much rehab to do on a house to resell it. If it’s in say 78207, I may do 15-20k in rehab, but I know I probably can skip the granite in the kitchen. If I am rehabbing in a higher end area such as 78201, I will do the granite and fancy back splash in the kitchen. Also, I have a construction company that allows me to save 30% or more on rehabs compared to retail contractors.
Making money in under market value properties for real estate cash flow isn’t easy, but it is doable with proper planning and research. If you have any questions about investing in the best San Antonio investment property, please contact us.
When you are considering below market value property or out of state investment property, please try to avoid the above mistakes!
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 🙂
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.
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.
I financially retired at 28 with more than $20,000 per month in cash flow. The most important factor in my success in buying the best San Antonio investment property is every house I buy is under market value. That is, I buy under market value properties that require rehab. It also helps that I invest in one of the best cities to invest in real estate.
I have more than 50 buy and hold, owner finance properties that I own in cash that I purchased under market value between 2001-2012.
I also have a great dog and mascot named Teddy, which you will learn about if you stick around TexasCashFlow.com 🙂
How I Determine Market Value
One of the biggest reasons I became a real estate agent was so I could determine market value of the best below market value San Antonio investment property on my own. It is never a good idea to use Zillow to determine market value of a property. Zillow is notoriously off base, especially when you are dealing with off market properties or an out of state investment property that are not in the MLS.
Also, bear carefully in mind that the value that you come up with will largely depend upon the repairs your under market value properties need. I like to buy properties that are at least 20% under market value. So if the house is worth $90,000 and needs $25,000 in rehab, buying the house at $115,000 is a waste of time and money. I will not make any money. I want to buy that house for at least 20% under $90,000, or about $72,000, so I can make a good profit.
How I Buy Under Market Value Properties
There are several ways that I use to buy under market value properties in San Antonio TX:
Buying fair market sale houses: These are houses that are owned by a private person who has equity in the house and there is no bank involved. Most of these sellers are in no rush to sell, so this can be tough. But I have bought many under market value properties in estate sales; that is where I get the bulk of my deals. Often times, there are several children involved and they just want to be rid of the house that needs repair.
Buy off market properties: Given my level of success in real estate investing, I tend to find many good deals that are not in the MLS. Agents and investors in the business send me below market value deals. Of course, you need to get experience in the business to work this way, but know that if you do become successful, good deals often find you. I have many of my below market value properties for sale on this website that will make you a good profit.
Buy REOs under market value: These are Real Estate Owned properties, and these are houses that the banks have foreclosed on. REOs are usually in the MLS, and some of them will be repaired and some will not. Of course, REOs are tougher to find now and many of them need a lot of work. To make your offer more attractive, you may want to tell the seller you don’t need to do an inspection. Pay all cash if you can – cash is king!
However you buy your under market value investment property or out of state investment property, do not spend too much money on the rehab. Rehabs are where many investors lose their rears. Spend too much on your rehab and you will never make any money. I own a construction company and I am able to do rehabs for 50% less than most contractors on the best San Antonio investment properties.
That in short is how I buy below market value properties in Texas. The big thing to remember is to stick to your guns on your numbers – if you need to buy that house 20% under market value to make money, don’t go over it. Move on to the next under market value property deal if you have to – there are lots of them out there!
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.