Below are answers to the most common questions about our Texas positive cash flow properties of fixer upper homes. We are the distressed property expert of the Alamo City and are here to answer your questions.
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Also, please review our Investor Guidelines, or “I Just Bought a House. Now What?!”
1. How long have you been in business?
The head of our real estate investing company is John Majalca, a highly respected real estate investor in San Antonio. John has been investing in San Antonio for 15 years. He has completed approx. 1000 real estate transactions – commercial and residential. In the last five years, he has focused exclusively on residential, owner finance real estate.
2. What type of investing do you do?
We specialize in owner financing affordable homes in San Antonio. We do this because it offers a great return on investment, helps to revitalize the community, and helps people own their own homes who could not otherwise do so through traditional lending.
3. How does your strategy work for the investor?
We have many wholesale single family homes available for cash purchase. These are fixer upper homes that have positive cash flow. Purchase one of those properties for cash For $45,000-$75,000 and do $10,000-$25,000 in rehab. Then, we will advertise around town for an owner finance buyer for your property – someone with a job and cash, but poor credit. We will carefully qualify that person or family for you. We will close the deal for you, and get the family in the house. Terms typically are $700-$800 per month, $5000 down, 10% annual interest.
4. What is a typical return on this investment?
5. What are the advantages of owner financed properties?
Simple. High return, very low risk (cash real estate), minimal rehab costs (10-20k typical) and no ongoing maintenance in your investment in property.
6. You mean I don’t have to repair the house?
You do need to do the initial rehab of $10-$25k But there are no long term maintenance costs. You don’t maintain the house – your buyer does.We will find you a buyer who will repair the property for you! You can expect a return of ~10% cap in the current market as of November 2015.
7. What are the owner finance terms?
Usually a 30 year note, 10% interest, $5000 down. Owner finance buyer can refi/buy you out at any time. Most don’t.
8. How long will it take you to find a buyer for my house?
It depends. It can happen in a week, or it can take 3-4 months. The key is to find the RIGHT buyer for your house. You probably do not have a mortgage on the property, if you bought it for cash. So your monthly expenses are minimal. It is wise to let us take our time to find you a good buyer – it will pay you very well in the end!
9. Do you have any references I can contact to see how your investment strategy worked for them?
Yes we do. Please contact us for investor references.
10. Is there a lot of demand for owner financing in San Antonio?
Yes, a lot. We have a very large population of cash-oriented, blue collar workers here. They are hard working people who are family oriented and they pay their bills. They just do not have credit. There is an inexhaustible demand for this type of housing here.
11. How do you find owner finance buyers?
John has an extensive marketing program throughout the city of San Antonio. He advertises to buy affordable homes, as well as for owner finance buyers for the homes. We also place ads in local newspapers and on Craig’s List. If you purchase one of our wholesale properties, we will find an owner finance buyer for your house.
12. If I buy one of your single family homes, can I rehab, rent or flip it?
Of course. It’s your property and you can do what you wish with it. If you decide to renovate and rent, we can recommend good property managers in the city. For flipping, we advise you to speak personally with John Majalca about what you have in mind. He can tell you if your exit strategy is realistic or not.
13. What do you get out of it if I buy a house?
We make a commission on the sale of each house – 3%. There also is a 10% management fee on the rehab. That is all.
14. What are the closing costs?
Approximately 3-4% of the sales price.
15. What about Dodd-Frank?
You can do three of these owner finance deals in a year. After that, you need to go through a loan originator (we have one we use), at a cost of about $500 per deal. That’s it.
16. How often do owner-fi buyers default?
About 10% within five years. It takes about 60 days to foreclose in TX. Often, the buyer just hands us the keys and moves out. Then, we just redo the deal with another buyer. Note that you get $3000-$5000 down from your buyer as an insurance policy, so to speak.
17. Where do you buy property?
We generally buy properties on the north, south and west sides of San Antonio. Our partner knows where and where NOT to buy in San Antonio. The condition of the home is not nearly as important as the location. You can be certain that any wholesale property you buy from us will be in a decent area where owner finance buyers will live with their families.
18. Do you sell commercial?
Our focus is on residential, affordable homes that net 8 to 18% cap rates with no repairs. If you are interested in commercial property in San Antonio, please send us your buying criteria, and John may be able to assist.
19. Who owns the property that I buy?
You do. It is in your name until your owner finance buyer pays you off. You pay the taxes and insurance on the property. We structure these deals in a TX land trust. For details on that, please get in touch with John Majalca.
20. Who structures the owner finance deal and terms?
John Majalca handles all of that. He negotiates the deal on your behalf. However, he will talk to you about what type of return you want to see, and will let you know what he thinks the property can return. On a $50,000 wholesale house, a typical deal is $895 per month, $5000 down, final price $89,900, 30 year note, 10% interest, no prepay penalty.
21. Do you have property in CA, OK, OH, NY, NJ etc etc?
We currently only work in San Antonio and may expand to Houston in the future. With our program, you can be comfortable owning property in San Antonio while not living here. You do not need to worry about maintenance or property management with our system.
22. How do you structure your deals legally?
We use a TX land trust for each property that we buy. This provides the investor with a great deal of anonymity and protection. However, we are not lawyers and do not provide legal advice. You should consult with your attorney about the best legal structure for the investment properties you buy.
23. How can an ugly house sell so easily to an owner finance buyer?
You need to understand the population of south and west side San Antonio. 90% or more of our buyers are blue collar Hispanics. Most of them have rented for many years. To them, it is a great opportunity to put that $800 per month for rent instead into a property they will eventually own. And they have the skills in most cases to improve the property.
Even if they do not opt to fix the property, they still are going to own a tangible asset, which has a lot of attraction for them. So, we are able to sell most of our owner finance properties to a qualified buyer within 30 days or less.
24. The owner finance buyer could default. This bothers me.
That’s true. But we are very careful in qualifying your buyer so the chance of default is low. If he or she does default, contact us and we’ll advise you on the foreclosure process, and will put another buyer into your property. Note that you get a $5000 down payment in most cases so this is a good insurance policy.
And remember – with rentals, you face a constant risk of people not paying and vacancy rates. No investment is perfect. We think the owner finance route is more attractive, as it offers long term cash flow with no repairs or property maintenance.
25. I’m not totally comfortable tying up my money.
Then it could be that buy and hold investing is not for you. If you are more interesting in flipping, we can talk to you about that as well, but flipping has a lot of risk.
We are strong believers in long term cash flow with buy and hold investing. It is low risk, there are no repairs with owner financing, and cap rates range from 8 to 18% in most cases.
If you want to potentially sell the note on the property in a few years, you can do that with these homes, but the long term goal with what we do is long term, buy and hold cash flow