Description: Investment in great shape new paint in/out, new floor, new water heater, updated bath/kitchen; Excellent cash flow opportunity, booming San Antonio investment properties, very popular location west of downtown, 2 beds, 1 bath, 576 sqft, large lot: .07 acres, estimated repairs: 2K, minor electric, clean/lawn maintenance. After Repair Value: 59.9K,
Price: $39,900 cash firm.
Exit Strategy San Antonio Investment Property: Owner Finance with 2k in repairs: 3-5K down, $595 monthly PI/TI, 30 year amortization, 10% interest, Price: 59.9K
Description: Stunning large lot with positive cash flow, under market value, booming San Antonio Market, very popular location east of downtown, 2 beds, 1 bath, 654 sqft, lot size: .22 acres, estimated repairs: 2K, minor electric, clean/lawn maintenance. After Repair Value: 61K.
Price: $35,000 firm.
Exit Strategy: Owner Finance San Antonio investment property with 2k in repairs: 3-5K down, $600 monthly PI/TI, 30 year amortization, 10% interest, Price: 61K
Many people hear about cash out refinances that are the main residence of the borrow, and I do know many people who buy San Antonio investment properties and Austin investment properties who pull money out of their home to buy more buy and hold properties.
After all, if you are able to borrow money on your personal residence at a 3% interest rate and are confidant you can invest that money in San Antonio real estate and make 10% reliably, why wouldn’t you do it?
But another cash out refinance to consider is in your investment properties. A few years ago, these types of loans were hard to find after the crash, but now there are many mortgage lenders that offer buy and hold investment property owners the chance to use equity in their investment properties.
Many real estate investors are able to drop their interest rate when they do a cash out, which improves their cash flow too.
If you are thinking about doing a cash out refinance on investment properties to buy more, please keep these thoughts in mind:
Do You Have Equity?
The more equity in your property, the better position you have when you get a new loan. Most lenders for Austin investment properties, San Antonio investment properties will loan up to 75% of the home’s appraised value. This is the maximum that has been set by Fannie Mae.
So before you opt for an investment property cash out refinance, you have to have good equity in the home. I think the best candidates for this rental property strategy are houses with 30-40% equity in them.
Non-Owner Occupied Cash Out Refi 2016 Rules
Maximum LTV is 75% for a one unit property and 70% for a 2-4 unit property.
If your buy and hold investment property was listed to sell in the last 1/2 year, the max LTV is 70%.
You also cannot do a cash out refinance on an investment property bought in the last 180 days.
Note: Cash out refinance loans on investment properties are riskier for lenders, as you are not living in the house. Expect tougher qualifications and a lot more paperwork than for your own home’s cash out refi.
Expect to need excellent credit scores and six months of cash to handle all of your mortgages.
Some lenders will not allow you to do this if you already have over four financed investment properties.
Is Cash Out Refi the Right Move for You?
If you have equity, meet all requirements of the lender, and you think a lower interest rate will help, also keep these factors in mind:
Look at how much your monthly payment will go up. Can your rental income handle it, when you consider repairs and vacancies?
Think about if you are going to buy more rental properties. Taking on more debt could affect if you will be able to get another loan.
Do the terms of the refi loan make sense for your goals? Different lenders have all kinds of different terms for refinances for under market value investment properties. If you have an ARM, you want to be sure you can handle change in payment.
Many people are interested in long term buy and hold real estate investing, but some people wonder if they should sell their properties at some point. I know many buy and hold investors in San Antonio, and once in a while, one of them will call me and tell me they want to sell. I’ve picked up some nice under market value deals on some of those calls!
In any case, how long you should hold onto your real estate investment rental properties depends on many things:
What is happening in the market
Costs to maintain the properties – vacancies, taxes, insurance
Amount of rent you receive
Interest rate on loans you have, if any
Type of property – single family, multi family, condo
There is not any assurance that your properties will appreciate in value, but if your buy and hold properties are in decent areas, you can assume that the value will at least hold in most markets, and may increase by at least 1% per year. In San Antonio, my fixer upper investment properties typically appreciate in value by 3% per year. Their REAL value, of course, is that they generate $500-$900 per month in positive cash flow ; )
Many commercial investment property firms often look at investment properties with a five year outlook. Whether they want to develop the properties or hold them for cash flow, they want to maximize ROI for their investors quickly.
Of course, as a private, single investor, you do not have to worry about all that; you can focus on what is most important for your own portfolio of rental properties. Let’s assume in 5 years that your San Antonio investment properties are worth 10% more than today and you decide to hold onto them. If in five years you gain zero appreciation, those five years you waited would mean a worse return on investment. However, your properties were still paying you each month some amount of positive cash flow, assuming you are running your properties responsibly.
Before you actually purchase Texas investment properties, you should determine what your investing goal is and stick with it, regardless of what happens in the market:
Paying for major expenses: Some investors end up selling their properties to pay for college tuition. If you need cash and the only other option is taking out student loans, you may want to sell the properties regardless of what is going on in the market.
Second income source: You do not necessarily ever need to sell your properties – I’m certainly not ever selling mine. Investment properties give me residual income and have for 15 years. Also, my properties can be depreciated for 27.5 years and that cuts my tax burden.
Maximize return ASAP: This means you are flipping investment properties. Flipping properties is more difficult in an appreciating market, as you need to find under market value properties and this can be tough. Flipping works best in a depreciating market.
I see five big advantages with buying and holding San Antonio investment property.
I Make Regular Income
Most investments offer either a regular return or appreciation. San Antonio real estate investments offer both! A really good buy and hold investment property, such as the one on Wagner St. listed below for an under market value price of $49,000, offers strong positive cash flow that offsets my expenses and any debt. It also provides me a nice monthly income.
If you read much on this website, you’ll know that many of our San Antonio investors do buy and hold investing with owner financing for long term cash flow.
Depreciation
Fixing and flipping in San Antonio is well and good, although it is harder to do in this appreciating market. I can tell because flippers call me wanting properties for .50 on the dollar! Yeah right, not in THIS market!
The great thing about buy and hold property is that the IRS lets you write off depreciation on the property over 27.5 years. This is ‘negative’ income but it’s just negative on paper, which helps my tax situation.
Equity Increase
If you have a mortgage on your San Antonio investment property, the cash flow lets you pay the mortgage without spending your own cash. And, each month, part of your principle is paid down. About 20% of each loan payment increases your equity in the property. You can then borrow some of that capital if you like to buy more investment properties.
Appreciation
Buy and hold investment properties can appreciate in value depending upon the state of the market. Most of my under market value fixer uppers in San Antonio appreciate at 3-4% per year. During the last crash, most of my properties did drop in value, but I was still able to have positive cash flow from them. I was even able to increase rents on some of them.
I am mostly a cash flow investor anyway; appreciation isn’t a big deal to me.
Leverage
If you put $20k into stocks and it increase 10% in value, you make $2000. Not bad. But if you put 20k into San Antonio investment properties, you can buy a $100k fixer upper with an 80% loan. If it goes up 5%, you made $5000 with only $20,000 invested!
Even if stocks have a higher return, it doesn’t matter because real estate returns are based on much more than the principle you invested.
If you are interested in San Antonio buy and hold investing, here is a great 15% or so ROI deal to get rolling.
San Antonio Wholesale Property Address: 1515 Wagner Ave. San Antonio, TX 78211.
Year Built: 1949
Description: Location Location! Cash Flow! Under market value, 3 beds 1 bath, 816 sqft, built: Lot Size: .14 acres, Yearly taxes: $600.00, Estimated yearly insurance $700.00, Estimated repairs: 15K, includes interior paint, electrical/plumbing up to code, landscape, trash removal, kitchen/bath updates, flooring, roof repairs.
Estimated Repairs: 15k
Cash Price: $49,000
Exit Strategy: Rent San Antonio investment property with 15K in repairs: $850-$900 per month — or Owner Finance with 15K repairs: 5k down, $900.00 monthly P/I, 30 year amortization, 10% interest, Price: 89K. 15% ROI is possible.
If you have considered investing in buy and hold real estate in San Antonio or another city, you probably have heard about the investing horror stories….major repair problems you didn’t anticipate, bad tenants, cash flow negative properties.
Most of the problems that investor run into in under market value fixer uppers can be avoided with proper planning and foresight. Here are a few areas that many San Antonio buy and hold investors get into trouble:
#1 Bad Location
You need to buy property where QUALITY buyers and tenants want to live. If no one you want to rent to or sell to wants to live there, you are going to have problems.
For many investors in fixer uppers in San Antonio, this problem comes down to wanting to buy the cheapest possible property, which usually means buying in a bad area. And that problem often comes down to not having enough money to really start investing.
I have seen this mistake time and time again – would be investors want to get started in buy and hold investing and really do not have the capital to do it right. Not having enough money means you end up buying cheap in bad areas, you get bad tenants, you don’t have cash reserves for repairs….pretty soon, you are in a very bad situation.
Personally, I buy in blue collar areas that are on the edge of wealthier neighborhoods. This property in Beacon Hill I sold to my father in law, which is an up and coming area on the edge of very expensive neighborhoods. This buy and hold deal worked out great for him:
Before Rehab – $50,000 cash purchase, zero rehab by investor, 90 DOM, resold for $80,000 owner finance, $804 per month, 14% ROI.After rehab, completed entirely by end buyer.
He just had the buyer pay him off, and he made nearly $48k on a $51k investment. Nice deal!
#2 Numbers Do Not Add Up
Another common problem new buy and hold investors get into is they find a nice looking property in a nice area and the rent sounds good, but when they add up the numbers, including repairs and vacancies, the expenses are greater than the cash flow.When you see this, you should always follow the numbers. Don’t listen to your heart. If there is not enough money in the deal, don’t do it. And be honest with yourself about what the expenses are, don’t fudge them to make them look good.There is nothing worse than buying a fixer upper buy and hold deal and having to put money INTO it to keep it out of foreclosure.
#3 The Property Is a Wreck
I deal with ugly properties that might scare many investors:
$20,000 cash purchase, $5000 in rehab, 65 DOM, sold for $39,900 owner finance (Fair Market Value), ROI 12%.
This is an example of our lower priced affordable home, but still an excellent investment in property. These houses will sell in our neighborhoods in San Antonio TX. It is a 4/1 on Colima Ave. in the 78207 zip code. It was purchased by the investor for $20,000 cash, which was well under market value. He had it repainted in and out and the door secured, and other minor fixes. That cost him $5000 total in repairs.
Houses in this range and location do not require major repairs and upgrades to resell.
We then sold the house with owner financing to a qualified end buyer. The buyer was qualified according to SAFE Act – documented income, tax returns, pay stubs, employment verified. All Dodd Frank underwriting rules were followed.
Terms:
$3000 down
$400 per month PI/TI
30 year amortization
10% interest
No prepayment penalty
No balloon
Final price: $39,900 (FMV)
ROI: 12%
That is the kind of house I deal with, but you as a new investor may want to steer clear of houses with major problems. If you get a truly ugly fixer upper, consider having an expert real estate investor/company run your investments for you.
Lastly, many buy and hold investors get into the business for passive income but find that they simply do not have the time and/or the money to do it right. That passive income dream can become a money sucking nightmare if you are not careful.
If you are looking for a good buy and hold investment property, I can help you with the below property and run the entire project for you.
Address: 126 E Dullnig Ct., San Antonio, TX 78223 Year Built: 1919 Description: Major cash flow on this San Antonio fixer upper distressed property – 4 beds 1 bath, 1100 sqft, two large storage units in the back, Lot Size: .19 acres, Yearly taxes: $1,600.00, Estimated yearly insurance $700.00, Estimated repairs: 30K, includes interior paint, electrical/plumbing up to code, landscape, trash removal, kitchen/bath updates, central HVAC, flooring, 2 room conversions, foundation/roof repairs. Max ARV: $109-$115k
Cash Price: $55,000
Exit Strategies:
Rent with 30K in repairs: $1150.00
Owner Finance San Antonio wholesale property with 20K repairs: 5k down, $995.00 monthly P/I, 30 year amortization, 10% interest, Price: 99K.
Our top real estate investors have done hundreds of rehabs on San Antonio investment property, so I know what I am doing on the rehab; my estimates are usually within 5-10% of the actual rehab number.
In May 2016, 2800 homes were sold, which is a 10% increase over May 2015. Also, May 2015/May 2014 saw a 9% increase in home sales over a year ago.
The average selling price of a house in San Antonio today is $249,000, with a median price of $209,000, which is up three percent from a year ago. The average price of San Antonio homes sold in May 2015 increased 10% from a year ago.
In April, San Antonio houses that are less than $200,000 were more than half of what was sold in the city. In May, 48% of the market involved houses that sold between $200,000 and $500,000.
San Antonio’s growth is higher than Texas’ overall, but the city is still a very affordable place to both live and invest. The average home price here of $249,000 is far less than the Texas average of $271,000.
Meanwhile, the city’s commercial development continues to grow strongly. A May 2016 report by Marcus & Millichap’s Retail Research Market Report found that the retail vacancy in San Antonio has reached an all time low. There also has been limited new retail construction, so the trend of increasing occupancy and rising rental prices will continue to have an affect on the commercial market.
The employment base of San Antonio will grow at a healthy 2.5% clip for 2016, which should contribute to the rising demand for various retail businesses from grocery stores to service companies.
In my under market value San Antonio real estate investing business, we continue to see strong growth in prices and demand for affordable homes, as well. I did manage to get this San Antonio fixer upper under contract and for sale for just $52,000, which will produce a rate of return of more than 15%:
San Antonio Wholesale Property Address: 1515 Wagner Ave. San Antonio, TX 78211.
Year Built: 1949
Description: Location Location! Cash Flow! Under market value, 3 beds 1 bath, 816 sqft, built: Lot Size: .14 acres, Yearly taxes: $600.00, Estimated yearly insurance $700.00, Estimated repairs: 15K, includes interior paint, electrical/plumbing up to code, landscape, trash removal, kitchen/bath updates, flooring, roof repairs.
Estimated Repairs: 15k
Cash Price: $52,000
Exit Strategy: Rent San Antonio investment property with 15K in repairs: $850-$900 per month — or Owner Finance with 15K repairs: 5k down, $900.00 monthly P/I, 30 year amortization, 10% interest, Price: 89K.
San Antonio Wholesale Property Address: 1515 Wagner Ave. San Antonio, TX 78211.
Year Built: 1949
Description: Location Location! Cash Flow! Under market value, 3 beds 1 bath, 816 sqft, built: Lot Size: .14 acres, Yearly taxes: $600.00, Estimated yearly insurance $700.00, Estimated repairs: 15K, includes interior paint, electrical/plumbing up to code, landscape, trash removal, kitchen/bath updates, flooring, roof repairs.
Estimated Repairs: 15k
Cash Price: $49,000
Exit Strategy: Rent San Antonio investment property with 15K in repairs: $850-$900 per month — or Owner Finance with 15K repairs: 5k down, $900.00 monthly P/I, 30 year amortization, 10% interest, Price: 89K. 15% ROI is possible.
Back in 2013, one of our investors bought their first San Antonio investment proeprty: a $50,000 buy and hold deal a few miles north of downtown San Antonio.
This was a point in the market when we did not have to do much rehab on our San Antonio investment properties. He picked up this house for a bit under $50,000 and cleaned it up with a broom and got rid of the trash. The total investment was $50,000.
At my recommendation, he did a seller finance deal on this San Antonio fixer-upper, under market value property with the following terms:
$50,000 cash purchase
$80,000 owner finance price
Zero rehab by investor
$806 per month
14% ROI
Before Rehab – $50,000 cash purchase, zero rehab by investor, 90 DOM, resold for $80,000 owner finance, $804 per month, 14% ROI.After rehab, completed entirely by end buyer.
The owner of the property did a fantastic job on rehabbing it, as you can see by the pictures. But that is not the end of the story on this San Antonio investment property!
More Pictures After Rehab:
In August 2016, the owner of the property decided to cash out the investor. She paid him off with the proceeds of the sale of one of HER investment properties.
She paid him a sum of approximately $75,000, which is what was left on the mortgage. So, not only did he make $25,000 on the sale of the property, he also made approximately $22,000 in payments over 2.5 years! He made a total return of $47,000 on his $50,000 investment!
Now that is a fantastic San Antonio investment property return!
Forbes magazine recently had another one of its Best Real Estate Investing Cities list, and Texas did very well. Austin was listed as the #1 city to invest in, and San Antonio real estate investing came in at #3. Houston, Dallas and Ft. Worth also made the top 10 list.
Some real estate investors have been pulling out of the Austin market, however, due to the high costs of real estate there. Forbes magazine gives us a clue why: The gross metro product for that city grew 24% from 2011 until the end of 2015, but houses there appreciated by 34%.
Meanwhile, the average home price in Austin was $334,000 in 2015. So clearly real estate prices are seriously on the rise in Austin. That’s why many investors call me up and are looking for San Antonio investment properties. San Antonio real estate properties are much cheaper; you still can buy a good affordable fixer upper in San Antonio for $45k to $50k. And the average home price here is about $210,000.
Given how much cheaper houses are here, there is lots of interest in San Antonio investment properties. However, you should note that days on market is longer in San Antonio than Austin. So what some investors who are interested in flipping under market value properties are doing is doing a flip or two in Austin and then doing buy and hold in San Antonio.
As a San Antonio property wholesaler, I have flipped many properties in San Antonio TX over the years, but in this current market, we are seeing profits on our flips of $7k to $10k. And days on market can be 90 or 120 days. For that reason, I am not strongly seeking out fix and flip investors at this time. I will do them for the right property and right investor, especially if the investor has the cash to do 4-5 at once. That way, both of us can make a good profit. Also, if you are a patient investor, then a San Antonio flip can work well. Just do not expect a house to sell in 20 days like in Austin.
I think the flipping market will get better in San Antonio once the market slows down in the next year or two.
So I have some investors flipping in Austin, and once they have 100k or 200k, they buy and hold in San Antonio with one of our $50k San Antonio fixer uppers:
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: $65,000.
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 105K, 10% interest, $1095 monthly PI/TI, 30 year amortization.
Alternate Exit Strategy: Flip with $50k in repairs. $8000 to $10000 profit.
I made the vast majority of my money in San Antonio real estate investing in buy and hold over the long term. Buy and hold in San Antonio is always a good deal because affordable homes seldom rise above 75k.
