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Cash Is King in Under Market Value Real Estate Investments!

Many investors wax poetic about the magic of leverage in real estate investing. That is, they say that by taking out a mortgage on an investment property and using a 10-20% down payment, you can buy more under market value properties and generate more cash flow.

I respect their position, but I disagree.

You can retire young by buying all cash investment property in San Antonio TX, one of the best cities to invest in real estate.  These are some of the best San Antonio real estate investments. Buying here in Texas is often better than say, California investment property, because you can buy so many houses with not much cash.

Why Do I Buy All Cash Investment Property?

I prefer incurring the lower risk that comes with buying properties all cash. My under market value investment property portfolio is:

  • Stable
  • Flexible
  • Can be sold quickly when and if I need to

By investing in all cash real estate properties, I have invested my money into a tangible asset that will usually produce cash flow, and may appreciate somewhat over time (this is not my priority – cash flow is).

buy-house-all-cash
All cash real estate sales have dropped but still are 30% of the market.

I also buy cash real estate San Antonio because I always owner finance my under market value investment properties. Many real estate investors take out mortgages and rent their properties. That isn’t my model. I buy all cash real estate and then owner finance at 10%. I get superior cash flow over 10% per year and also have no landlording costs with San Antonio investment property.

When I Buy All Cash San Antonio Investment Properties

I typically pay $40,000 for the under market value property, and about $25,000 for the rehab. So I am in the deal for $65,000 and then owner finance it for fair market value – approximately $90,000. That property owned all in cash generates $800+ per month of positive cash flow.

If I had a mortgage on the house and rented it, I would have only $300 to $400 per month in cash flow, and also would have repairs.

For me, I buy only for long term, maximum cash flow when I buy property all cash in the best San Antonio real estate investments, one of the best cities to invest in real estate, IMHO. It’s a good city to own an out of state investment property because houses are cheap, there are lots of qualified buyers, and cash flow is excellent especially with owner financing.

More Considerations When You Do All Cash Investment Property

  • I don’t worry about a bank giving me a mortgage for investment properties. I can close fast – in 10 days. That gets me some great under market value properties.
  • My real estate investment portfolio is safe and stable. I never worry about having a mortgage to pay when a renter skips town.
  • I incur less risk as I do not worry about appraisals on my properties. If your lender sees lower appraisals in your neighborhood, they may loan you less money.
  • In the real estate crash, I sold several of my all cash investment properties quickly when I needed money from my San Antonio investment property.
  • Buying all cash investment properties usually means you buy in affordable cities. Make sure you do research to figure out where to buy your all cash investment property. As of right now, prices are up in some markets, but if you save your cash, you may be able to pick up houses for a substantial discount in the next downturn.

In short, I recommend that people looking for an out of state investment property buy property all cash, as that is the best way to enjoy maximum cash flow with low risk.

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Why Buy Out of State Investment Property?

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.

san fran
I feel for San Francisco real estate investors.

I’ve been fortunate enough to build my large portfolio of under market value properties here in Texas, where property values are a lot lower than some places. San Antonio investment property produces excellent real estate cash flow and is quite inexpensive. I also only owner finance my houses, so I have no maintenance costs.

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.

tx
I’m biased, but TX is a great place for out of state investors – the population is soaring due to job growth.

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.
  • Trends: What’s going on in the state as far as population? Here in Texas, we are seeing MEGA population growth.   My market of San Antonio is #5 on the list above as far as hottest housing markets go. Jobs are the biggest reason that people are coming to Texas, as well as housing affordability. This makes Texas a great place for out of state investors.
  • 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.

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

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Advantages

  • You’ll get the house at a low price
  • High cap rate or ROI

Disadvantages

  • 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

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Advantages

  • Totally rehabbed
  • 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

Disadvantages

  • 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.

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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.

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

 

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.

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 you can retire early in one of the best cities to invest in real estate – Buy under market value properties just like these with cash or with borrowed cash. I do $35,000 in rehab. Then resell the house with owner financing to a qualified buyer. Simple! 

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. 

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Buy San Antonio Investment Properties – Don’t Be Bored and Listless for the Next 20 Years Waiting for Retirement

Greetings from San Antonio, TX! It is a lovely, sunny and chilly day in south Texas.

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.

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Some Excellent Credit Repair Tips!

Not only homeowners need to have good credit! Having good credit is important for investors as well to buy under market value property. We now have a professional loan officer in house to help our investors and consumers (contact us if you are looking for a TX home or investment loan). Here are some little credit repair secrets to boost your score quickly.

#1 Become an authorized user. If you have a good friend or relative you trust with a good credit score, you can become an authorized user on their card. This can raise your score 10-20 points fast, if the card has a high limit and low utilization rate. NOTE – some cards do not take your social security number when you are added as a user, so your credit score will not be improved. Check with the credit card company.

#2 Keep a 1% balance. Doesn’t that sound nuts? But it is the truth – if you have a card with a high limit and don’t use it at all, you will not get as much benefit if you keep a 1% balance.

Contact us if you need credit repair help to help you buy below market value property; we have a trusted expert available. Also contact us if you need a TX home loan.

 

 

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What Should You Not Do When Buying Under Market Value Property?

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!

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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 🙂

teddy5

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.

 

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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 can help you to build property cash flow over time. 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 investors looking for a good out of state investment property.

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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.

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.

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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.