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Can You Repair A Pier And Beam Foundation Yourself?

You bought a San Antonio investment property in 78228 for $75,000 cash. It’s a 2/1, 1400 square feet, and needs $50,000 of repairs. ARV is $170,000. But a problem surfaces: The pier and beam foundation is in rough shape, and the kitchen floor slopes. What do you do?

Many would call a professional foundation company. However, buying a distressed property in San Antonio often means doing some repairs yourself to cut costs. Repairing your pier and beam foundation yourself can be difficult, but it is possible. You need construction skills, the right tools, and a patient approach. Here are the steps to fix your San Antonio investment property pier and beam foundation.

First, inspect the foundation to determine the extent of the damage. Crawl under the home with a level, flashlight, and tape measure. Look for cracked beams, uneven piers, and signs of insect or rot damage. Check for sagging floors in your house. Look for stuck doors and windows. The soil may shift with changes in moisture, so look for poor drainage around the foundation. Note the problem areas and measure the height differences where the foundation has settled.

Second, improve drainage to prevent more foundation problems. Remove leaves from gutters. Ensure your downspouts are positioned at least five feet away from the foundation. Grade the soil around the home to slope away from the building. Try for a six-inch drop for 10 feet. If standing water persists, consider installing a French drain or consult a professional plumber for more advanced options.

Third, you need to jack up the San Antonio distressed property to level it. Purchase 20-ton capacity jacks and place them under the main beams, close to the damaged piers. You need solid, level ground. Or, use concrete blocks as a jack base. Do not move the San Antonio investment property more than 1/4 inch daily. This caution avoids damaged plumbing or cracked walls. Install temporary supports, such as steel posts, as you lift the house. Check the level often; you need to raise the home evenly to ensure stability. If you’re unsure about jacking, hire a structural engineer, as jacking up the house incorrectly can cause damage.

Fourth, after leveling the house, repair or replace the damaged piers and beams. If piers are settling, dig near the affected pier to the base, perhaps 18 inches deep. If the pier’s intact but sinking, add a concrete footing (12x12x12) reinforced with rebar. It needs to cure for at least a week. Then, place concrete blocks or steel shims to lift the pier to the right height.

If the beams or posts are rotted, remove the damaged areas with a saw and replace them with pressure-treated lumber. Secure any new beams with galvanized brackets or bolts. Make sure every connection is tight!

Last, after the repairs, lower the home slowly with your jacks. Take out any temporary supports as you proceed. Recheck your level to ensure the foundation is even. You may want to reinforce your crawl space with ventilation to reduce moisture. We recommend installing vents to provide one square foot of ventilation for every 150 square feet of crawlspace.

Keep watch on your foundation over time. Walk through the San Antonio distressed property monthly to look for any movement, such as sticking windows or creaky floors. Ensure drainage systems are clear and moving water away from your repaired foundation. DIY pier and beam foundation repairs are affordable, but doing them right requires proper tools, skill, and patience. Doing these repairs yourself will boost the ROI of your San Antonio under market value property – well done!

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Choose A Shady Contractor Suffer, Ye Shall

My blog readers might notice that I committed many real estate investing sins. I have learned lessons. Today, I travel the path of a reformed terrible real estate investor. I’m not half bad. I’ve had many successes after many failures. Here is another early failure.

I bought a distressed two-bedroom San Antonio investment property for $40,000 in 2008. It needed a new roof, siding, and major plumbing work, including a new plumbing line to the main line at the street. I chose a contracting company for the $25,000 rehab that a friend recommended.

A mistake, and one I made multiple times in my early distressed property investing career. Haste. I wanted to become a successful real estate investor, but I cut corners to reach my dream. I was impatient.

A sad fact about the real estate business is that many scammers are attracted to it like flies to…well, you know. The FTC reports 83,000 complaints about home renovations and improvements every year.

My contractor’s rehab work was subpar. After he completed the work, the ‘new’ roof leaked, the ‘new’ siding started to peel off after five weeks, and the ‘new’ plumbing system stopped up under the pier and beam foundation. A smelly mess ensued.

I knew one of the laborers the contractor hired on my house. He called me a month after they completed the work. Sad news, he told me. I paid over $10,000 for new materials for the roof and siding. But my friend told me the contractor had the workers grab old materials off piles of scrap in the alley. They used old shingles and older siding to rehab my San Antonio distressed property.

I don’t know what the contractor did with my $25,000, but it didn’t go toward new materials for my San Antonio investment property.

I had to pay another contractor $20,000 to redo the renovations. Eventually, the house became successful and provided steady rent to me for almost 10 years. However, it took five years to turn cash positive.

Lesson – Choose your San Antonio investment property contractors carefully. I recommend driving by the property every week during renovations. Watch your contractors and the quality of work they perform. Vet your contractors carefully. Check online reviews and call their references.

Last tip: Don’t be hasty in real estate investing. Success will come, but only with patience and discipline.

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Why Our Investor Used Her $40,000 Windfall To Be San Antonio Rental Property

A year ago, one of our San Antonio investors had a windfall of about $40,000 that was left to her when a relative passed away. This wholesale property investor had about $27,000 of student loan debt. She wasn’t sure what to do with the money – whether she should spend it, pay off loans, or invest in San Antonio rental property.

The student loans came out to about $500 per month, so it was tempting to pay off those loans with the $40,000. She also got advice from family members to do various things with the cash – buy a car all cash, invest in CDs, fix up her home, etc.

In the end, she decided to use that $40,000 to buy her first San Antonio investment property. Many of her relatives couldn’t understand buying a home with that money, and not live in it!

Why She Didn’t Pay Off Her College Debt

There are good arguments to pay off student loan debt, without question. But this under market value property investor decided to wait on that for three reasons:

  1. College loan debt is tax deductible: This investor’s loans have an 8% interest rate, which after her tax deductions and inflation rate of 3%, the APR is around 4%.
  2. Liquidity: If she paid off her college debt with the money, she’d have no liquid cash. This would have made a tough situation if she had something bad happen, such as a roof problem on her home or needed emergency surgery.
  3. No cash flow: If she paid off her loans, that money wouldn’t be making her money. She had another investment property (rental property) that made about 30% return on an investment of $35,000.

San Antonio Rental Property Purchase

So, she bought an under market value property for us with a price of $105,000. The actual value of the home was about $137,000.

She put down $28,000 and had closing costs of $4,000. Her out of pocket costs were $32,000.

The rental property had two units – one was a 2/1 for $750 a month and the other was a 3/2 for $1,000 a month. Mortgage payment with taxes and insurance was $700. The property was in good shape and only needed $1,500 in repairs. Monthly costs were $170, including water and trash.

Monthly cash flow came $880 or so, and she kept five months of cash reserves for the mortgage payment for about $3500. Her yearly cash flow was $10,200, minus a vacancy rate of 7%, for a total of about $9800 a year.

Her ROI was $9800, divided by $32,000, for about 30% cash-on-cash return.

She was able to get enough in rental income to pay for her monthly college debt payments and still have cash flow! That’s why, if you do it right, investing in San Antonio rental property can make sense.

But you need to get the right property at the right price, with acceptable repair costs. San Antonio investment properties are increasing in value, so you need to find a good deal to maximize your cash-on-cash return. But when you find the right one, you can bet that you’ll see increased appreciation; we had about 10% appreciation on homes in San Antonio in the last year.

We will have new San Antonio investment properties on this site soon (as of May 24, 2021), so check back soon!

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How to Buy Your First Investment Home

Real estate often produces many wealthy people, so there are many reasons to consider buying an investment home. But like any type of major investment, you are wise to understand the subject well before you put your money on the line. With the information below, you will be better prepared to buy your first investment property in San Antonio.

#1 Make Sure You Can Handle It

One of the biggest parts of owning investment property is dealing with its daily headaches, which include plenty of repairs. Do you know how to repair things? Do you enjoy using tools? If not, you can always pay others to handle your repairs, and/or give the responsibility to property managers. But you will have lower profits that way.

Many property owners with a few properties may do their own repairs, but if you do not want to spend your time on this, you may not want to be a landlord.

Many new landlords discover they do not enjoy maintaining properties, so be sure this is something you want to do before you spend a dime.

#2 Pay Down Personal Debt

Some experienced investors may have debt as part of their overall portfolio. But many experts say the novice should get into investment homes with as little debt as they can. If you have student loans, car loans and credit card debt, you may want to pay that down before you start to take on other major obligations.

#3 Have Cash Available

First of all, getting an San Antonio investment home in 2018 will usually require you to put down a larger down payment than you do with a personal residence. You often need 20% down to buy many investment properties today.

One exception is the FHA loan; if you live in the investment home yourself (such as a duplex or triplex) you can get a loan with a 3.5% down payment. But most experts advise putting more money down. Plus, you should have plenty of cash in the bank if things start to go wrong with your property. You could have a major repair needed, or you may have an apartment vacant for months.

#4 Watch Out For Higher Interest Rates

Investment properties are riskier for lenders. So the interest rate on your money will be higher. This higher rate will eat into your profits, so be prepared for this.

#5 Watch Your Margins

Wall Street companies that buy distressed homes usually shoot for 5% or 7% returns because they have a lot of overhead to pay. But you should have a profit margin goal of 10%. It is wise to estimate your maintenance costs at 1% of the value of the property each year. Other costs of owning the property will be HOA fees, insurance, property taxes and various monthly costs. Also, don’t forget to account for vacancy.

#6 Beware of Fixer Uppers

It is always tempting to buy a cheap, distressed home and try to repair and flip it into a profitable investment home. But if this is your first home, you may not want to take on a headache. Unless you are hooked up with a contractor that does good work cheap, or you comfortable making major home repairs on your own, you should probably avoid a home that needs a lot of work for your first investment.

A better idea is to look for a home that is under market value in a decent area that only needs cosmetic repair.

#7 Get a Good Location

This can be easier said than done. You need to find a home with reasonable property taxes, good schools, a neighborhood with lower crime rates and a good job market. But if you find this type of neighborhood, the homes there could be beyond your budget. This could tempt you into buying cheaper homes in bad neighborhoods. This isn’t always a failure, but it is definitely riskier. When you buy homes in worse neighborhoods, you will have more problems with crime, repairs, tenants, etc.

#8 Determine Operating Expenses

The operating expenses on your property will probably be between 35% and 80% of the total income on the property. If you are charging $1500 for rent and your expenses are $600, this is 40%. Some investors use the 50% rule. This means if you charge $2000 for rent, expect $1000 per month in expenses.

The bottom line on your first investment home is that it can be a great thing if you do your homework. But if you do not really understand what you are doing, your first investment property can end up costing you money. So be sure that you buy the right home at the right price and have determined your budget and operating expenses as realistically and accurately as possible.

 

 

 

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Why Seller Financing Often Makes Sense in San Antonio

As successful under-market value real estate investors in San Antonio, our investors own plenty of rental properties and owner finance properties. Depending upon market conditions, we may do one investment property type more often than the other, but we always strongly believe in the San Antonio owner finance market as a way to grow your wealth.

Some real estate investors are afraid of owner financing a property. Why would you want to be the bank? Most investors want to put down 20% on a property and rent it out. Or they want to flip the house and move on to the next real estate investment deal. But there is a lot of money to be made by owning the property in cash and owner financing it. You also can have a mortgage on the home and do a wraparound mortgage as well as you like, but that is a topic for another blog post.

The major benefit of owner financing a property is that you enjoy having checks mailed to you each month for the mortgage payments, and you do not have to do anything else. Owner-financed property is a nice fit for the weary landlord, tired of the repairs and hassles of rental property. That is a major reason why owner-financed houses in San Antonio became our investors’

Offering seller financing on a fixer-upper will open up many opportunities to make a lot of money with your investments. Many potential buyers of a home do not qualify for a traditional mortgage. In San Antonio, we have millions of Hispanic renters who want to own their own home. But they have bad credit or no credit; many deal only in cash. These potential buyers need someone to give them financing if they are ever going to buy. This is a great opportunity for you to make a good ROI on your home.  You can ask for a higher price for the home and get a good rate of return.

For example, check out the following San Antonio property:

Booming south side market, 318 Elks Dr. San Antonio Texas 78211, lot size: .12 acres, 3 beds 1 bath, estimated rehab 7K, paint interior/exterior, plumbing/electrical up to code, Max ARV: 85K, Asking Price: 49K, sold comps are excellent in this neighborhood.

Max ARV: $85,000
Asking Price: $49,000

Exit strategy: owner finance, 5k down payment, 85K sales price, $850 monthly PI/TI, 30 year amortization, 10% interest or rent $850 monthly.

This home is $49k and needs only $7k of rehab to sell it, in my opinion. Thus you are in at $66,000 and can sell it for $85,000 (ARV) and charge 10% interest and make $850 per month.

Those terms are pretty typical for this type of house, but as the bank, you can charge whatever you want. If you ask too much, you may take months to sell it. But if you negotiate lower terms, you can sell it faster.

We strongly recommend as a real estate investor having at least some of your real estate portfolio as owner-financed properties, especially in San Antonio.

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Converting Investors’ Rentals to Owner Finance Was the Best Decision Ever

Before the market crash, two of our biggest investors owned more than 100 rental properties. Like many investors, they once thought that owning rental properties was the only way to make money in real estate investing.

What they found was that they were often dealing with repair problems.  It didn’t matter that they had property managers. When you own 100 houses, you always have to deal with a repair, a late bill, a vacancy, paperwork and so on.

They also found it was hard to know what their cash flow on each house was each month. Writing checks for new water heaters and fridges gets old fast!

It was around 2009 that one of our investors’ mentors talked to them about switching to owner finance so they could retire with millions in real estate. That mentor only did owner finance homes.

Rather than being a landlord responsible for property upkeep and repairs, there are more efficient ways to generate monthly cash flow.

Be the Bank!

Think about your own house. Each month you send an electronic payment (or check) to your mortgage company or bank. Your bank doesn’t have to maintain the property – you do. Since you are buying the property from the bank on terms, it is natural to your benefit to maintain the property. The bank knows that statistically, homeowners are much more likely to keep their houses in good repair than renters. That’s what makes holding mortgage notes so attractive.

Our mentor taught our investors they could be the bank for people who do not have the credit history to qualify for a regular mortgage loan. The investor carries the loan on the distressed property for 30 years just like the bank, and the new owner of the house simply pays a mortgage payment each month that includes taxes and insurance.

The mentor said to our investors –  why should you spend $10s of thousands on rehabbing a property when you can have the end buyer do most of it? Owner finance investment property is smart.

The end buyer usually has a vested interest in maintaining their property, as they own it.

How a Typical Owner Finance Property Deal Looks:

$62,000 cash purchase, $10,000 rehab, 50 DOM, sold for $89,900 owner finance, $937 per month, 12.3% ROI.

This 3 BR 1.5 bath property investment with positive cash flow north of downtown San Antonio TX is in a heavily revitalizing area. It was bought by the investor for $62,000.

The under-market value property only needed approximately $10,000 of rehab, including new flooring, paint in and out, and minor foundation work.

The total project cost to the investor for this under-market value property was $72,000.

Within 50 days of the completion of rehab, it was sold with owner financing with the following terms:

  • $5000 down
  • $89,900 final price
  • 10% interest
  • 30 year note
  • $937/month PITI positive cash flow
  • Cap rate 12.3%

After our investors converted most of their under-market value properties to owner finance, most of of their worries about properties disappeared. The owner maintains it and the investors simply enjoy the monthly cash flow from each property into their bank accounts.

Most people don’t seem to ever consider owner financing their property investment, probably because they don’t know about it.

The keys to success in owner finance property are simple:

  • Carefully documenting the income of the potential buyer and verifying their work history
  • Follow the Dodd Frank law, which mandates that you must collect proof of their income and document their work history.
  • You can have a Texas licensed loan originator do this for you for a $750 or so fee (we have one on staff).

The bottom line on owner finance investment property is you enjoy cash flow without maintenance and the buyer enjoys buying their own home at last – a true win-win for everyone.

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How Our Investors Buy Investment Properties in Texas Below Market Value

The most important factor in our big investors’ success in buying the best San Antonio investment property is every house they buy is under market value. That is, they buy under market investment properties that need rehab.

How To Determine Market Value

One of the biggest reasons many investors we have become real estate agents is so they can determine market value of the best below market value San Antonio investment property on their 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. Our investors like 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. They want to buy that house for at least 20% under $90,000, or about $72,000, so they can make a good profit.

How Investors Buy Under Market Value Properties

There are several ways that our investors use to buy under market value properties in San Antonio TX, one of the best cities to invest in real estate:

  • 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 our investors have bought many under-market value properties in estate sales; that is where they find most of their deals. In many cases,  there are several children involved and they just want to be rid of the house that needs repair.
  • Buy off market properties: Given our investors’ level of success in real estate investing, they tend to find many good deals that are not in the MLS. Agents and investors in the business send our site and top investors below-market 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. We currently are analyzing several below market value properties that we will post on this site soon.
  • 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. Our top investors own a construction company and are able to do rehabs for 50% less than most contractors on the best San Antonio investment properties.

That in short is how our investors 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!

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Take Over a Hard Money Loan on an Investment Property and Save Big!

Investing in San Antonio real estate can be a great way to build wealth as it was for me. One of the challenges, when you are first starting out, is finding the capital to fund your investments of course. One of the ways that some investors get started is by using hard money.

A hard money loan is a bridge loan that is used for the short term to finance a property while you are doing renovations. A hard money loan in San Antonio is often used by house flippers who want to renovate the home and then sell it retail for a profit. But another strategy that some under market value property investors use is to use the hard money loan to renovate the home. Then, once the property is fixed, get a conventional investment property loan on the home and pay off the hard money loan. The property then can be rented out and you pay the loan from the rental proceeds. If you have done the deal right, you should be able to put away some money every month as your profits and save it over time to do more deals.

Hard money of course is expensive; you can expect to pay an interest rate of 12% to 16% in many cases, and you also have to pay an up front fee and a renewal fee every six months with many lenders. Ideally, you will want to have the property renovated in six months or less so you can either sell it or get a conventional loan and hold it as a rental property.

On a related note, sometimes if you look around, you can find a real estate investor who has a hard money loan on a property but does not have or does not want to spend the cash to renovate the property. In this case, you might be able to work out a deal with the real estate investor that can really save you a lot of money.

All you would need to do with this investment property would be to take over the hard money loan from the investor. In many situations, the investor may have bought the home at a much lower price than it is for sale for today. This can be a great way to get an under market value deal on a property.

For example, we have a San Antonio investment property below where the investor has a hard money loan on the home for about $58,000. That is way below market value. Homes have appreciated in San Antonio by at least 7% in the past year overall. This home on Alametos St. is for sale for $65,000, but if you take over the hard money loan, you have saved another $7000, plus the fees of taking out a new hard money loan. Then, you only need to spend the money on the rehab. What a great way to save a bundle on an investment property! Below is more information on this under market value deal.

Potential more than 40K in profit on this investment. 1614 Alametos, San Antonio, Texas 78201. Excellent location, just north of downtown with a short distance to the river walk and the new San Pedro creek river walk extension (multi-billion dollar inner city revitalization project). Properties in this location are expected to appreciate by more than 50% in value over the next two to three years.

1614 Alametos has a large back yard with shady trees. Currently, the property is set-up as 2 bedrooms and 1 bathroom with a large patio in the back of the house. To get the maximum value out of this property and location, another bedroom and bathroom should be added. Estimated repairs: $65K with purchase price: $65K. Max After Repair Value: $199K

Note: 1622 Alametos just down the street was sold to an investor in 2015 for $65,000. With $15,000 of rehab, the property was sold for $99,000 with owner financing for a 13% ROI. Home was sold within one week.

Price: $65,000

Exit Strategy: Buy, Rehab and Hold this San Antonio investment property.

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Looking to Buy Texas Investment Property? Forbes Is High on San Antonio

Forbes magazine reported this month that Texas is one of the best real estate investment property states in the country. In fact, it called it the United States of Texas because of the various attractive real estate markets in the state that are very different from one another. While the oil business is synonymous with the Lone Star State, the article notes that oil exploration, pumping, processing and financing occur in various real estate markets in the state, and there also are other industries in some Texas cities that are more important than ‘black gold.’

Houston is a difficult market for some real estate investors right now because it is hard to know what the long term effects of flood damage are. However, the possibility for future flooding could encourage more people in Houston to rent and not buy, which could lead to more rental property demand.

Dallas has been a popular place for real estate investors but prices have been climbing 10%  per year lately. The higher prices mean more people turning to rentals, so this could be a good fit for many rental property investors. But prices are high and going higher, so some landlords could be priced out of the market.

Probably the most difficult market in Texas right now is Austin. It is a more challenging investment market right now because prices are so high. Rapid growth of the population led to a doubing of home prices in the last 10 years. The growing tourist and tech industries have really increased economic growth which is good, but prices are quite high. Investors who do buy here often find that the best path forward is to subdivide a large house into several units.

The good news for San Antonio real estate investors is this local market is one of the best in the states. Population growth has been solid but not so high to overwhelm the real estate market. Job growth is strong and tourism is more important in this city than oil. The strong military presence here leads to a strong demand for rental property. Home prices are generally in balance with incomes and rents, although home prices most recently did rise in some parts of the city by 10%. The rental property market in San Antonio is quite large, with 40% of people renting at this time.

Forbes reports the current population of San Antonio is 2.3 million, with 6% population growth over three years and 3.1% job growth rate. Home prices went up 8% from last year and the average home price is $235,000.

Most of our real estate investment properties have been in San Antonio over the years and our investors do well., Prices are higher today, but it is still possible to make at least 10% per year on your real estate investments here.

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San Antonio Home Buyers Struggle to Find Homes in Tight Market

The San Antonio housing market has gotten tighter in the last several months as prices are rising and supply of home on the market is getting tighter. For March 2018, there were 2012 homes sold in San Antonio, which was an increase of 3% over last year. The market has gotten stronger and bigger every year since 2012, and is being fueld by the strong local economy and a growing population.

The median home price for San Antonio was $215,000 in February 2018, which was a 6% increase from $202,000 a year ago. There has been a shortage of construction workers and a low supply of affordable homes for sale that have caused prices to rise. Still, prices in the area are still more affordable than many parts of the country, and San Antonio real estate investors can pick up homes in blue collar areas of the city for $70,000 or so that will produce 12% ROI, such as this one:

Excellent investment with tremendous potential. 307 Golodrina Ave., 3 beds 2 bath, 1370 sqft. Lot size: .11 acres, estimated rehab to make new and flip 50K, Max ARV: 169k, asking price: 75K.

Max ARV: $169k
Asking Price: $75,000

Exit strategy: Recommended exit strategy with 20K rehab: 5-10K down payment, sales price: 129K, $1,295.00 PI/TI 30 year amortization, 10% interest or rent $1200 monthly.

The San Antonio area’s inventory of homes on the market, which is measured by the time it takes for a house to be sold if no new homes go on the market, was 3.3 months, which is very tight. The record low was December 2017 at 3.1 months. An inventory of six months shows a balance between sellers and buyers. The last time the San Antonio market was balanced was Nov. 2012.

Interestingly, the San Antonio real estate market has continued to get stronger even as interest rates rise. The national average for a 30 yar loan fixed is around 4.5%, which is nearly 1% higher than early 2017. Still, interest rates are historically low, and the economy is strong, so people’s rising wages may be helping them to deal with the higher debt costs.