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.

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!

SOLD – 1614 Alametos, San Antonio, TX 78201

Investors, flip this house! $55,000 cash price, $50,000 rehab, $30,000 to $40,000 profit!

  • Address: 1614 Alametos, San Antonio, TX 78201
  • Description: San Antonio flip investors and real estate investors  – Flip this house, river walk extension being built in LA Heights neighborhood, exceptional back yard, perfect location north of downtown, 3 beds, 1 bath, 1,400 sqft, lot size: .14 acres,
  • Cash Price on San Antonio Fixer Upper:  $55,000 CASH under market value 30%
  • Exit Strategy: Flip – estimated repairs: 50K, clean/lawn maintenance/interior paint/exterior paint, plumbing/electrical up to code, flooring, sheetrock/texture, roof, foundation. Max After Repair Value: 149K
  • Sold and Rental Comps: Sold Comps 1614 Alametos
  • For more information, please contact us. 

San Antonio Investment Properties Under $40,000 Again!

For the last three years, many San Antonio investment properties have been rising in price. For more than a year, it was difficult to find San Antonio fixer uppers that could be purchased for less than $50,000.

And when I was able to find that under market value fixer upper, it needed more than $25,000 of repairs. That can reduce the final ROI on a San Antonio property to a range of 10-11%. Now, I own dozens of San Antonio buy and hold properties that earn 10%, and I am very happy with that. But some investors like to see 12-15% returns on their money, and I can respect that.

Recently, as of October 2016, some areas of San Antonio continue to appreciate in value. On the north side in Stone Oak, for example, San Antonio home prices are still rising. But many of the fixer upper San Antonio properties I buy are finally falling a bit in value.

Recently I have been able to get a few fixer uppers under contract for under $40,000. Just as good, I have found some San Antonio buy and hold properties that only need $2000 or $4000 in repairs, if you do an owner finance exit strategy. This means that the ‘owner’ of the property who buys it from you on terms will fix up the property.

So you as the buy and hold investor can enjoy a return around ~14% ROI and never have to repair it. Now that is quite a nice San Antonio real estate deal! Here’s one of those properties:

Front

Address: 1604 Montezuma St, San Antonio, TX 78207

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

How Long Should I Hold My Buy and Hold Investment Property?

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.

 

My Best Tips for Successful Buy and Hold Investing in San Antonio

Investing in under market real estate in San Antonio has treated me well over the years. I firmly believe that investing in under market value fixer upper San Antonio properties for the long term is the best way to enjoy long term cash flow.

If you are on the fence and are about to dive into buy and hold investing, I have some simple tips to share, as a successful San Antonio property wholesaler:

  • Work with a real estate agent and investor

Most real estate agents just represent people who are buying or selling their personal residence at retail prices. The majority of agents do not invest in real estate themselves, so they are often unable to help you find a good under market value fixer upper that will produce good positive cash flow.

I only became an agent in 2010 after about 8 years of very successful fixer upper buy and hold investing in San Antonio. I know a good under market value deal when I see it.

  • Cash flow!

You need to get a San Antonio wholesale property under market value enough so that when you do the repairs and collect rent from the tenant, you will have enough to cover all of your expenses. These usually include mortgage, taxes, insurance, repairs and vacancies.

Right now, the San Antonio real estate market is pretty hot, and good fixer upper deals for affordable homes are harder to find. This is why working with a highly experienced real estate agent and investor is so important: She can help you find a good under market value deal that can produce cash flow. Also, if you work with an experienced investor agent, she will probably have a good rehab crew that can do the fix up work at a fair price.

Here is a nice wholesale property deal in San Antonio I just found that will produce $1150 per month in rental cash flow:

Front

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 conversations, foundation/roof repairs.
Max ARV: $109-$115k

Cash Price: $55,000

If you do that San Antonio distressed property all cash, you should have about $700 left for positive cash flow – not bad! – after expenses.

  • Due diligence

I have done about 900 houses in my career, so I personally inspect each San Antonio wholesale deal to see if I will be able to generate enough cash flow after repairs. This is where having an expert agent investor on your side with an expert rehab crew will pay you back big!

A very common error for new fixer upper investors is to overdo the rehab or not be aware of all the things that have to be fixed.

  • Only invest if the cash flow is there

I never buy an under market value property based upon what I think the value of the house will be in a few years. That is real estate speculation and that is a great way to end up in the poor house. If after I run the numbers – property cost, rehab cost, all expenses – I generate positive cash flow of a few hundred dollars, I do the deal.

  • Don’t forget repairs and vacancies

I like to account for at least $50 per month for repairs on my fixer upper deals in San Antonio. Also, plan on a 5% loss for vacancies. However, I often do San Antonio Section 8 rentals, and I find that this type of rental income is quite solid and safe; I have Section 8 tenants who have been with me for 5 years or more.

Above all, after you find a good potential under market value property that will produce positive cash flow, do the deal. Don’t sit around thinking about it too long or you may never take action. Many people think about investing in San Antonio wholesale property, but the majority never do a deal because of fear.

If you do your due diligence as I outline about, there should be no reason to not move forward on that property!

 

 

 

San Antonio TX Economy Still Strong, Even With Oil and Gas Slowdown

Personal income growth since 2011 in Texas ranks #2 in the US, with only North Dakota ahead. Some San Antonio real estate investors think that crashing oil and natural gas prices would have slowed down the Texas economy, but the Lone Star State continues to do well. And San Antonio buy and hold properties continue to sell and rise in value.

Note: I don’t personally worry much about what the economy does in San Antonio anyway. In the 2007-9 crash, I bought and sold $2 million in real estate and still had my San Antonio buy and hold houses rented out with no problem. San Antonio affordable homes are always in demand. 

Economic experts in Texas this month stated that several areas of the Texas and San Antonio economies continue to keep job growth going and wages rising. For example, health care is very strong, and San Antonio has a very strong military presence with several Air Force and Army bases.

Even with low oil prices, Texas still created 1.7 million jobs from 2010-15, which is the best in the US. In the same time frame, the entire US economy lost 400,000 jobs.

The oil and gas slow down has had some impact in Houston, but San Antonio is continuing to see low unemployment and wage growth. San Antonio is seeing economic growth in the 3-4% range.

Even though oil prices are low for the time being, research shows that oil production has only dropped marginally in Texas. There are 2.5 million barrels per day produced in this state, down from 2.8 million two years ago. The small production decrease has come even though there are only 200 or so active rigs in the state, which is down from 900 two years ago.

This means good news for San Antonio buy and hold investors, and San Antonio flip investors. I continue to buy and sell real estate investments, although the prices are up 20% from two years ago.

I recommend doing Section 8 rental property for a good San Antonio buy and hold investment, as the rental market is very strong:

Front

  • Address: 804 S San Eduardo Ave, San  Antonio, TX
  • Year Built: 1949
  • Description: Fixer upper, under market value 4 beds 1 bath, 816 sqft, built: 1949, lot size: .1 acres, yearly taxes: $1,200.00, estimated yearly insurance: $750,
  • Estimated Repairs: 30K, roof, central hvac, windows, plumbing, electrical, kitchen/bath update, interior/exterior finish.
  • Cash Price: $48,000
  • Exit Strategies: Rent San Antonio investment property with 30K in repairs: $1,095.00 with section 8, no need to chase the monthly payment, San Antonio Housing Authority pays direct deposit to your account.

SOLD – 4907 Waycross Ln., San Antonio, Texas 78220

Front

Address: 4907 Waycross Ln., San Antonio, Texas 78220-1840
Year Built: 1971
Description: Under market value fixer upper 4 beds 2 bath, 1078 sqft,  lot size: .13 acres, yearly taxes: $1,200.00, estimated insurance: $750.00, estimated repairs: 30K; central hvac, flooring, update kitchen/bath, roof, interior/exterior finish.
Price: $49,000 Cash
ARV: 109-115K
Exit Strategy:

  • Owner Finance with 30K repairs: 5k down, $1,095.00 monthly P/I, 30 year amortization, 10% interest, Price: 109k
  • Rent with 30K in repairs: $1,095.00 with section 8, no need to chase the monthly payment, San Antonio Housing Authority pays direct deposit to your account.

Contact us for questions or to make offer.

Comps: rental comps 4907 way cross ln sold comps 4907 way cross ln
More Photos:
Back Bath Bed 1 bed 2 Bed 3 Bed 4 Kitchen Living_Dining

 

 

SOLD – 804 S San Eduardo Ave, San Antonio TX

Front

  • Address: 804 S San Eduardo Ave, San  Antonio, TX
  • Year Built: 1949
  • Description: Fixer upper, under market value 4 beds 1 bath, 816 sqft, built: 1949, lot size: .1 acres, yearly taxes: $1,200.00, estimated yearly insurance: $750,
  • Estimated Repairs: 30K, roof, central hvac, windows, plumbing, electrical, kitchen/bath update, interior/exterior finish.
  • Cash Price: $48,000
  • Exit Strategies: Rent San Antonio investment property with 30K in repairs: $1,095.00 with section 8, no need to chase the monthly payment, San Antonio Housing Authority pays direct deposit to your account.
  • Owner Finance with 30K repairs: 5k down, $995.00-$1,095.00 monthly P/I, 30 year amortization, 10% interest, Price: 99K-109k
  • Contact us for more information or to make offer.
  • Property Analysis, Sold and Rental Comps: Rental Comps 804 S San Eduardo Ave Sold Comps 804 S San Eduardo Ave

More Images of this San Antonio fixer upper:

Back Bath Bed 1 bed 2 bed 3 bed 4 Kitchen Living room

SOLD – 804 Virginia Blvd, San Antonio, TX 78203

Front

    • Address: 804 Virginia Blvd, San Antonio, TX 78203
    • Year Built: 1900
    • Description: Act fast – hot market and low under market value price! Serious cash flow on this San Antonio fixer upper! San Antonio wholesale property has 3 beds 1 bath, 900 sqft, built: 1900, Lot Size: .07 acres, Yearly taxes: $1,000.00, Estimated yearly insurance $600.00,
    • Estimated Repairs: includes interior paint, plumbing up to code, /bath updates,  Max ARV: 99K.
    • Cash Price: $45,000
    • Alternate Exit Strategy: Rent with 25K in repairs: $995.00 with section 8, no need to chase the monthly payment, San Antonio Housing Authority pays direct deposit to your account.
    • Contact us for more information or to make offer.
    • Property Analysis, Sold and Rental Comps: Prop Anal 804 Virginia Blvd, Rental Comps 804 Virginia Blvd, Sold Comps 804 Virginia Blvd

More Pictures of this San Antonio fixer upper:

Back Bath Bed 1 bed 2 Kitchen Living Master bed Shower