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Investing in Real Estate and Building Your Rental Portfolio

As you are thinking about investing in real estate and building your rental portfolio, you can no doubt find many wholesale property companies in San Antonio to sell you properties.

I am a San Antonio property wholesaler like others in some ways, but with me, you will find a key difference:

I built myself a large portfolio of rental investment properties (and owner financed investment properties) practically from scratch in about 5 years, from 2001 until 2006. If the person selling you properties has few to no properties, how much do they really know about what they sell?

When I first got started in San Antonio real estate investing, I did not have much capital, only about $25,000. In my first year in real estate, I did 50 houses – San Antonio flip properties.

I did that by finding $2 million in private money from a retired doctor and investor in San Antonio. He loaned me in the money in small parcels and I bought under market value $30,000 properties, rehabbed them, and flipped them for a $8000 profit, which we split.

I was able to make $100,000 in my first year in real estate investing, and I re-invested most of the profits into buy and hold rental properties.

Now I am in the position where I have a very large portfolio of buy and hold properties, and I really do not need anymore properties for myself. I like to help other small investors develop their own portfolios.

I run across many small real estate investors in California that want to build a rental property portfolio but are priced out of their current market. I specialize in helping these investors maximize their available cash so that they can buy enough rental properties so they can quit their jobs within a few years.

Here is a typical real estate investing scenario I see:

  • California investor with a good $200,000 per year job and $100,000 cash or equity cannot buy anything in CA worth having.
  • He has steady high tech employment and good credit.
  • I recommend that you buy an under market value San Antonio investment property for cash at $70,000.
  • We do $35,000 in rehab on the fixer upper property. I make it really nice – with central air, tile, lighting, granite, really make it shine.
  • We then rent it out section 8 for the investor for approximately $1295 per month – ARV is about $139,000.
  • After the house is rented, the investor from California can cash out refinance up to 80% and do another section 8 rental property.
  • If he has a line of credit on his residence, he pays himself back with the line of credit from the first investment property, and then borrows another $100,000 and does another one.

This is one of the ways that I built a portfolio of buy and hold properties after I had profits from my San Antonio flips in my first few years in real estate.

So, if you are thinking about buying San Antonio wholesale property, I recommend that you find a 10 year expert in the business who not only can sell you a property, but has experience in building a cashflowing portfolio for himself.

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Why Buying Section 8 Rental Property With Cash Is a Great Buy and Hold Strategy

The new wholesale property investor in San Antonio needs to decide if he wants to flip property or buy and hold property. My business is set up primarily to buy and hold property; for the last five years or so, I have especially focused on San Antonio buy and hold property with owner financing.

Owner financing San Antonio properties has the following advantages for the out of state property investor:

  • There are no maintenance problems as with regular buy and hold investing
  • The owner of the under market value property maintains it
  • You simply enjoy the cash flow of the investment property.
  • You help to beautify the community and put a hard working family into a home they own.

Now that is has been my bread and butter way of buying and holding real estate in San Antonio over time with 13% or so returns.

However, there are times where you may want to do buy and hold rental property in San Antonio TX. Some of the most common reasons that we see with our out of state property investors is:

  • They have a high income of $200,000 or more and they want to reduce their taxable income.
  • With rental property they are able to enjoy depreciation and tax write offs.
  • You cannot do this with owner financed property.

When I decide that I want to buy and hold rental property, one of the things that I often do is section 8 rentals. Now, some San Antonio real estate investors may recoil from Section 8 rentals, but to me, there is hardly anything better in rental properties! Section 8 is managed by the Department of Housing and Urban Development, and can be a good deal for the rental property investor. Here is why:

  • Payments are always on time and very convenient: Rents are received every month on time via direct deposit.
  • Protection from financial hardship: No more worries about your renter losing his job. Most section 8 tenants get a  voucher that covers most or all of their rent.
  • Rent is higher: In my houses, I often will get a section 8 rent for $1200 when I might have only gotten $1100 from a conventional renter.
  • Easy marketing: Section 8 uses GoSection8.com which allows me to post San Antonio rental properties and to review applicants for no cost.
  • Minimal vacancies: There is a large demand for section 8 in SA TX.

Oh, there is one other major advantage of section 8 – attention flippers in San Antonio!

Flipping houses is fine and can be profitable, but what if it does not sell? Then you have a rehabbed property and you have trouble getting your profits.

So rent it section 8! When you rent it out with section 8, after it is occupied for at least 6 months, you can do a cash out refinance on it and pull out as much as 80%! Then you can do more San Antonio rental properties. Not a bad deal, huh?

 

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What Is the Buy and Hold Real Estate Strategy?

Many real estate investors in San Antonio and elsewhere in the US debate whether they should do buy and hold property or flip property. Personally, I believe in flipping properties to build capital, and then doing buy and hold real estate investing for the long term.

To put it succinctly, the buy and hold real estate strategy is the concept of buying under market value real estate investments, fixing them up enough to get them rented or resold without overdoing it, and holding the San Antonio wholesale property for the long term and collecting the cash flow.

I generally prefer buy and hold real estate over flipping property for a long term strategy. The reason for this is that buying and holding real estate is a truly passive activity if you do it right. If you get the right tenants or owner finance buyers in the property, the wholesale property will pay you month after month and you will not have to do much to it.

On the other hand, flipping property involves constant work on rehabs and if you get caught in a downturn, many investors end up losing money, and have a property where they owe more than the property is worth.

If you are going to do buy and hold investing with San Antonio investment property, here are some quick tips to get the best cash flow:

  1. Find the right under market value property: You want to make sure that you are buying a San Antonio wholesale property that is under market value by at least 20%, in my opinion. Where many buy and hold investors lose out is by buying a property that is too expensive and the cash flow is non existent or even negative if repairs crop up. You will always end up losing money if pay too much at the closing table.
  2. Be sure the numbers on that wholesale property make sense: Cash flow is king in this strategy. You want to be certain that you will be cash flow positive after you pay all expenses each month, accounting for repairs and vacancies. On my rental properties in San Antonio, I put aside $100 per month on my $75,000  houses to make sure I have enough to pay for repairs. On my owner finance houses, the buyer maintains it and I just collect the cash flow. On my houses that are worth 75-100k rehabbed, I am making at least 1% of their value in rent, usually a bit more than that. So even with a mortgage, I would be making $300 or so in cash flow per month. I actually buy mine cash though.
  3. Screen buyers and tenants with care. You have to be certain that you take your time when you screen your tenants and buyers. I am very careful who gets into my houses. I check their employment, work history, bank statements, pay stubs, credit history and criminal record. My section 8 tenants have to be totally vetted for them to get in. And my owner finance buyers rarely have to be foreclosed upon because they have long term steady jobs.

I own many long term buy and hold properties, and I always pay under market value, never over rehab them, and I always end up with positive cash flow.

If you are thinking about investing in buy and hold real estate and have limited capital, say, $100,000 or so, one great strategy is to buy two buy and hold properties in San Antonio with 20% down conventional financing, do the repairs and then rent them out section 8.

After the house has been occupied for a year or so, you can do a cash out refi and get up to 80% of the current value, which on a 100k asset could be about 80k. Then take that money and do another rental property.  I have a large portfolio of buy and hold San Antonio properties myself, and I can show you how to build a 20 house or more portfolio that produces great cash flow. And then, if you want after 5 years, you can package up that portfolio of turnkey rental properties and sell them to a cash investor in California.

That is a great way to generate long term cash flow in rental property. Below is a property perfect for this strategy.

66

    • Address: 2229 W Hermosa Dr.  San Antonio, TX 78201
    • Year Built: 1948
    • Description: Under market value property sale in hot north of downtown neighborhood, 2 beds 1 bath, 769 sqft, built: 1948, lot size: .14 acres yearly taxes: $1,200.00, estimated yearly insurance: $800.00, estimated repairs on this distressed sale.
    • Rehab Option#1: 35K, includes new HVAC, converting to 3 BR, updated kitchen, flooring, paint in/out, exterior skirt, roof, room addition, appliances, paint out door storage exterior, trash, lawn maintenance.
    • Max After Repair Value: $139,000.00 with owner financing, comps are for 3/1.
    • Rehab Option #2: 15k  with Owner Finance ONLY – AC, flooring paint in and out $109,000 ARV.
    • Cash Price: $69,900 firm.