Posted on

Why I Still Think Buying and Holding San Antonio Real Estate Is the Best Investment

We think that buying San Antonio investment properties with a buy and hold strategy is the best idea for real estate investing here.

Here are the five major advantages to buying and holding real estate investments in San Antonio, in our years of experience.

  • Income: Most investments you purchase offer a regular return, such as an annuity, or potential for appreciation in equity (stocks), but buy and hold real estate offers both of these. The best buy and hold real estate investments offset your expenses and debt, and also produce monthly positive cash flow of 5-10% per year. Meanwhile a typical annuity pays 3-4%.
  • Depreciation: Flipping houses in San Antonio is great and I have done my share, but the IRS is always going to get its piece of your real estate profits with flips. With buying and holding, you can write off the value of your San Antonio wholesale property over 27.5 years. This depreciation is negative income. However, it is only negative in a paper sense because your costs of upkeeping the property come out of your cash flow. So, depreciation losses reduce or remove your positive cash flow and reduce your taxes.
  • Building up equity: The cash flow from your San Antonio investment property allows you to pay your mortgage without spending your own money. Each month, also, part of your loan principle is paid off. About 15-25% of every loan payment will pay off the principle of your loan and add to your equity.
  • Appreciation: Your real estate investments can go up in value, and of course they can go down. The good news is that with properly cash flowing real estate properties, you are making profits regardless of what is going on in the market. My San Antonio properties did drop in value by 20% in the crash, but I was able to continue receiving income from them; in some cases, I even could increase the rents in the downturn.  As long as you have positive cash flow in downturns, you will be fine. I did great in the downturn five years ago with my San Antonio real estate investments. I bought and sold $2 million in real estate during the crash.
  • Leverage: If you put $25,000 into mutual funds, and it increases by 10%, you made $2500. If you put that same money into buy and hold real estate, you can buy a $75k property with a $60,000 mortgage loan. If it goes up 5%, you made around $3500, or a 20% or so return!! So, maybe the stock market has a better return on average but with buy and hold real estate, your returns are based upon a higher amount than your actual investment of principle.

As I said, I also flip houses, so this is not an either/or deal. But I like buying and holding affordable San Antonio properties because of the tax advantages, the passive cash flow, and the ability to scale. If I am holding 25 houses producing $500 of cash flow each, I have that each year, and as equity builds, I can refinance and buy more.

In summary, San Antonio buy and hold investing is the best ‘get rich slow’ scheme. You can over time create residual income, and also increase your equity exponentially as you pay down the principle, and also through appreciation and leverage.

If  you are looking for a good under market San Antonio investment property to buy and hold, here is a nice $48k deal:

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. ARV $99k.
  • 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.

With this under market value San Antonio fixer upper, you can rent it section 8 for $1100 per month, and after 6 months, you can cash out refinance approximately $70,000 and do another rental property. Your cash flow on the above deal would still be approximately $250 to $300 per month.

Posted on

Why Investors Who Obsess About Interest Rates and ROI Lose Money

Obviously it is important in San Antonio real estate investing to make a good return on your investment dollar. In my 15 years of investing in San Antonio investment property, I have averaged about $8000 profit on flips on under market value properties, and approximately 12% ROI on San Antonio buy and hold deals.

However, if you as an out of state property investor obsess too much on ROI, how much you will make on that flip, or the interest rate that you are paying on your borrowed capital, it can talk you out of doing profitable deals, and that is a big mistake.

In the last month, I have seen investors talk themselves out of doing profitable deals – I am talking about clearing $10,000 on a flip in particular. This under market value San Antonio property is a good example:

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 on this fixer upper 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.

On this San Antonio flip deal, the investor will make in the area of $10,000 on a flip, or maybe $6000 or $7000 if they have to borrow hard money. Now some people think that is too little to bother with. Oh my goodness! They are so  wrong. When I first started in San Antonio real estate investing, I did 50 houses in my first year.

We’ve had investors borrow millions from private investors and they split the profits  50/50 when each project was completed. Now I only ended up making $3000 or $5000 per flip when I sold them. But I didn’t worry about such a ‘small’ amount of profit, because I made – get this – $100,000 in my first year in San Antonio wholesale property investing! And I re-invested 80% of that profit.

Let me be clear: Investors who laugh off making $5000 or $10,000 on a San Antonio flip are being foolish. True, if you only do 1 flip a year, you are not going to be able to build capital very quickly. So, you need to do at least 4 per year, or ideally, 10 or more. Then you take that $5000 or $10,000 per deal and invest it again into San Antonio flips or San  Antonio buy and holds.

I have dealt with well-meaning but short-sighted investors who actually were going to scuttle $10,000 profit flip deals because they were going to possibly have to borrow 14% rate hard money. Of course it is smart to borrow the cheapest capital that you can – ideally private money or a line of credit on a piece of property you own.

Failing that, hard money is often the only option. While it is true that you will pay high interest and fees – possibly up to $4000 per deal – why on earth would you nix doing deals if you still stand to profit? Which is better, making $6000 or making zero? I know what I’ll go with!

At the end of the day in San Antonio real estate investing, focus on your total profit, not on the interest rate and fees you are paying. If you are making $5000 on a flip, I’d be happy with it and do 10 more this year.

Update: This week we had a buyer walk away from a deal that would have made her $8000 or so because she refuses to use hard money. So, rather than make $8000, she makes nothing.