One of the challenges of dealing with rental investment properties in San Antonio and other places is that they cost money to rehab and maintain.
When many San Antonio real estate investors purchase under market value properties, the normal scenario is something like the following:
Buy an under market value San Antonio fixer upper for $50,000.
Stick $25,000 into it to get it ready to rent.
Rent it out for $900 per month.
That is a perfectly acceptable way to generate cash flow with buy and hold real estate investments.
But what if you can buy the house cheaper than that, put only a few thousand into it, and get it occupied for about the same monthly payment?
That is what I do on many of my San Antonio investment properties. Take a look at this very nice, incredibly inexpensive $35,000 San Antonio fixer upper deal:
Address: 1707 Gorman, San Antonio, TX 78202
Description: Stunning large lot with positive cash flow, under market value, booming San Antonio Market, very popular location east of downtown, 2 beds, 1 bath, 654 sqft, lot size: .22 acres, estimated repairs: 2K, minor electric, clean/lawn maintenance. After Repair Value: 61K,
Price: $35,000.00 cash firm.
Exit Strategy: Owner Finance San Antonio investment property with 2k in repairs: 3-5K down, $600 monthly PI/TI, 30 year amortization, 10% interest, Price: 61K
On this investment property, I got it under contract for just $39,000 (prices in my areas have been dropping lately). And rather than rent out the property – which would require $25,000 or more of rehab, I just do $2000 to clean it up.
Then, I find an owner finance buyer interested in buying the property from me on terms of 30 years, 10% interest, $5000 down. That way, I leave most of the rehab to the end buyer, and I can enjoy a very high rate of return without doing any repairs.
Owner financing a house successfully requires me to do my homework. I need to make sure of the following:
The buyer has enough income to afford the payment and to live with the other normal life expenses.
They have a stable job for at least the last two years.
They have a $5000 down payment.
Most of these buyers have poor credit, so it is up to me to find good buyers who can pay me on time. If they don’t, we foreclose and get them out in 60 days, and get another buyer in there.
That’s the cornerstone of my San Antonio investment property portfolio – buy and hold with owner financing with limited repairs of $2000 to $5000. What do you think?
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:
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
Description: Location Location! Very popular neighborhood with extra-large back yard south of downtown. This is a high ROI, under market value San Antonio investment property ! – 3 beds 1 bath, 850 sqft, built: 1972, Lot Size: .16 acres, Yearly taxes: $1,052.00, Estimated yearly insurance $600.00, Estimated repairs: 5K, landscape tree removal, trash removal interior/exterior. ARV: 69.9K
Cash Price on San Antonio Fixer Upper: $39,900
Exit Strategy: Owner Finance this San Antonio investment property with 5K in clean up: 5k down, $695.00 monthly P/I, 30 year amortization, 10% interest, Price: 69.9K.
Description: Investors, this is an under market value San Antonio buy and hold property for you! Only $2000 in repairs that we do for you, and then owner finance it form $695 per month!
Excellent cash flow opportunity with this San Antonio investment property, central AC/heat, 5 year old roof, booming San Antonio Market, very popular location west of downtown, 1257 Saltillo St., San Antonio, TX 78207, 2 beds, 1 bath, 960 sqft, lot size: .1 acres, estimated repairs: 2K, clean/lawn maintenance. After Repair Value: 69.9K, ,
Price: $43,000 firm – cash only
Exit Strategy:
Exit Strategy: Owner Finance with 2k in repairs: 3-5K down, $695 monthly PI/TI, 30 year amortization, 10% interest, Sales Price: 69.9K.
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
Description: Stunning large lot with positive cash flow, under market value, booming San Antonio Market, very popular location east of downtown, 2 beds, 1 bath, 654 sqft, lot size: .22 acres, estimated repairs: 2K, minor electric, clean/lawn maintenance. After Repair Value: 61K.
Price: $35,000 firm.
Exit Strategy: Owner Finance San Antonio investment property with 2k in repairs: 3-5K down, $600 monthly PI/TI, 30 year amortization, 10% interest, Price: 61K
I see five big advantages with buying and holding San Antonio investment property.
I Make Regular Income
Most investments offer either a regular return or appreciation. San Antonio real estate investments offer both! A really good buy and hold investment property, such as the one on Wagner St. listed below for an under market value price of $49,000, offers strong positive cash flow that offsets my expenses and any debt. It also provides me a nice monthly income.
If you read much on this website, you’ll know that many of our San Antonio investors do buy and hold investing with owner financing for long term cash flow.
Depreciation
Fixing and flipping in San Antonio is well and good, although it is harder to do in this appreciating market. I can tell because flippers call me wanting properties for .50 on the dollar! Yeah right, not in THIS market!
The great thing about buy and hold property is that the IRS lets you write off depreciation on the property over 27.5 years. This is ‘negative’ income but it’s just negative on paper, which helps my tax situation.
Equity Increase
If you have a mortgage on your San Antonio investment property, the cash flow lets you pay the mortgage without spending your own cash. And, each month, part of your principle is paid down. About 20% of each loan payment increases your equity in the property. You can then borrow some of that capital if you like to buy more investment properties.
Appreciation
Buy and hold investment properties can appreciate in value depending upon the state of the market. Most of my under market value fixer uppers in San Antonio appreciate at 3-4% per year. During the last crash, most of my properties did drop in value, but I was still able to have positive cash flow from them. I was even able to increase rents on some of them.
I am mostly a cash flow investor anyway; appreciation isn’t a big deal to me.
Leverage
If you put $20k into stocks and it increase 10% in value, you make $2000. Not bad. But if you put 20k into San Antonio investment properties, you can buy a $100k fixer upper with an 80% loan. If it goes up 5%, you made $5000 with only $20,000 invested!
Even if stocks have a higher return, it doesn’t matter because real estate returns are based on much more than the principle you invested.
If you are interested in San Antonio buy and hold investing, here is a great 15% or so ROI deal to get rolling.
San Antonio Wholesale Property Address: 1515 Wagner Ave. San Antonio, TX 78211.
Year Built: 1949
Description: Location Location! Cash Flow! Under market value, 3 beds 1 bath, 816 sqft, built: Lot Size: .14 acres, Yearly taxes: $600.00, Estimated yearly insurance $700.00, Estimated repairs: 15K, includes interior paint, electrical/plumbing up to code, landscape, trash removal, kitchen/bath updates, flooring, roof repairs.
Estimated Repairs: 15k
Cash Price: $49,000
Exit Strategy: Rent San Antonio investment property with 15K in repairs: $850-$900 per month — or Owner Finance with 15K repairs: 5k down, $900.00 monthly P/I, 30 year amortization, 10% interest, Price: 89K. 15% ROI is possible.
If you have considered investing in buy and hold real estate in San Antonio or another city, you probably have heard about the investing horror stories….major repair problems you didn’t anticipate, bad tenants, cash flow negative properties.
Most of the problems that investor run into in under market value fixer uppers can be avoided with proper planning and foresight. Here are a few areas that many San Antonio buy and hold investors get into trouble:
#1 Bad Location
You need to buy property where QUALITY buyers and tenants want to live. If no one you want to rent to or sell to wants to live there, you are going to have problems.
For many investors in fixer uppers in San Antonio, this problem comes down to wanting to buy the cheapest possible property, which usually means buying in a bad area. And that problem often comes down to not having enough money to really start investing.
I have seen this mistake time and time again – would be investors want to get started in buy and hold investing and really do not have the capital to do it right. Not having enough money means you end up buying cheap in bad areas, you get bad tenants, you don’t have cash reserves for repairs….pretty soon, you are in a very bad situation.
Personally, I buy in blue collar areas that are on the edge of wealthier neighborhoods. This property in Beacon Hill I sold to my father in law, which is an up and coming area on the edge of very expensive neighborhoods. This buy and hold deal worked out great for him:
Before Rehab – $50,000 cash purchase, zero rehab by investor, 90 DOM, resold for $80,000 owner finance, $804 per month, 14% ROI.After rehab, completed entirely by end buyer.
He just had the buyer pay him off, and he made nearly $48k on a $51k investment. Nice deal!
#2 Numbers Do Not Add Up
Another common problem new buy and hold investors get into is they find a nice looking property in a nice area and the rent sounds good, but when they add up the numbers, including repairs and vacancies, the expenses are greater than the cash flow.When you see this, you should always follow the numbers. Don’t listen to your heart. If there is not enough money in the deal, don’t do it. And be honest with yourself about what the expenses are, don’t fudge them to make them look good.There is nothing worse than buying a fixer upper buy and hold deal and having to put money INTO it to keep it out of foreclosure.
#3 The Property Is a Wreck
I deal with ugly properties that might scare many investors:
$20,000 cash purchase, $5000 in rehab, 65 DOM, sold for $39,900 owner finance (Fair Market Value), ROI 12%.
This is an example of our lower priced affordable home, but still an excellent investment in property. These houses will sell in our neighborhoods in San Antonio TX. It is a 4/1 on Colima Ave. in the 78207 zip code. It was purchased by the investor for $20,000 cash, which was well under market value. He had it repainted in and out and the door secured, and other minor fixes. That cost him $5000 total in repairs.
Houses in this range and location do not require major repairs and upgrades to resell.
We then sold the house with owner financing to a qualified end buyer. The buyer was qualified according to SAFE Act – documented income, tax returns, pay stubs, employment verified. All Dodd Frank underwriting rules were followed.
Terms:
$3000 down
$400 per month PI/TI
30 year amortization
10% interest
No prepayment penalty
No balloon
Final price: $39,900 (FMV)
ROI: 12%
That is the kind of house I deal with, but you as a new investor may want to steer clear of houses with major problems. If you get a truly ugly fixer upper, consider having an expert real estate investor/company run your investments for you.
Lastly, many buy and hold investors get into the business for passive income but find that they simply do not have the time and/or the money to do it right. That passive income dream can become a money sucking nightmare if you are not careful.
If you are looking for a good buy and hold investment property, I can help you with the below property and run the entire project for you.
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 conversions, foundation/roof repairs. Max ARV: $109-$115k
Cash Price: $55,000
Exit Strategies:
Rent with 30K in repairs: $1150.00
Owner Finance San Antonio wholesale property with 20K repairs: 5k down, $995.00 monthly P/I, 30 year amortization, 10% interest, Price: 99K.
Our top real estate investors have done hundreds of rehabs on San Antonio investment property, so I know what I am doing on the rehab; my estimates are usually within 5-10% of the actual rehab number.
In May 2016, 2800 homes were sold, which is a 10% increase over May 2015. Also, May 2015/May 2014 saw a 9% increase in home sales over a year ago.
The average selling price of a house in San Antonio today is $249,000, with a median price of $209,000, which is up three percent from a year ago. The average price of San Antonio homes sold in May 2015 increased 10% from a year ago.
In April, San Antonio houses that are less than $200,000 were more than half of what was sold in the city. In May, 48% of the market involved houses that sold between $200,000 and $500,000.
San Antonio’s growth is higher than Texas’ overall, but the city is still a very affordable place to both live and invest. The average home price here of $249,000 is far less than the Texas average of $271,000.
Meanwhile, the city’s commercial development continues to grow strongly. A May 2016 report by Marcus & Millichap’s Retail Research Market Report found that the retail vacancy in San Antonio has reached an all time low. There also has been limited new retail construction, so the trend of increasing occupancy and rising rental prices will continue to have an affect on the commercial market.
The employment base of San Antonio will grow at a healthy 2.5% clip for 2016, which should contribute to the rising demand for various retail businesses from grocery stores to service companies.
In my under market value San Antonio real estate investing business, we continue to see strong growth in prices and demand for affordable homes, as well. I did manage to get this San Antonio fixer upper under contract and for sale for just $52,000, which will produce a rate of return of more than 15%:
San Antonio Wholesale Property Address: 1515 Wagner Ave. San Antonio, TX 78211.
Year Built: 1949
Description: Location Location! Cash Flow! Under market value, 3 beds 1 bath, 816 sqft, built: Lot Size: .14 acres, Yearly taxes: $600.00, Estimated yearly insurance $700.00, Estimated repairs: 15K, includes interior paint, electrical/plumbing up to code, landscape, trash removal, kitchen/bath updates, flooring, roof repairs.
Estimated Repairs: 15k
Cash Price: $52,000
Exit Strategy: Rent San Antonio investment property with 15K in repairs: $850-$900 per month — or Owner Finance with 15K repairs: 5k down, $900.00 monthly P/I, 30 year amortization, 10% interest, Price: 89K.
San Antonio Wholesale Property Address: 1515 Wagner Ave. San Antonio, TX 78211.
Year Built: 1949
Description: Location Location! Cash Flow! Under market value, 3 beds 1 bath, 816 sqft, built: Lot Size: .14 acres, Yearly taxes: $600.00, Estimated yearly insurance $700.00, Estimated repairs: 15K, includes interior paint, electrical/plumbing up to code, landscape, trash removal, kitchen/bath updates, flooring, roof repairs.
Estimated Repairs: 15k
Cash Price: $49,000
Exit Strategy: Rent San Antonio investment property with 15K in repairs: $850-$900 per month — or Owner Finance with 15K repairs: 5k down, $900.00 monthly P/I, 30 year amortization, 10% interest, Price: 89K. 15% ROI is possible.
