Description: Under market value investment property, three bedroom, one bath that has 928 square feet. Beautiful home with TWO exterior storage units – this is a MAJOR selling point for the end buyer; most buyers are blue collar contractors, and they need their tools to be completely secure.
Max After Repair Value: $99,000.
Cash Price: $65,000.
Exit Strategy: Owner finance this out of state investment property with positive cash flow with only $10,000 in repairs completed in 30 days – $99,000, $900 per month, $5000 down, 30 year note, 10% interest. This San Antonio investment property offers passive cash flow with no maintenance.
Alternative Exit Strategy: Buy at $65,000, remodel $15,000, rent $995 per month.
Investors, you will never see a San Francisco investment property, Los Angeles investment property or a Seattle investment property at this price point and rate of return!
I have made my real estate investing career in buying and selling under market value properties in San Antonio TX.
I like to lovingly refer to my properties as ‘junk houses.’ I love that most investors see them as ‘junk’ and run away from them. I have made millions off of ‘junk houses’ that other investors are scared of.
The smart investor just has to look beyond the exterior ugliness and see the potential of the house and the neighborhood.
I just had yet another under market value success story I wanted to share with you. My out of state investment property investor bought this ‘junk’ house for $25,000 in November:
It had sat empty for years and was part of an estate sale. Now this house was ugly, no question about it. But it is located in an up and coming neighborhood in 78207, where the city of San Antonio has spent millions of dollars putting in running trails, parks, shopping plazas, green space and so on. This ‘junk’ house is only 2 miles from downtown and all the tourist attractions of the city.
Yet this under market value house sat for months and no investor wanted it. I grabbed it and quickly resold it to an out of state investment property investor.
Right next door to this ‘junk’ house were these owner occupied homes:
Those houses right next door are worth more than $100,000, but no one wants my under market value ‘junk’ house because it’s temporarily ugly:
The conventional investor wanting real estate cash flow cannot see past the ugliness, but I saw the potential here because of the neighborhood revitalization and the nice houses around it.
So, I sold this house for $25,000 to an out of state investment property investor who did $27,000 in rehab (which I did for him in 30 days), which included:
Electrical update
New flooring (float new floor over that minor foundation issue after it’s repaired)
Clean out
Update bath and kitchen with tile and granite
New light fixtures
Paint in and out
Finish second bedroom
Note that I own a construction company, and my rehabs are typically 2/3 of the price of most companies’ rehabs.
Note that this is a seller financed property, not a rental property.
Below are the after rehab pics of this San Antonio investment property:
The ARV on this below market value property is $79,900. We just finished the rehab in the middle of January 2016. And, by early February, we already had an owner finance buyer for it: $5000 down, $800 per month, $79,000 final price, 10% interest, 30 year note.
The house was on the market for less than a month. So on a $52,000 investment, the out of state property investor will earn about 15% ROI with no more repairs because we owner financed the house.
This is the kind of under market value investing I do – I buy ‘junk’ houses that other investors reject and turn them into little gold mines.
Most of my investors wanting real estate cash flow usually buy Seattle investment property California investment property, San Diego investment property, Los Angeles investment property, or San Francisco investment property, and are shocked at the type of returns you can get here in San Antonio TX with San Antonio investment property – with no repairs!
Many of my out of state property investors come to San Antonio TX from San Francisco. They find it is very difficult to find affordable San Francisco investment property that will produce passive cash flow.
According to Forbes, 2016 is an excellent time to pick up under market value properties for cash flow in many undervalued markets. One of the most undervalued investor markets is San Antonio, which comes in at #6 on their list with a median price of only $189,000. It also is rated as their #4 boom town.
San Antonio is a much more affordable place than San Francisco to buy under market value properties.
San Antonio is where I have bought hundreds of under market value properties since 2000. I have made millions of dollars off of below market value, $50,000 houses that many investors would laugh at.
It’s much easier to make real estate cash flow on investment properties in the undervalued market of San Antonio. It is IMHO one of the best cities to invest in real estate given its growing population, affordable real estate, low taxes, and strong economy.
San Francisco Investment Property Hugely Overvalued = No Cash Flow
Meanwhile, San Francisco houses and San Francisco investment property is among the most overvalued in the US, according to Forbes. That magazine states that five of the most overvalued investment property markets are in California: San Francisco, San Diego, San Jose, and Los Angeles.
What is driving the lack of affordable investment property in San Francisco? There simply is not enough supply of market value properties for home buyers, which means that California investment property is just too expensive to produce real estate cash flow.
One of the reasons for that, Forbes says, is that many Chinese buyers have come into San Francisco and bought up San Francisco investment properties, paying full cash offers.
Another source says that San Francisco price to rent and price to income ratios have gone up by 25% from 2012 until 2015. The median price for a San Francisco house is $548,000 and is up 24% from a year ago.
In fact, San Francisco investment property houses are getting near to levels that were during the bubble years of 2006 and 2007. That was when prices in San Francisco were near $665,000.
I do not know how San Francisco investment property buyers can survive in that market, or California investment property generally. If you buy for appreciation, maybe you can do well, but that is far too risky for me.
I am an under market value, buy and hold, real estate cash flow investor.
A Good Example of Under Market Value, Cash Flow Property
Like I said earlier, I buy and sell under market value properties that many wealthy investors laugh at.
For example, this below market value San Antonio investment property was sold to my investor for only $25,000:
No one wanted this ‘junk house.’ I did! I saw the $100,000 houses next door lived in by the owners, and all of the revitalization going on in this area of San Antonio on the near west side.
Many out of state investment property buyers looking for real estate cash flow would never buy this house. My investor did for $25k, and then I did $27k in rehab:
Electrical update
New flooring (float new floor over that minor foundation issue after it’s repaired)
Clean out
Update bath and kitchen with tile and granite
New light fixtures
Paint in and out
Finish second bedroom
The ARV on this below market value property is $79,900. We just finished the rehab in the middle of January 2016. And guess what? By early February, we already had an owner finance buyer for it: $5000 down, $850 per month, $79,000 final price, 10% interest, 30 year note.
That is what you can do with investment properties in an under valued market here with San Antonio investment property. Anyone who buys San Francisco investment property or Los Angeles investment property or Seattle investment property will never see these types of returns or prices.
Many home buyers and under market value property investors in the Seattle WA area have been looking for the last couple of years for affordable homes not too far away from downtown. But Seattle real estate is out of reach for many investors.
I have been reading that it is very tough going. According to Redfin’s Real Time Housing Market Tracker, it is very difficult to find under market value investment property in and around Seattle. In fact, you will have a hard time buying anything under market value within 50 miles of the city.
Redfin reported last year that Seattle actually pulled even with housing-starved San Francisco for the first time in history. Also, Seattle was reported to have the lowest home inventory ever, making it hard to find affordable Seattle investment property.
The nationwide view for housing generally was better in 2015, with prices going up an average of 10% overall. Only 18% of houses were sold above market value around the US.
But in Seattle….ouch. Last March, the median sales price in Seattle was $380,000. This was an 11% rise from the year before. The Seattle cash buyer does not know where to go for cash flow!
If you are an under market property Seattle investor, you are going to have a very difficult time producing passive cash flow a Seattle investment property.
Welcome To Texas, New Seattle Out of State Investment Property Investors!
I sold this ‘junk’ house for $25k, rehabbed it for 27k, and resold it for a 12% ROI for the investor in just one month. It sold for $89,900.
This year, I have actually picked up two near out of state property investors from the Seattle area looking for real estate cash flow. As it turns out, both of them were having an impossible time finding affordable properties that could generate cash flow.
As is often the case, these out of state investors have good jobs that make them $200,000 or more per year, but they must work 50 hours or more per week, and travel for 1/4 of the year or more. They want passive cash flow on below market value property, and that is what I do in San Antonio TX.
Usually, when a new investor comes in from out of state, such as California or Washington, I will put them into a nicer under market value property in a hot area. North of downtown San Antonio in 78201 is especially hot. Lots of young professionals are moving in there as it is so near downtown and all of the nightlife and tourist activities.
In many cases, I resell these below market value houses after rehab of 10-25k in days or weeks for 12%+ real estate cash flow. Here’s a great San Antonio investment property:
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: 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: $129,000.00 with owner financing, comps are for 3/1.
Cash Price: $69,900 firm.
Exit Strategy: Owner finance this out of state investment property with positive cash flow with $35,000 in repairs, $1295 per month, 10% interest rate, $5000 down, 30 year note. Or, do $15k rehab – HVAC, paint in and out, flooring, resell for $105,000, $1050 per month.
I buy and sell wholesale properties in San Antonio TX every week that most investors say I should have just torn down. ‘Why would anybody buy an out of state investment property that looks like THAT?’
LOL! I have made millions of dollars in my 15 year, under market value property investing career, and most of it was on cheap, ‘junk’ houses selling for well below market value. Ugly houses that typical investors run screaming from.
I own dozens of previously ‘junk’ houses that I bought under market value that looked very rough, such as the distressed property you see below for real estate cash flow.
Take a hard look at that photo. Does that photo make you want to run away and hide? If so, sorry, but you are making a serious mistake. You can purchase under market value properties just like that one for $29,900. Then, you do not rent it.
No. Instead, you owner finance it to a blue collar, hard working buyer that we qualify for you. As long as the buyer can prove they are working steadily and have $5000 down payment, they can buy this house.
Here is where it gets even better for the below market value property investor: You can often sell a house such as the one below AS IS to an owner finance buyer. You might spend $1000 or $2000 to clean it up, but other than that, you often can sell the house as is.
I just sold this house with NO REPAIRS with owner financing in Jan. 2016, $500 per month, $5000 down.
So, if you buy ‘junk’ houses such as the one below for $29,900 and do no repairs, and then owner finance it for about $49,900, $500 per month. You can enjoy at least 12% ROI and never do any repairs! Not bad for excellent real estate cash flow.
Or, do $30k in rehab and resell it for $5000 down, $895 per month, $89,900 final price.
Either way, you are making an outstanding rate of return on an under market value investment property that most investors foolishly avoid.
If you want to get really wealthy with an out of state investment property, buy a dozen or more of these little, ‘junk’ distressed, San Antonio investment properties and owner finance them as I did. You will get $500 to $600 per month on each if you do no repairs, or $800 to $900 per month if you do the rehab. It’s up to you!
Address: 228 Yucca, San Antonio, Texas 78207
Year Built: 1950
Description: Booming San Antonio Market, very popular location west of downtown, this is a 2/1 that has a lot of potential, perfect for a young family. This is a great location and wholesale property, only a few minutes west of downtown and the Riverwalk. Property sits on a beautiful large lot, plenty of room for growth or a wonderful playground and garden.
Max After Repair Value: $89,900
Cash Price: $29,900 firm.
Exit Strategy: Owner Finance with 35K repairs: 5-10k down, $895 monthly P/I, or owner finance as is, $500 per month, 30 year amortization, 10% interest, Price: 89.9K, can sell note after 1 year; or rent: $900 monthly with 38K in repairs.
Notes: We recommend that you owner finance this house because you will have no maintenance expenses.
The majority of my buyers for real estate cash flow are former buyers of California investment property, San Francisco investment property, Los Angeles investment property and San Diego investment property. San Antonio investment properties are hard to beat for cash flow and low cost, especially when you do not have to do maintenance on them.
But remember, this is seller financed property, not a rental property.
As a financially retired expert in under market value investment properties in Texas (San Antonio – one of the best cities to invest in real estate), I always purchase my below market value properties for cash flow – never for appreciation. Anyone considering California investment property – take note! Appreciation is a crap shoot. Cash flow is forever.
You can retire young with appreciation, but there is some luck involved. With cash flow investment properties, you can be a master of your own destiny.
Instead, I invest for cash flow in all of my below market value properties. I make at least 11-12% ROI on each of my under market value investment properties in San Antonio, which I find one of the best cities to invest in real estate. Here’s exactly how I do it:
I find an under market value property.
I buy it cash for at least 20% under market value (or I move on)
I do $25,000 or so in rehab.
I sell it with owner financing at 10% interest, $5000 down.
That is it, my friends. That is the simple secret to investing in under market value properties and making millions. Each one of my San Antonio investment properties makes at least $500 per month in passive cash flow. If my houses appreciate, great – I may sell one or two and make $20,000. But that is rare.
Banking on Real Estate Appreciation Gets Investors Hosed
A huge mistake that many new real estate investors make when buying under market value property is that they have no passive cash flow. Their hope is that the houses will go up in value. That is pure speculation, and you only want to speculate when you can afford to speculate.
When I first buy my under market value property in San Antonio, I do about $25,000 in rehab, but I am careful to not overdo it. Over rehabbing is another landmine that many real estate investors step on. Not me. I do enough rehab to get the house sold. I research the under market value properties in the San Antonio neighborhood to get a good idea of how much rehab to do. Once I sell the house with owner financing, it is producing positive cash flow for me.
The advantage of doing owner financing instead of renting is all the repairs are on the buyer. I do not spend a penny on fixing the house after the rehab is done. Cool huh?
The Disaster of Negative Cash Flow
Many real estate investors buying for appreciation routinely low ball their monthly expenses. I’m talking vacancies, repairs, interest on loans, etc. Most new investors will not account for what they do not know, because they so much want to see positive cash flow. Remember – when you underestimate expenses, you are not thinking. You’re feeling. Don’t do that. Buy the best cash flow investment in your area, or another area.
I Never Try to Predict the Real Estate Market
Well, I do try to take a guess on where things are headed (I think we will see a booming real estate market in San Antonio for at least two more years). But I am never going to bank my income on whether or not my educated guess about the local real estate market pans out. No thanks.
It is a lot safer to invest for cash flow and never appreciation. Buying my little under market value properties in San Antonio has made me quite wealthy at a young age. So that is what I recommend most investors do – invest in the best cash flow investment you can find.
Many investors wax poetic about the magic of leverage in real estate investing. That is, they say that by taking out a mortgage on an investment property and using a 10-20% down payment, you can buy more under market value properties and generate more cash flow.
I respect their position, but I disagree.
You can retire young by buying all cash investment property in San Antonio TX, one of the best cities to invest in real estate. These are some of the best San Antonio real estate investments. Buying here in Texas is often better than say, California investment property, because you can buy so many houses with not much cash.
Why Do I Buy All Cash Investment Property?
I prefer incurring the lower risk that comes with buying properties all cash. My under market value investment property portfolio is:
Stable
Flexible
Can be sold quickly when and if I need to
By investing in all cash real estate properties, I have invested my money into a tangible asset that will usually produce cash flow, and may appreciate somewhat over time (this is not my priority – cash flow is).
All cash real estate sales have dropped but still are 30% of the market.
I also buy cash real estate San Antonio because I always owner finance my under market value investment properties. Many real estate investors take out mortgages and rent their properties. That isn’t my model. I buy all cash real estate and then owner finance at 10%. I get superior cash flow over 10% per year and also have no landlording costs with San Antonio investment property.
When I Buy All Cash San Antonio Investment Properties
I typically pay $40,000 for the under market value property, and about $25,000 for the rehab. So I am in the deal for $65,000 and then owner finance it for fair market value – approximately $90,000. That property owned all in cash generates $800+ per month of positive cash flow.
If I had a mortgage on the house and rented it, I would have only $300 to $400 per month in cash flow, and also would have repairs.
For me, I buy only for long term, maximum cash flow when I buy property all cash in the best San Antonio real estate investments, one of the best cities to invest in real estate, IMHO. It’s a good city to own an out of state investment property because houses are cheap, there are lots of qualified buyers, and cash flow is excellent especially with owner financing.
More Considerations When You Do All Cash Investment Property
I don’t worry about a bank giving me a mortgage for investment properties. I can close fast – in 10 days. That gets me some great under market value properties.
My real estate investment portfolio is safe and stable. I never worry about having a mortgage to pay when a renter skips town.
I incur less risk as I do not worry about appraisals on my properties. If your lender sees lower appraisals in your neighborhood, they may loan you less money.
In the real estate crash, I sold several of my all cash investment properties quickly when I needed money from my San Antonio investment property.
Buying all cash investment properties usually means you buy in affordable cities. Make sure you do research to figure out where to buy your all cash investment property. As of right now, prices are up in some markets, but if you save your cash, you may be able to pick up houses for a substantial discount in the next downturn.
In short, I recommend that people looking for an out of state investment property buy property all cash, as that is the best way to enjoy maximum cash flow with low risk.
If you are an investor or possible investor in California, you probably know the answer to that question! Many of my out of state investors in California cannot believe the sky high cost of investment properties in many of the high population areas of California, such as San Francisco, Los Angeles and San Diego. Great places to live, but for positive cash flow investing? Not so much! California investment property is very expensive.
If you are thinking about buying an out of state investment property for passive income, here is a good simple guide that can help:
How to Select Your Out of State Investing Market for Passive Income
Where you are going to invest in under market value properties depends on your real estate investing goals. Are you a flipper or a buy and hold investor? If you hang around my site long, you’ll learn I retired early with buy and hold investment properties that are owner financed. I’m a big believer in buy and hold long term cash flow – that is how I financially retired at just 28 in San Antonio – one of the best cities to invest in real estate, in my humble opinion.
Anyway, a good buy and hold market for passive income might not be the best flipping market. Here in San Antonio TX, flipping has gotten tough as the economy is booming as of January 2016; it’s hard for flippers to get properties cheap enough to make a good profit. For buy and hold investing though, I still make 10-12% per year, or $500-$700 per month in positive cash flow.
I’m biased, but TX is a great place for out of state investors – the population is soaring due to job growth.
As you think about where to buy out of state investment property and under market value properties, consider:
State law: Is the state friendly to property owners? You want to invest in a state that makes it easy to evict tenants or to foreclose. State that are tenant friendly, such as CA, make it so hard to evict or foreclose, you could lose your shirt.
Price to rent: What does rent cost compared to the price to buy? In my town, it’s 16.90, while in San Francisco it’s 30.05. Whoa! No wonder so many CA investors are investing in out of state investment properties.
These are not all the factors to consider when you are buying an out of state investment property instead of California investment property, but if those three areas look favorable, you probably could do well in that market and financially retire early as I did, in one of the best cities to invest in real estate. San Antonio investment property is excellent for cash flow.
How To Find Out Of State Investment Properties and Under Market Value Properties
Now that you know which market to buy your below market value investment properties, how are you going to locate that house? Most investors I know do it two ways:
They find a good real estate agent investor who is hooked up with excellent contractors, property inspectors, title company, real estate attorneys.
They find a good turnkey property provider. The house has been totally rehabbed and usually has tenants or buyers in place.
Which of these routes you go with will depend upon your investing goals again. Some out of state property investors want to have absolutely no headaches or management worries, so they just buy turnkey properties. Other out of state investors think that method is too expensive, so they manage their own rehabs and property management.
If you decide to find your own below market value properties in your chosen market, here’s what you’re looking at:
Buying Below Market Property Yourself
Advantages
You’ll get the house at a low price
High cap rate or ROI
Disadvantages
The house will not be producing income during the rehab and the time it takes to find a renter or an owner finance buyer
Rehab costs could shoot up if you don’t have reliable partners
Harder to manage the rehab and management from a distance
Difficulty in controlling material costs
Buying Turnkey Property
Advantages
Totally rehabbed
Tenant or buyer may already be in place
No work for you
Cost of material more predictable and stable
You know the quality of work you will get
Whole investment team is in place
Disadvantages
Higher initial cost
Lower ROI or cap rate
How big a difference are we looking at between buying a run down under market value house and buying a turnkey? Let’s take a look:
Run down property: Estate sale, $30k purchase, $30k in rehab – will produce 13% ROI with owner financing or renting.
Turnkey property: $80k purchase price, no repairs, will produce 9-10% ROI with owner financing or renting.
So which will it be? Most people would say you obviously go for the better ROI with the under market value property you do yourself. But remember, you are going to have to do a heck of a lot more work – at a distance – with the fixer upper property. A turnkey property will earn lower ROI, but it a lot less stress. At the very least, you might consider a good turnkey property if you are a beginner in real estate investing. That way, you can make some good positive cash flow as you develop your own investment property team.
It all boils down to how you look at investing in real estate. Investing by definition means using something to get some type of return. You just have to decide if you want to use just your money to get a return, or use your time AND money to get a potentially higher return.
Choose wisely based upon your personal investing goals, and you will hopefully be able to be financially retired on your time table.
Personally, if I were a usual buyer of California investment property, San Francisco investment property, Los Angeles investment property or San Diego investment property, I would strongly consider buying out of state investment property. Investment property is all about real estate cash flow…..it’s something you can rely on year in and year out, unlike hoping for appreciation.
Investing in under market value properties in San Antonio, Texas has provided me with a fantastic, long term passive income. Before the real estate downturn of 2007-9, I was not a real estate agent, and I relied on several investor friendly agents to show me potential under market value distressed properties in San Antonio TX.
After the crash, many real estate agents got out of the real estate business . I discovered that finding a good, long term real estate agent was harder than before to buy below market value property.
It was in 2010 that I made a fateful decision: I became a real estate agent and investor myself, and it has been a great decision for me. It has made it easier for me to buy under market value properties in San Antonio TX.
Being a licensed Texas real estate agent can help you to build property cash flow over time. Currently I own more than 50 owner financed investment properties in San Antonio TX. On most, I am making at least 10% return, which means I have cash flow of $500 to $800 per property. Most of them I own in cash.
Whenever I buy another distressed real estate property for buy and hold, I am able to save at least $1000 on real estate commissions. If I buy 40 houses a year, that’s more than $40,000! What a deal!
If you are buying more than 1-2 below market value properties per year, I think it is a good idea to go ahead and get your real estate license. If you do absolutely nothing else with it, your real estate license will save you majorly on commissions.
On many of my deals, I as the real estate investor agent buy the under market value property, fix it, and then resell it with owner financing. I am able to save TWO real estate commissions on these deals, which in some cases saves me $5000 or more!
Advantages of Being a Texas Real Estate Investor and Real Estate Agent
A real estate investor agent can save on real estate commissions for below market value properties, as I illustrated above.
You have access to your area’s MLS and can do your own due diligence on potential investment properties. Having MLS access saves you time, and allows you to get offers in before other investors.
As a real estate agent investor, you will be able to network with other agents, who certainly know people who want to invest, or may be investors themselves. I often buy unlisted properties because of my contacts with other agents in San Antonio TX.
You can do your own BPOs or Broker Price Opinions. This is a 1-3 page report that a licensed real estate agent can do, for a payment of $50-100. This is a great way to earn extra cash flow as you are getting started in real estate investing.
You also can sell retail properties to supplement your income, which has really come in handy for me several times each year as a real estate agent investor. Nothing like earning another $20,000 per year!
Clearly, the advantages of being a real estate agent investor are many for getting texas cash flow. I believe becoming an agent is really worth it if you buy several under market value investment properties annually. I also have found that being a real estate agent investor makes it easier to work with investors looking for a good out of state investment property.
I buy under market value properties in San Antonio TX. As the real estate market continues to heat up in San Antonio, more people are jumping into the real estate investment business.
Many people who start to invest in under market value investment property in San Antonio end up never making money or losing a lot of money. That goes the same for people looking for out of state investment property.
Most often, people run into real estate investment problems because they are impatient or do not have a good, long term plan for good cash flow on below market value property.
I have been successful with my San Antonio investment properties (I financially retired at 28) because I have a very simple plan that I always stick to:
I buy distressed San Antonio homes for 20% or more under market value, and resell them with owner or seller financing to make a 20% return long term. The vast majority of my portfolio is long term buy and hold in the best San Antonio investment property.
Of course, buying good distressed properties under market value in San Antonio is not easy. If it were, everyone would be buying them and retiring early!
Here is the most common mistake I see by far in people who buy distressed real estate properties and out of state investment property: They pay too much for the house and have very little cash flow!
They buy the house often at the top of the market, and the only way they make cash flow each month is if the property is always occupied, and there are no maintenance issues.
As soon as something goes amiss, they end up losing money each month and have no cash flow in their under market value San Antonio investment properties.
The biggest piece of advice I can give you is to always pay as little as possible for the investment property in the best cities to invest in real estate. If you are not skilled in negotiation or are just a beginner, you need to work with a skilled investor who can help you to get a low price on that below market value house.
If you have questions about investing for cash flow in under market value San Antonio houses, please contact me! I always can use cash partners and both of us will make a good profit in the best San Antonio investment property.
