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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.

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Should I Become a Real Estate Agent as an Investor?

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.

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What Is the Worst Mistake in Buying Investment Properties?

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.

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Turn 3 Properties Into 6 or More in 5 Years With Your IRA

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I am a strong believer of investing in under market value real estate property with all cash and owner financing them. When you buy distressed properties with all cash and finance them to qualified buyers, there is one overwhelming advantage with these below market value investments:

  • You have no mortgage on your property investment, so if the property is ever vacant for any reason, you do not have overwhelming financial pressure bearing on you. Over leveraged real estate investors were a major factor in the real estate meltdown five years ago.

Of course, on the other side of the ledger, you cannot purchase as many distressed sale properties as you could if you leveraged your capital and use 20% down conventional financing. This is always a valid concern for people with limited capital to invest in the best San Antonio investment property.

Still I would like to illustrate how the smart and patient investor can take three fixer upper homes and turn it into 6 and possibly more in 5 years, assuming you have no additional cash to invest after the initial investments. The illustration below assumes you owner finance the houses, so you do not have any maintenance costs. This is our tried and true positive cash flow model!

That $275,000 in Your IRA

I run across many aspiring investors that have savings and IRA assets of $275,000 or so. In current market conditions in San Antonio TX, that $275,000 can fund approximately three solid distressed sale properties in cash. Let’s illustrate with three houses we have right now:

  • Property 1 – 262 Bogle St., 78207: $50,000 + $30,000 rehab = $84,500 investment + $2500 closing costs, $2000 commissions = $89,000 total investment.

Total Owner Finance Cash Flow Per Year: $8940 ($745 per month after tax/ins.)

  • Property 2 – 109 Llano, 78223: $29,900 + $40,000 rehab = $69,900 investment + $2100 closing costs, $2000 commissions = $74,000 total investment.

Total Owner Finance Cash Flow Per Year: $9,000 ($750 per month after tax/ins.)

  • Property 3 – 1027 Sams Dr., 78221: $59,900 + $40,000 rehab = $109,000 investment + $3000 closing costs, $3000 commissions = $115,000 total investment.

Total Owner Finance Cash Flow Per Year: $12,000 ($1095 per month after tax/ins.)

Total Income from 3 Properties Per Year: $29,940

The next step would be to bank that positive cash flow from your three properties for up to five years. At the five year mark, you will have approximately $149,700 in your tax deferred IRA.

At this point, how many property investments you can buy depends upon the state of the San Antonio real estate market. Right now, the prices are higher because unemployment is lower, and more rehab is necessary to sell the houses. However, there is a high probability that in the next five years, there will be a substantial downturn in real estate prices.

In the last crash from 2008-11, the price of my distressed houses dropped from $50,000 median to $30,000 median. I was able to purchase many more homes during the downturn.

If the prices go down to approximately $35,000 per property plus $10,000 in rehab (possible in a slower economy given people simply want any house to live in), you could buy at least 3 more houses, and possibly 4. With three more houses, you would have approximately $45,000 in total cash flow from your grand total of six houses!

If the prices stay the same five years from now (which in my 15 year experience is very unlikely), you could purchase at worst two more properties, with a total cash flow from your five properties of $40,000 or so.

In either case, that cash can be banked in your IRA to buy more of the best San Antonio investment property whenever market conditions warrant buying more.

I am waiting until the next downturn to take my banked cash flow from my current portfolio to buy at least another 20 houses. You can and should do the same thing!

 

 

 

 

 

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2513 W Poplar St, San Antonio, Texas 78207

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  • Address: 2513 W Poplar St, San Antonio, Texas 78207
  • Description: Fixer upper home, great opportunity to own cash flow property, Booming Texas Market, 3 beds, 1 bath, 1000 sqft.
  • Estimated Repairs on Distressed Property Sale:10K, includes interior texture/paint, new HVAC, minor flooring, minor foundation, plumbing/electrical up to code. Max ARV 79K with owner financing, Price: 45K cash.
    Exit Strategy: Owner Finance for positive cash flow with 10K repairs: 5k down, $800 monthly P/I, 30 year amortization, 10% interest, Price: 79K, can sell note after 1 year.
  • Positive Cash Flow: $700 per month with no maintenance. Consider this investment in property!
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Why You Should Ignore Popular Advice About Real Estate Investing

This article now appears on Inman News.

  Key Takeaways

  • Ignore what your eyes tell you about property’s appearance: study the numbers, cost of repairs and the area.
  • Pay 20 percent to 30 percent under market value or move on to another deal.
  • Buying in poorer areas means less competition for the deal, and it could make you 12 percent ROI or better.

There are so many myths out there about purchasing distressed properties in what people often call “problem” neighborhoods. Raise your hand if you ever heard this before: “Don’t ever buy a real estate investment in a bad neighborhood.”

ignore

I hear it all the time. It’s baloney. Many of the best San Antonio investment properties are in so-so areaa.

If you just trust your eyes and only buy in nice areas, your chances for making money are slim. For instance, a major real estate investing company is a perfectly good organization that focuses on selling rental properties and related training.

In a recent blog, however, the company said this: “The whole idea of buying property for investment is to buy in hot or an up-and-coming neighborhood. Don’t waste your time or money investing in a property located in a poor or declining area.”

It is correct in the sense that you should definitely buy in an up-and-coming neighborhood. I do that all the time when I buy under-market value houses in San Antonio.

I study the market and find the neighborhood near a hot area that I think is going to get hot next, and I snatch up $40,000 houses for cash before they go up to $80,000. I make 10 percent to 15 percent a year on most of these best San Antonio investment properties.

However, the rest of the quote is questionable: “The whole idea of buying property for investment is to buy in hot or an up-and-coming neighborhood.” If this means paying anywhere near market value, I don’t agree at all. That’s how investors end up making zero cash flow.

I will buy a 20 percent to 30 percent under-market-value house in a hot, affordable neighborhood (under $80,000 wholesale is my strategy). That makes a lot of sense. That type of deal will produce excellent, positive cash flow if you don’t over rehab.

For example, a California investor bought this three-bedroom, one-and-a-half bathroom house in a rising area north of downtown San Antonio:

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The investor bought it from me for $62,000 — approximately 30 percent under market value — and did $10,000 in repairs. He resold it with seller financing with $5,000 down, $89,900 price, $937 per month property, taxes and insurance (PITI). That’s 12 percent ROI.

This company might consider this a poor neighborhood, but my investor doesn’t have to repair the house, and he makes 12 percent on his money. What a great out of state real estate investment.

“Don’t waste your time or money investing in a property located in a poor or declining area.” I don’t buy in declining areas, but what defines a poor area?

Does that include households that make $2,500 or $3,000 per month? That’s 90 percent of the owner-finance buyers that helped me to financially retire before I was 30 on distressed sales.

The majority of the neighborhoods that I invest in are considered poor areas, but they are on the way up, as the city is pouring revitalization dollars into parks, green space, walking paths and more.

For instance, this three-bedroom, one-bathroom home west of downtown is in a so-so area:

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Sure, it’s not pretty, but smart investors ignore what their eyes tell them and study the numbers, the nature of the repairs and the area. The repairs on this house to resell it were minor, and the nearby area has seen millions and millions of dollars in new construction and city funding.

The investor purchased it from me for $29,900 — about 30 percent under market value. After $7,000 for paint inside and out, foundation repair and clean up, it sold with seller financing for $5,000 down, $55,000, $550 per month PITI. That’s 11 percent ROI.

And this is in an area that most investors would consider poor. It is, however, on the way up.

Of course, you cannot simply go into any poor area and start buying cheap, distressed sales with positive cash flow. That’s also a path to ruin. But if you only purchase investment properties in nicer areas, you will be fighting a lot of investors for any of the few deals that generate cash flow. That drives prices up to market value and beyond, and you can kiss your profits good bye.

Invest in distressed, fixer upper homes or under market-value properties for true positive cash flow, but be certain to:

  • Carefully study the market to learn which area is near a hot area and will likely go up in value in the next year.
  • Get the property for at least 20 percent under market value to leave room for a profit of at least 25 percent on a flip and 10 percent ROI on a buy-and-hold.
  • Buy out of state investment properties in areas that are less expensive, especially in B and C neighborhoods.
  • Owner finance the property to a qualified buyer — save yourself thousands in rehab costs. Do enough to sell the house and leave the rest to the new owner.

If you invest carefully in properties in poor or bad areas, you will end up with cash flow that all the poser investors simply dream of.

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Why I Love Down Real Estate Markets!

real-estate-chart-300x300

I have invested in all kinds of real estate investment properties in Texas for 15 years. That means I have seen many ups and downs in the local and national real estate market.

It’s true that in the last real estate crash, I did lose some money. In fact I was sweating quite a bit in 2010! Still, I came out of the crash owning more than 100 MORE houses than I did before the crash! It turns out that the real estate crash was a blessing for me.

Here are three ways that I was able to get through the last downturn in terrific shape in my real estate investments, especially distressed sales.

#1 I Got The Heck Out of Expensive, Higher End Houses

The biggest problem I had in the latest downturn was that I had far too much money invested in expensive houses from $500,000 to $1 million in San Antonio TX. When the market was rolling in 2004 to 2006, buying these houses was great. I bought a house for $500,000, put $200,000 in and resold it for $1 million. I was making fantastic money, but the bubble was about to burst.

One day in 2007, I called the bank and they would no longer loan money to investors. My heart sank. That’s when I knew a down turn was coming. And it sure did.

I ended up getting stuck with several $1million houses that I could not sell for what I paid for them. I ended up losing several hundred thousand dollars.

That got me down, but it was a blessing: I learned to not invest in such high end real estate. While it can be good when times are good, those houses are the first to get hit in a downturn.

I learned to invest in real estate that ALWAYS in demand no matter what’s going on in the economy.

#2 I Started Investing Only in Under Market Value Affordable Homes

If you read this site at all, you know what I do: I invest in under market value real estate in San Antonio and distressed sales, which I then owner finance at 10% interest. This real estate product is always in demand in my affordable neighborhoods. I know that no matter how bad the economy gets, I can always sell these houses and make money.

The best part about distressed property sales: The demand for them increases in a downturn! People lose their jobs and houses, so need a small house, and I provide it.

As a matter of fact, I love real estate downturns. I actually make more money. In the last crash, I snatched up 100 more houses at $25,000 each. Now they are worth $50,000 or more.

I love real estate crashes.

#3 I Buy in Cash And Don’t Sell

As a distressed property expert,  I buy most of my houses in cash and for cash flow. So in a crash, the last thing I do is sell a house for a loss. I simply let the house produce cash flow. If I have to foreclose because someone loses a job, then I resell it for $5000 down again.

People tend to lose their shirts in crashes because they buy more expensive properties and are depending upon appreciation to make money. I never do that. I simply buy my little under market distressed houses or distressed sales for cash flow.

Always remember: The key to my success in real estate investing is I can make money in any market.

 

 

 

 

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How I Increase My Profits with Limited Rehabs

overspending

With the real estate market heating up in San Antonio, lots of new real estate investors are jumping into the game. It always happens when the market gets hotter.

However, many of those new investors will fail. It always happens in every ‘up’ market. I make positive cash flow in every market.

One of the biggest reasons that investors crash in real estate investing in distressed properties or under market value properties is they simply spend to much on rehab. I never spend too much on these fixer upper homes or distressed property sales.

Many real estate investors do not understand the neighborhood in which they invest. They assume that a 3/1 in 78210 is going to be largely the same as a house in 78207, as far as fixing it goes. This is completely wrong.

A home in 78210 on the north side of downtown San Antonio, TX is a hotter area with an average income of 2013 reported at $26,522. Meanwhile, in 78207, the average income  is $20,100.

This makes a major difference in terms of how I rehab the house. For a 78210 house, which is currently in higher demand due to its proximity to downtown, I will often opt for a fancier finish to include:

  • Granite counters
  • Premium light fixtures
  • Tile flooring
  • Nice front door

The rehab on a house in 78210 might be around $15,000. We did a deal in 78210 that was $62,000 cash, and rehabbed for $10,000. It included new flooring, nice paint in and out, and refinishing the floor.

On the other hand, we did a rehab in 78207 last year with a lower income, and spent much less: about $5000. We just painted the floor, painted in and out, fixed the foundation and got rid of trash at this fixer upper home.

That’s all that a buyer in that area would expect – just the basics. To spend all of that money on fancier finishes in that neighborhood would be overkill.

Let’s do the math. The investor in 78207 paid $29,900 and did $5000 in rehab. It makes the investor $450 per month in cash flow.

The distressed sale property in 78210 cost the investor $62,000 and makes the investor $750 per month. The rehab here was $10,000.

On 78207, the house makes a return of 15% or so. But if we put another $5000 in for too much rehab, the return would drop to about 13%.

I save my investors thousands of dollars and increase returns by 2-3% on each deal by knowing when to call it quits on rehab.

Of course, this all sounds simple on paper, but figuring out how much to spend on rehab of a Texas investment property – just enough to sell it quickly – takes a great deal of practice over years of investing.

If you are starting in real estate yourself or do not know well the neighborhood where you invest, make sure you are relying on a solid agent or investor there. He or she should be able to tell you how much rehab to do on your distressed investment property.

So many real estate investing careers are wrecked by careless attention to rehab costs. Please don’t let it happen to you.

 

 

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The Crash and How I Stayed Positive in Real Estate Investing

‘If you look the right way, you can see that the whole world is a garden.’ – Frances H. Burnett, The Secret Garden

sunrise

It is incredibly important to always stay positive in your real estate investing business. Early on in my career, I learned maintaining an optimistic attitude in my under market value real estate investing would carry me through the tough times.

And have I had some tough times! But let me back up:

Before the crash, my real estate investing in distressed San Antonio properties boomed. I also bought $1 million houses, rehabbed them and resold them. These were the boom years – I could resell those big mansions for a $300,000 profit! Life was great.

The Crash

And then one day in 2007, I called the local bank to borrow more money. They said:  ‘Oh, we aren’t loaning money to investors anymore.’

Whoa. And that was when things started to crumble. I couldn’t borrow money from banks, even though I owned more than 100 properties with an excellent record of success.

Worse, I couldn’t sell my $1 million mansions anymore for what I paid for them. And of course, fewer banks were doing mortgages, people lost their jobs and couldn’t qualify….that end of my business was a bit of a mess.

God and Increase

However, I managed to stay positive throughout it all. In my personal case, I focused on God and people who deliver Godly, positive sermons and speeches. Some of the positive people I listened to online included (and still do include) Joel Osteen. I find that his positive and optimistic sermons about increase and prosperity (in all things, not just money) to be tremendously uplifting.

I also listened every day to Bob Harrison, who is known as America’s #1 Increase Authority, and is the founder of Christian Business Leaders International. His lectures and seminars are incredibly rewarding.

Those two mentors most of all got me through the crash.

Optimism Leads to New Opportunity

Maintaining a positive outlook through the downturn opened me to new opportunities in real estate investing. I realized that ironically, it’s the higher end, $500k+ homes that are the riskier investments! Meanwhile, my little $40,000 2 BR 1 bath houses still bought and sold like normal! In the middle the crash! And that was when I fully focused on distressed, under market value real estate investing.

My logic was, people will always need a house to live in, even in bad times. So the demand for affordable homes ($25k-75k depending on the market condition) will always be there. I was able to buy up distressed homes in the crash for as little as $20,000!

I bought 200 of them and most I still hold today, each producing monthly cash flow with owner financing.

3 Tips

Now, I always advise new and experienced investors to maintain a positive attitude at all costs. It is what will make you stick with investing and be successful when others quit. Here is what I recommend to you:

  1. Listen every day to positive and motivational people during your work. Personally, I listen to Christian leaders such as Harrison and Osteen, but that is what works for me. You may be different. Find positive mentors online that you can listen to and inspire you. Listening to them is what got me into the best part of my real estate career – owner financed real estate in under market value houses. You cannot go wrong in distressed sales with positive cash flow.
  2. Stay away from all negativity, especially online. The Internet is wonderful, but it can be a cesspool of negativity! The problem is that people feel anonymous and uninhibited online, and will say terrible things. This is true in real estate forums. I’ve had people tell me all sorts of nonsense about owner finance, that it is dishonest, illegal, predatory….it’s a waste of my time. I get away from them immediately. If you spend too much time among real estate investors online, the pessimism of a few can really get you down. Get completely away from that! I made nearly all of my money in real estate investing without a website and without ever going online. It’s not necessary to participate in real estate online forums to succeed in fixer upper homes for positive cash flow.
  3. Find a positive and successful real estate mentor! Whatever city you live in, you can find a mentor to talk to that can inspire and motivate you. Why would he talk to you? Well, what can you offer him? Offer to help him out for free in any way he needs so that you can learn from him. You want to find a really successful, long term, ethical investor, ideally a person in business 10 years. You’ll  have to go to real estate meetings for a few months to figure out who is who in your city. I did exactly this when I first got started and got connected in San Antonio with very successful investors who still inspire me to excellence today.
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5 Ways to Use Real Estate Investing To Achieve Your Financial Freedom

This article is now on Inman News.

Takeaways:

  • Find an inexpensive, stable real estate market and become a local property expert.
  • Find private investors and a mentor who has done more than 500 deals to help you learn.
  • Owner-financed real estate is always profitable.

Many of our investors in San Antonio financially retired when they were relatively young. They developed positive cash flow in investment properties without coming from money.

They were able to build nice portfolios of distressed properties in Texas in cash.

Here’s how you can do it too:

1. Find an inexpensive, stable real estate market

When most of our investors started, they were in college and didn’t have a lot of money. Some of them came to Texas and tried to invest in Austin; even 20 years ago, it was expensive. But many investors we have looked to San Antonio investment properties.

  • $30,000 houses.
  • Lots of blue-collar workers.
  • Diverse and healthy job market, not just oil and gas.

This is a very good city for fixer upper homes under market value. I bought my first house for $25,000, rehabbed it for $5,000 and made 10 percent annually by renting it out. That was the beginning.

Lesson learned: Avoid real estate markets with high entry costs if your capital is limited. Lower-cost cities are much easier for beginners to invest, especially in distressed sales.
Avoid real estate markets with high entry costs if your capital is limited.

2. Find private money

So our investors would often have one or two properties but little in the bank. What to do? Make calls and find private money. You also can go to real estate meetings and look for capital.

It isn’t easy, but you can find some investors who will loan you money at reasonable rates; some of our investors have done that. It’s how they built a large portfolio of San Antonio distressed properties.

Lesson learned: Be ready and able to make hundreds of phone calls and knock on many doors to find private capital.

3. Become a local market expert

In the early years, many of our investors swung a hammer and did many rehabs themselves. Doing the work myself taught them to understand the little houses they invest in so they could become distressed property experts.

They learned what a San Antonio rehab should cost on an investment property and to never overspend on a rehab. Overspending on rehabs can kill your real estate career.

Some of our investors became real estate agents so they could source their own deals, and find deals at least 20% under market value.

Lesson learned: Learn your local market so you can get houses well under market value. Can’t find them in a hot market? OK, then go to a dozen real estate meetings in the next three months, and find an expert real estate investor who can help you find those deals.

Offer to help them with their business — anything from making calls to hanging bandit signs — in exchange for helping you find under-market-value deals.
Find an expert investor to help you find deals, and offer to help the investor with business.

4. Find a good real estate mentor

Starting in real estate investing without a mentor is like playing tennis without a racket. Every single rookie investor should work with an experienced, successful investor mentor who has done hundreds of deals and succeeded in boom and bust real estate markets. I found several in distressed sales.

You can find mentors at city real estate meetings. You also can go to real estate investor meetings in other towns. You can connect with a lot of rich investors with networking.

Lesson learned: Find a mentor who has been in the business for 10 years, has done 500 or more deals, and has made profits in the most recent real estate downturn. That’s someone you want to work with.

5. Invest for cash flow with owner financing

In 2005, one of our successful mentors taught me that rental real estate often is profitable, but done right, owner-financed real estate is always profitable.

So many investors stopped rehabbing and renting properties that year, and changed to owner-finance only.

Now, they buy for cash, do $10,000 or $20,000 in rehab, and resell the home with owner financing to a buyer with $5000 down.

This model has no ongoing maintenance or property management costs. Each house puts $500-$700 a month into their bank accounts, and they don’t have to do anything.

Every one of their investment properties has positive cash flow, and was bought solely for monthly cash flow from owner financing. Most don’t buy for appreciation.

Lesson learned: Think about investing strategies other than renting out houses. Owner financing is much less stressful, and the cash flow is more stable.
Owner financing is much less stressful, and the cash flow is more stable.

Following those five essential tips is what many of our investment property investors to retire early, and you can too!