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.
Back in 2013, one of our investors bought their first San Antonio investment proeprty: a $50,000 buy and hold deal a few miles north of downtown San Antonio.
This was a point in the market when we did not have to do much rehab on our San Antonio investment properties. He picked up this house for a bit under $50,000 and cleaned it up with a broom and got rid of the trash. The total investment was $50,000.
At my recommendation, he did a seller finance deal on this San Antonio fixer-upper, under market value property with the following terms:
$50,000 cash purchase
$80,000 owner finance price
Zero rehab by investor
$806 per month
14% ROI
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.
The owner of the property did a fantastic job on rehabbing it, as you can see by the pictures. But that is not the end of the story on this San Antonio investment property!
More Pictures After Rehab:
In August 2016, the owner of the property decided to cash out the investor. She paid him off with the proceeds of the sale of one of HER investment properties.
She paid him a sum of approximately $75,000, which is what was left on the mortgage. So, not only did he make $25,000 on the sale of the property, he also made approximately $22,000 in payments over 2.5 years! He made a total return of $47,000 on his $50,000 investment!
Now that is a fantastic San Antonio investment property return!
Most San Antonio real estate investors are afraid of ‘foundation problems’ on their fixer upper properties. I understand why that is:
A serious foundation issue on a property can kill the profits on a buy and hold deal. If you have a $25,000 budget to rehab a San Antonio wholesale property, a $10,000 foundation repair can turn it into a negative cash flow situation.
However, one of my millionaire mentors in real estate investing taught me many years ago to not usually worry about foundation problems on buy and hold investments. Actually, I tend to be attracted these days to foundation problems.
The reason? Because most other investors are scared of foundation issues and the competition for these distressed properties is lower. Meanwhile, if you try to buy an old fixer upper for $50k in San Antonio with no foundation problems, you will probably be fighting off a lot of investor competition, which drives up the price.
By buying a foundation problem fixer upper, you often find that you can get the house 5k cheaper, which you can then put into fixing the foundation.
When I am looking at San Antonio wholesale property to buy, I keep these ideas in mind about the foundation:
Uneven floor is not a big problem in an old house in San Antonio
Most of the buyers of my properties are accustomed to being in a house with a foundation that is not perfect, so a floor that slopes a bit is not a deal killer.
Some investors in San Antonio will see that minor sloping floor and freak out. However, my experience with the houses I buy between 1900 and 1950 usually have a somewhat uneven floor with a pier and beam foundation.
This can be caused by rotting floor joists, ground settling over the decades or shoddy construction.
When I do my inspection, I usually get under the house and see how serious the problem looks. For many of the houses I buy, all that needs to be done is to replace some floor joists for a few thousand dollars.
It is unusual for me to buy a pier and beam foundation house in San Antonio that needs more than 5k of repairs.
Wholesale prices on foundation work
Going to a regular foundation contractor could leave you with a deal busting foundation bill. I have workers who can fix a foundation for half of that price. This includes permits and the engineering report.
That’s why it may be a good idea for you to work with an experienced investor who has the network to get a foundation repaired affordably.
Foundation problems can mean profits
I have bought houses for $25k that had foundation problems, but all they needed was about $3000 in repairs for the foundation. On one of these deals, I fixed the foundation and sold it to an investor for a 5k profit.
She then did 5k more in repairs and owner financed that 25k house for $50k and $550 per month. She is making 14% a year on that deal.
All on an under market value San Antonio investment property with a foundation problem.
So, don’t always be afraid of dealing with a foundation issue; it can turn out to not be a deal breaker, especially if you work with an expert investor who can help you do repairs affordably.
Section 8 rental property in San Antonio is a controversial topic in some quarters. Section 8 housing came to be during the Great Depression, when the federal government wanted to provide public housing for lower income people. Today, the purpose of section 8 is to offer subsidized housing to certain lower income citizens.
But is San Antonio section 8 property a good real estate investment? Generally, I say yes; I like to deal with the San Antonio Housing Authority and section 8 renters. That said, it depends on the property and a few other things. Let’s look at section 8 rental property pluses and minuses:
Pluses
Your income is stable and guaranteed each month. You receive your payment each month electronically. After a person applies and passes the background check and other screening, the section 8 voucher gives them up to 100% assistance for their rent.
Higher rent. You can reassess the rent you charge each year and increase it by up to 8%. So, if you rent your San Antonio investment property for $800 monthly, you could raise it to $1175 in five years.
Incentive to keep up the San Antonio rental property: There is an annual inspection, so if the renter trashes the house, they can lose their voucher. Note: I do serious rehab on the San Antonio fixer upper before I rent it, and pictures are taken. So if there is a lot of wear and tear, I can show the tenant did it.
Large number of possible tenants: The GoSection8.com website has thousands of prospective San Antonio renters and it is quite easy to get a house rented.
Long term rent: I find that most section 8 renters rent for many years, so you will have fewer vacancies with your San Antonio rental property.
Minuses
Government bureaucrats: You have to deal with the red tape of the Section 8 bureaucracy and this can cause some delays. However, I find that the San Antonio Housing Authority is pretty good to work with.
Slow payments: It can take longer than I like to get a renter in my San Antonio buy and hold property due to delays with the government. But, once the tenant is in, the rent comes in every 30 days on time.
Inspections: Section 8 has fairly strict inspections, but I do complete rehabs and I know what Section 8 looks for, so I do not have major problems here.
More repairs: The renter does not own the San Antonio property so it is possible that more wear can happen.
Late payments: I have had a few tenants over the years pay late, and reporting them can take some time.
Generally, I find section 8 rental property in San Antonio to be a good bet. I am able to get good renters into my investment properties by carefully screening potential renters.
Here is a good potential San Antonio section 8 rental property:
Address: 4907 Waycross Ln., San Antonio, Texas 78220-1840 Year Built: 1971 Description: Under market value fixer upper 4 beds 2 bath, 1078 sqft, lot size: .13 acres, yearly taxes: $1,200.00, estimated insurance: $750.00, estimated repairs: 30K; central hvac, flooring, update kitchen/bath, roof, interior/exterior finish. Price: $49,000 Cash ARV: 109-115K Exit Strategy:
Owner Finance with 30K repairs: 5k down, $1,095.00 monthly P/I, 30 year amortization, 10% interest, Price: 109k
Rent 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.
I hold a lot of San Antonio owner finance properties but in recent years I have been doing more section 8 rentals for San Antonio investment properties.
Some people do not like section 8 rentals because they think they can have more problems with those types of renters. However, I find that generally, using section 8 with the San Antonio Housing Authority works quite well.
Section 8 rental property can work really well for the out of state investor who wants to reduce taxable income and enjoy depreciation and write offs. As much as I like owner financed property, you cannot write off anything or reduce your taxable income with depreciation.
I have been doing section 8 rental properties in San Antonio for several years and I have found there to be many great advantages:
You will always get your payment electronically on time. You never have to worry about chasing down rent payments.
If the economy goes down, you do not have to worry about the San Antonio renter losing his job. The voucher will always pay their rent.
I can often charge more rent to a section 8 tenant.
I really love how easy it is to market for section 8 renters. All I have to do is post the San Antonio buy and hold property on the GoSection8.com website and I start to get calls from potential renters.
Of course, it is very important to screen the potential renters carefully. I do background checks and credit checks, and I always verify employment. I want to have potential renters that have a voucher that covers the rent, and I also want them generally to bring in at least $1500 in additional income per month, and I increase that if there are several children in the house.
Last, doing section 8 rental property allows you to leverage your money. You can often do a 20% down loan on a San Antonio investment property, and then do the rehab. Once it is occupied for a few months, you can cash out refinance about 80% of the ARV and use that cash to buy more property. This is a quick way to build capital and buy and hold cash flow.
In short, doing section 8 rentals with San Antonio wholesale property is a really fine way to increase your net worth and cash flow.
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.
Owner Finance with 30K repairs: 5k down, $995.00-$1,095.00 monthly P/I, 30 year amortization, 10% interest, Price: 99K-109k
