Below Market Value – Page 2 – TexasCashFlow.com

February 5, 2016February 10, 2016

Looking for Real Estate Cash Flow in Under Market Value Property in Seattle? Good Luck!

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.

These San Antonio investment properties are reselling fast right now; in fact, I just rehabbed and resold this under market value house in a few weeks after rehab was done.

February 3, 2016February 7, 2016

A $25,000 “Junk” Under Market Value House Success Story in San Antonio

I have made my real estate investing career in buying and selling under market value properties in San Antonio TX that most investors are afraid of.

The under market value properties for real estate cash flow that I buy are scary looking, but you just have 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 now my investor has excellent real estate cash flow.

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 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 $20,000 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

Below are the after rehab pics:

The ARV on this below market value property is $65,000. 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, $650 per month, $65,000 final price, 10% interest, 30 year note.

The house was on the market for less than a month. So on a $45,000 investment, the out of state property investor will earn about 12% 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 with steady, no maintenance real estate cash flow.

January 28, 2016January 31, 2016

How $20,000 ‘Junk’ Under Market Value Properties Make Me Rich

Many under market value real estate investors cannot believe that I have become very wealthy by buying and selling below market value ‘junk’ houses for $20,000 or $30,000. The fact is, I have bought and sold hundreds of these distressed properties in the last 15 years in San Antonio TX.

There always is very strong demand for these little, profitable under market value houses. We have so many blue collar, Hispanic workers here who have rented forever and want to buy a house but do not have credit. I consider it a great opportunity to work with these people so that they can buy their own house.

Just because the house is unattractive to you or I does not mean it does not hold value for some buyers. Most of my under market value buyers are contractors, and they can repair the house and turn it into a very livable little home. These are great little houses for the out of state investment property investor. Note that the house is always sold at fair market value, never above fair market value.

For example, the house below was said by some people to be worthy of a tear down. They are not wise investors; I have been criticized on ‘investor websites’ such as Bigger Pockets for this type of investing. Frankly, they are fools – conventional thinking, 20% down, rental property investors.

I have made a few million dollars off of these ‘junk’ owner finance properties that many so-called ‘investors’ overlook, and provide a house for a hard working person to live in. But note – investing in under market value properties and owner financing them takes cash. It’s an advanced investing system for out of state property investors with cash.

Most of my blue collar worker buyers had rented for years, and some of them had truly ‘slumlord’ type landlords; I’ve heard the stories from my buyers. Buying a house via owner financing such as this can be a better option for some workers, as long as the house is priced at fair market value.

Here are the details:

front 3 — $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 out of state investment property 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 (legal in TX – sorry Bigger Pockets!)
No prepayment penalty
No balloon
Final price: $39,900 (FMV)
ROI: 12%

Note: The final price for the owner finance buyer is FMV and DOES NOT constitute ‘predatory lending,’ which is illegal per Dodd Frank regulations. Sold comps in the neighborhood on properties of similar size, age and condition are approximately $39,900 to $49,900 – if elec and water work and roof is not leaking.

A CMA was run on similar houses within a two mile radius. Max value in that area for similar houses is $99,900 for an immaculate property that has been updated.

More photos of this below market value property:

It has been occupied by a blue collar, owner finance buyer for a year, and I know that many repairs have been made to it. All the while, it has returned 12% ROI of passive income to the investor.

Buying and selling these little ‘junk’ under market value properties has been very good to me, and can be for you, too. You also can buy nicer homes here in San Antonio and do the same thing, if this type of property is not your cup of tea – such as this under market value property.

January 27, 2016January 30, 2016

$25,000 Under Market Value Property – San Antonio TX 12% ROI

One of the best ways to make passive income in real estate investing is under market value properties. Every one of the houses that I buy in San Antonio TX are at least 20% under market value. By buying a property that is under market value, you always know that you will be well protected if there is a downturn in the market while you are working on the wholesale property.

Most of my below market value houses in San Antonio TX might be called ‘junk houses,’ but there are three things you should understand:

I owner finance my houses to mostly blue collar Hispanic contractors, who greatly value the opportunity to own their own home without any banks involved.
There are 500,000 or more blue collar Hispanic workers living in the communities I buy under market value properties. There always is a strong market for owner financing these distressed homes.
These under market value investment properties can easily produce an investment return of 11-12% without any maintenance. In some cases, these below market value investment properties can be sold without any repairs at all; I just sold a distressed, $25,000 house this week to a blue collar worker for $45,000, $5000 down.

In short, these below market value investment properties in San Antonio, Texas are an excellent source of cash flow that have made me wealthy. Here is a nice $25,000 wholesale property that will make at least 12% ROI if rehab is done. I also can market it with a quick $2000 clean up and the ROI could be 14% or more:

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: $25,000 firm.
Exit Strategy: Owner Finance with 35K repairs: 5-10k down, $895 monthly P/I, 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.

January 26, 2016May 29, 2021

How Investing in Real Estate Can Make You A Millionaire

Lots of people want to know: stock market or real estate? Real estate or stock market? Anyone who knows me – an under market value property investor in San Antonio TX who owner finances everything – knows that I always will prefer real estate investing over the stock market.

Investing in real estate right can make you a millionaire at a young age. Some of us used to invest in the stock market but lost our rears in the early 2000s, not to mention 2008.

Many people think that if we put enough cash into the stock market, we will be able to retire and not incur a great deal of risk. The problem is that it often takes 30 years to invest enough, and you never know when you are going to be about to retire, and suddenly the market dives. When that happens, many would be retirees end up having to work another 10 years or more.

The low interest rates in the last few years mean that elderly people often have 50% of their money or more in stocks. This is often because they took such a hit in the big economic downturn in 2008. Now they have to take a lot more risk with stocks.

For me, once I got out of the stock market with my $50,000 and invested in real estate, I become wealthier much faster. I began in 2001 and had 40k of college debt, but by investing in below market value properties, I was able to be essentially retired at age 28 with 20k+ per month of cash flow.

I find that investing in under market value property just produces more steady cash flow than any other vehicle. I never have to ask invest in stock market or real estate, invest in real estate or stock market. It’s 100% under market value real estate for me.

I always choose real estate over the stock market because my returns are like this property below:

new front — $65,000 cash price, $15,000 rehab, resold for $99,900 owner finance, $1041 per month, 7 DOM, 12.9% ROI.

This under market value property was purchased by a CA cash buyer in July 2015 at 1622 Alametos St. This house is in 78201, and is north of downtown. This region is seeing rapid growth and appreciation.

The out of state investment property investor bought cash on this below market value property, and we completed $10,000 in repairs in 3 weeks:

$65,000 cash price
$1500 carpet removal and adding wood vinyl in 3 bedrooms
$3500 HVAC
$750 for third bedroom conversion.
$750 for dumpster – clean out
$1500 two tone interior paint
$500 update five light fixtures
$1500 level front bedroom
$1500 closing costs

Total Investment: $76,500

Repairs were complete on July 31, 2015 and out of state investment property was put on MLS. By Aug. 3, we had two full owner finance, price offers as follows:

$1041 per month
30 year note
10% interest rate
$5000 down payment
$99,900 final price
$216/mo. taxes/insurance

Investor’s total monthly income after taxes/insurance is $825.

Final ROI: 12.9%

I will make nearly 13% per year without repairs on this under market value property until the buyer decides to refinance. Most stock portfolios cannot produce that type of steady return. That is why I always recommend investing in real estate instead of the stock market. Invest in real estate or stock market? For me it is not a choice at all.

January 24, 2016January 24, 2016

Should I Invest in the Stock Market or Real Estate?

To invest in the stock market or real estate? Many people are asking themselves that question right now as their stock portfolios take a beating. I have been on both sides of this and have a strong opinion.

In the last 20 years, I have invested in under market value real estate as well as the stock market. I have reached a firm conclusion: Investors generally speaking are better off to invest in real estate over the stock market.

Even though I have done well at times when the stock market increased in value in the early 2000s, I have been able to make much more steady passive income from investing in below market value properties.

Conventional thinking investors think that if we invest sufficient cash into the stock market, they will be able to stop working with little risk. The big problem that most people have is how many years it takes to invest and the big ups and downs of the stock market.

Invest in the Stock Market or Real Estate?

Given the low interest rates we have seen for the last eight years, many older people are far more invested in stocks than they ever thought they would be. This is understandable as they need to grow their portfolio so they do not run out of money. But there is a lot more risk by investing in stocks rather than bonds.

With under market value real estate, you can stop working much earlier and safer than the stock market, if you do it right. Take me: I started out in 2001 with $40,000 of college debt and was financially retired in real estate by 2007 with $20,000 per month in passive income from investment properties. I did invest in the stock market early on and made nearly $100,000; of course I lost half of it in the stock market dive after 9/11. That is when I started to look at investing in under market value real estate in San Antonio.

Investing in real estate instead of the stock market has many advantages:

Leveraging your money, if you decide to get mortgages and rent out the property (this is not what I do, but many do so)
Long term, steady cash flow- every one of my under market value properties produces $600-900 per month of steady cash flow without repairs.
Tax breaks – rental property owners enjoy many tax write offs and depreciation write offs.
If you know what you’re doing (or working with an expert), you can buy under market value properties in real estate and make 10% a year or more, year after year.

It Is Tough to Retire Reliably By Investing in the Stock Market

The US government and most traditional investing models tell us to invest in stocks and mutual funds. Over time, the stock market generally goes up in value. I learned this the same as everyone else and I first invested in the stock market when I graduated from Northeastern University 16 years ago.

I quickly got frustrated with this because I found that while I had years where I made 15% per year, I also had terrible years, such as right after 9/11, when I was negative growth and lost 10s of thousands of dollars.

I also ran the numbers in retirement calculators and was amazed at how long and how much I would be investing before I could ever stop working.

Even worse, I was just spitballing when I would die, and I also had to take a guess at what my investment return would be. If I lived longer than I thought or didn’t get the return I thought, I’d run out of money!

Then I Discovered How Real Estate Investing Is Better Than the Stock Market

I have been investing in below market value property since 2001. After I lost 50% of my net worth in the stock market after 9/11, I left Boston (where I went to college) and came home to TX. I soon discovered something amazing: I could buy houses under market value in San Antonio by 30% or more. With some rehab, I could rent them out or owner finance them and make a steady 10% per year, or even 15% in some cases.

Investing in Real Estate Provides Cashflow!

When you buy your under market value properties, look at how much passive income they produces. I see at least $600 per month of cash flow on my deals. I buy my houses in cash and owner finance them at 10% so I have no repair costs. I prefer investing with owner financing than renting so I have more cash flow and no maintenance.

The cash flow from my under market value properties continues year after year. I only hold the note on the property, so I never have to be a landlord. Once you have enough of these houses, you can retire. I actually did ‘financially retire’ at 28 once I had $20,000 per month in cash flow.

Now, some stock market investments will generate cash flow, but rarely are dividends going to give you a steady 10-15% annual return. You might see a 15% return on your stocks, but that is just on paper and you will see no cash gain until you sell. Meanwhile, I am getting steady cash flow every year from my below market value houses.

If you rent out your properties, you also enjoy appreciation of the asset (all of my houses are now owner financed, though).

How I Get Great Returns in Real Estate Investing

Everything comes down to buying a house under market value. As a Texas real estate agent with 15 years of experience, I am very skilled at finding these houses and negotiating a price that provides me or my investor with at least a 10% annual return. Many of these below market value houses are REOs, short sales or estate sales. The seller may want to get rid of it and just recover some cash.

I buy my houses at least 20% under market value. So if I buy a $50,000 house, I have to see at least $10,000 in equity when I close.

Note that it does cost more to buy and sell houses than it does to sell your stock. But if you are smart and buy under market value, you will more than make up for that.

Rental Properties Have Major Tax Advantages

I no longer rent out my properties, but no doubt, many of my investors do rent them out and enjoy great tax benefits. Under market value properties may be depreciated, so the cost of the house, repairs and any improvements can over time be depreciated. According to the IRS, you can deduct your depreciated value of the house from your yearly taxes over 26.5 yrs. If the house is $100k, you could deduct about $3700 from your income each year, which would save you about $1000 per year in taxes.

One Downside of Rental Properties

They require management and repairs. You cannot just buy a rental property and forget about it, like a stock share. But with my system of owner financing, I can pretty much buy the house and get a buyer in there, and it pays me monthly cash flow, even better than a stock.

My Rate of Return Over 15 Years Beats the Stock Market

I own more than 50 owner financed properties in San Antonio TX, and over 15 years, I have made over 13% on average from all of my properties, ranging from $500 to $900 per month in pure cash flow without any repairs.

From 1950 until 2009, the stock market returned an average of 7%, and that mostly is on paper, so you have to sell to realize the gain. Meanwhile, I make 10 to 15% per year on my under market value, owner financed properties in San Antonio.

Also, the stock market has very bad years, such as 2001 and 2002, when the stock market dropped 10% to 20% per year. If you were on the cusp of retiring those years and lost 50% of your net worth, you were out of luck. I know people in that situation. And I was making 13% per year or so at that time on my houses. Demand for my under market value properties only goes up in a downturn, too.

If I would have to invest more than $500,000 per year at 7% interest in a tax deferred account to generate the cash flow that I have in under market value real estate. I would have to continue to invest that every year. I have more than $40,000 in cash flow coming in every month right now from my properties without investing a dime more.

So, when you think to invest in real estate or the stock market, I think the conclusion is pretty clear – investing in under market value real estate makes a lot of sense long term, due to the rate of return and the passive cash flow – especially if you owner finance the properties.

January 23, 2016January 23, 2016

What Are Some Pitfalls of Investing in Out of State, Under Market Value Properties?

Everyone enjoys getting a higher rate of return on their under market value property, which is why many investors look for out of state investment properties – meaning investing in lower cost markets than say, northern California.

But there is no question that there is some risk involved in investing outside of your home territory. This can get particularly dicey if you are investing in out of state investment property for appreciation. As a financially retired real estate investor in Texas, I never bought under market value properties for appreciation. Never! It is just too risky.

I always buy my below market value properties in San Antonio TX for regular, steady cash flow.

When buying out of state property, it is easy to be lured into a questionable market by low prices and promises of high rates of return. Here are some of the pitfalls you may run into when investing out of state:

Your under market value wholesaler may tell you that the property can rent or owner finance for a higher monthly amount than the market supports. You should make sure that the rental and sold comps for the property support the proposed monthly payment. Note that you can eliminate most repairs on a property if you owner finance the house rather than rent it out.
Under market value buyers in some out of state real estate markets are shocked to find out that they cannot sell the house as quickly as they like. Some developers in some states may restrict selling a property in the first year. I always buy under market value properties in C neighborhoods in San Antonio, so I do not have this issue.
You buy an under market value property out of state and you discover that you are not allowed to lease it. Sometimes a homeowner’s association will pass a new restriction that limits leasing a property. Most of the neighborhoods I buy my below market value properties have no HOA.
Extra costs for investing out of state. Other states and localities may have higher taxes and transfer fees. In Texas, we do have higher property taxes as we have no state income tax.
Under market value houses in out of state markets may not appreciate as quickly as what you were promised. I never buy below market value properties for appreciation, so any appreciation is just icing on the cake for me.
Property management companies may not manage your out of state investment property effectively. I always recommend that out of state investors owner finance properties when they buy them from me to eliminate property maintenance issues.
Generally make certain that you do your due diligence when buying out of state investment property under market value. Do careful research on property values and price to rent ratios for the specific neighborhoods you are considering.

January 22, 2016

How Do You Buy Under Market Value Properties in Another Market?

Buying under market value properties can be a wonderful investment, whether you decide to rent them out or owner finance them (as I do in my 100+ property portfolio).

Of course, the major advantage of buying under market value properties is the cash flow that they generate each month. On my below market value properties in San Antonio TX, I earn approximately $700 per month on my owner financed properties owned in cash. Here is an example:

The investor bought cash on this below market value property, and we completed $10,000 in repairs in 3 weeks:

$65,000 cash price
$1500 carpet removal and adding wood vinyl in 3 bedrooms
$3500 HVAC
$750 for third bedroom conversion.
$750 for dumpster – clean out
$1500 two tone interior paint
$500 update five light fixtures
$1500 level front bedroom
$1500 closing costs

Total Investment: $76,500

Repairs were complete on July 31, 2015 and property was put on MLS. By Aug. 3, we had two full owner finance, price offers as follows:

$1041 per month
30 year note
10% interest rate
$5000 down payment
$99,900 final price
$216/mo. taxes/insurance

Investor’s total monthly income after taxes/insurance is $825.

Final ROI: 12.9%

Now that is some nice passive cash flow, isn’t it?

Many under market value investors are not able to find good properties with cash flow in their home markets. So, they may be looking outside of their home market at out of state investment properties.

But where should you buy your under market value properties in another state? Hopefully I can shed some light on that key question here.

I have been fortunate that I do not need to consider buying out of state investment property because my returns in San Antonio TX are still over 11% per year, even with housing prices up a lot in the last year. Two years ago, a typical below market value property I bought was $40,000, now it is more around $55,000.

I continue to invest here in San Antonio, one of the best cities to invest in real estate, because the return is good and I have many advantages:

I have a real estate license in TX, which saves me big when I buy under market value properties.
I have a large network of contractors, fellow investors, lenders, agents, title companies etc.
I know my neighborhoods very well, which means I know how much to pay for a house and how much to resell it for. I also know how much to rehab a house without overspending.

But if you are an out of state investor looking for best cities to invest in real estate, what should you consider?

Before you start to look for out of state investment properties, I suggest that you increase the area that you are looking for under market value properties in your home state. If you only need to drive 90 minutes to find a good area to buy under market value properties, then that might have more appeal than looking 1000 miles away. If you are a California investor, this may not work for you though.
If you cannot invest in under market value property near you, think about areas that you know. Did you grow up in another state? Do you have any family or friends in a good state you can buy out of state investment property? The better you know that area, the easier it is to find below market value properties in decent areas.
If you cannot find a good out of state investment property where you know people, do you have time to research a new market? It is usually a good idea to visit a new investment property area and you can have a bit of a vacation while yo do so.
Look at lists online for the best places to buy under market value properties this year. You can find excellent resources online that tell you the cities with the best rent to value ratios. I personally prefer to owner finance my properties and not rent them, however.

How to Know If An Area Will Be a Good Under Market Value Investment

Once you have located a good potential below market value investment market, you want to know if you will be able to produce good cash flow. You want to make sure that the economy is strong and stable above all else. Getting the cheapest real estate is NOT the only consideration!

Is the population growing or shrinking? A growing population is a very good sign of a strong job market. Here in Texas, we are seeing major population and job growth as of 2016, even with lower oil prices.
Are housing prices going up or down? If housing prices are dropping, this is not always bad. During the 2008 crash, the values of under market value properties in San Antonio dropped, and it was awesome! I could buy houses for $30,000 again, and I did – more than 25 of them. However, if housing prices are crashing and the population is leaving, this could be trouble.
What kind of risk is in the area? Is it a part of the country that has a lot of tornadoes or floods? Are there crazy swings in housing prices? In San Antonio, we are pretty steady here. The market didn’t go too high in the boom, so didn’t fall that far in the crash.
What about property taxes? We have no state income tax here in TX but we have higher property taxes. Still, I’ve managed to financially retire at 28 years old with my owner finance portfolio of under market value houses.

If you are thinking about buying out of state investment property after you investigate the local market, you will need to have a good team to rely on in that area.

One way to minimize problems with property management in an out of state market is to owner finance your properties rather than rent them out. You can have a buyer live in your house and pay you mortgage payments each month. The buyer maintains the house, and if they don’t pay, you foreclose just as a bank would. This can work very well in Texas, which is an easy foreclosure state.

In summary, there are many excellent below market value property markets to invest in. Just because you don’t live in one does not mean you can’t invest. If you are thinking about investing in another area for under market value property and have questions, contact me and I’ll try to help.

January 20, 2016

A Recent 12% ROI Under Market Value Project With No Landlording

This distressed property sale was completed in August 2015. The market in San Antonio TX has changed greatly in the last year. The market is booming and prices are up across the board, even in fixer upper homes.

Still, we have CA investors coming into our fine city and buying property investment homes and making 12-13% ROI annually, with no property maintenance.

The investor bought cash on this below market value property, and we completed $10,000 in repairs in 3 weeks:

$65,000 cash price
$1500 carpet removal and adding wood vinyl in 3 bedrooms
$3500 HVAC
$750 for third bedroom conversion.
$750 for dumpster – clean out
$1500 two tone interior paint
$500 update five light fixtures
$1500 level front bedroom
$1500 closing costs

Total Investment: $76,500

Repairs were complete on July 31, 2015 and property was put on MLS. By Aug. 3, we had two full owner finance, price offers as follows:

$1041 per month
30 year note
10% interest rate
$5000 down payment
$99,900 final price
$216/mo. taxes/insurance

Investor’s total monthly income after taxes/insurance is $825.

Final ROI: 12.9%

January 19, 2016

What Should I Look for In a Wholesaler That Sells Under Market Value Properties?

As a very successful wholesaler of below market value properties in Texas, I know what many under market value property investors are looking for when they buy a property:

ROI and nothing else.

I definitely do understand why below market value property investors buying out of state investment property want to make a good rate of return! Many of my California cash buyers get tired of making 3% returns on their insanely expensive investment properties, so obviously they want to make as high a return as possible.

But as my mascot Teddy says:

Smart boy! 🙂 Currently, my under market value properties in San Antonio TX, we are seeing prices in the $60,000 range with $25,000 to $30,000 in rehab, which nets an annual rate of return of 11-12% typically. Some investors may not think this is enough, but I can tell you this: I was able to financially retire at age 28 by making 10-12% per year on under market value buy and hold investments, and $5000-$10,000 on flips.

Here is a good example of a great below market value property I own:

Address: 914 W Hutchins Pl, San Antonio, TX 78221-2513
Year Built: 1950
Description: Add more Cash Flow properties to your portfolio, large fenced yard with mature tress, 9, 3 beds, 1 bath, 1300 sqft, Yearly Taxes: $2,000.00, Estimated Yearly Insurance: $700, located south of beautiful downtown, well established neighborhood, parks, and schools, Estimated Repairs: 30-35K, flooring, electrical/plumbing up to code, bath/kitchen update, paint in/out, central HVAC, etc. Max ARV 109K with owner finance.
ARV: $119,000-$125,000 with owner finance
Cash Price: $59,900 firm.
Exit Strategy:Owner Finance with 30K repairs: 5-10K down, $1095 monthly PI/TI, 30 year amortization, 10% interest, Price: 109K; or Rent with 30K rehab: $1095.00; Or paint clean Jazz with 15K in repairs and owner finance for 87K.
review sold and rental comps.

Now, many under market value investors will look at that return, which is around 11-12% and say, ‘Yeah, that’s pretty good, but I can go to XXXXX and make 15% ROI.’

I understand the sentiment, but if all you care about is ROI with below market value property investing, you could be headed for trouble. I’m sure there are some great $5000 properties that you can buy in Detroit! Good luck with that.

What I have learned in 15 years of buying and selling under market value properties is that there are other factors in play when you buy a property from a wholesaler:

How many rehabs have they done in the last 10 years and how long have they been in business?
How experienced are they in doing rehabs?
How accurate are their rehab numbers?
How experienced are they in finding quality tenants and owner finance buyers?
Are there ARV numbers accurate and is the house being prices with the market?

Those are just a few things that you should carefully consider besides the rate of return on your under market value property. After all, earning ‘16%’ doesn’t sound so good if you are having constant problems with vacancies, property damages and the rehab costs $30,000 more than was estimated.

A top notch wholesaler is an expert in the neighborhoods in which he works. He has done hundreds of deals and rehabs in those areas and knows exactly what a rehab will cost and how much to spend. He also knows what the house will sell for when it’s all said and done.

My point is that you should consider the experience and quality of the wholesaler you are working with, not just the raw, stated rate of return.