Investor · Boerne, TX · Member since 2015 · 139 posts · 71 votes
Hello San Antonio investors! I have only been in the market for a few months, but I was super excited about living in a market that would allow me to invest locally. Unfortunately, every deal I analyze ends up in either miniscule or negative cash flow. Here is a sample of a single family home in northeast S.A.:
Purchase price $110,000
Rent $1250/mo
Mortgage $594/mo
Insurance $100/mo
Taxes $267/mo
Repairs (5%) $62.50/mo
Capex (5%) $62.50/mo
Vacancy (Varies, but for this example 7%) $87.50/mo
Property management $104.70/mo
Net ($28.20)/mo
So, obviously there is a way to make money here or nobody would be inviesting. Please let me know your thoughts on my assumptions and how I can find deals that will provide a cash on cash return of at least 10%.
Investor · San Antonio, TX · Member since 2012 · 596 posts · 587 votes
8y
@Betty Cruz If they were chopped up into multiple units prior to the City of San Antonio's adoption of the new Unified Development Code (UDC) in 2001 which re-zoned the entire city, they are likely "grandfathered" in and are considered "legal but non-conforming." The burden of proof for this falls on the property owner, not the City, and the City can choose to except or deny your proof, should an issue arise.
For those properties illegally, converted after the adoption of the UDC, they are considered in violation and non-conforming. Technically illegal, but they aren't going to file criminal charges or anything, however City Code Compliance and Zoning can issue violations, which can result in fines, hearings, and ultimately court dates and even condemnation.
Not to fear, though, you can always request a variance, special exception, or zoning change for the subject property. A zoning change is best because it stays with the property after the sale; variances and special exceptions can sunset or terminate with the sale of the property. CoSA Development Services has some really great people and they are happy to advise on your best option and they are willing to work with you to get your desired outcome. That being said, zoning changes and variances are reviewed by boards appointed by the City Council and there is no guarantee the board or dissenting constituents/neighbors will agree with your request.
Now on the financing. If you pay cash for a non-conforming property and don't plan to refinance, you're fine. However if you finance (Hard Money or Conventional) the purchase or plan a cash-out refinance, you may run into underwriting issues.
Scenario: You may have a 4 plex, located in an R-4 zoning (Residential Single-family up to 4 units per acre) which does not allow for multifamily properties (RM-4 zoning or higher would be required). Your lender's underwriter may disqualify the loan due to the improper zoning. Often times, property owners think they are fine because BCAD says "Duplex" or "Multi-Family Use," but BCAD does not control zoning or land-use and although the Use may be correct, the City zoning may not be. I have had clients run into these issues from time to time.
One last item to mention. If the property has been chopped up into more than 5 units, this may also preclude you from obtaining your desired financing as 5 units or more is considered commercial property. Additionally, the City requires fire suppression systems (FPS) for properties with more than 5 units. FPS is extremely expensive and can turn a great investment into a costly liability.
Understanding proper zoning and land-use prior to purchasing a multi-family property is paramount to a successful investment.
Investor · Boerne, TX · Member since 2015 · 139 posts · 71 votes
8y
@Account Closed, been working through an investor friendly realtor that was recommended. I have begun to build relationships with others, but nothing has quite come my way yet. I have made s afew offers at prices that would make sense, but no luck so far. I have focused on distressed properties but I have not yet found an owner that is willing to sell at the price I need to pay. Still working diligently but want to make sure I am working on the right things.
Realtor / Investor · Vienna, VA · Member since 2014 · 133 posts · 114 votes
8y
@Steven Gillmer You mortgage number seems high. 20% down at 4.5% over 30 years is $446 a month. Hopefully you are not using hard money for a buy and hold. ( For personal reasons, can you PM me with the name of your investor friendly Realtor, let me know what you think to date and why you think they are investor friendly? Thanks.)
Rental Property Investor · San Diego, CA · Member since 2016 · 73 posts · 55 votes
8y
Steven Gillmer It looks as if your numbers are VERY conservative. Offhanded, it looked like it would cashflow without issues. My assumptions would be $110,000 purchase price, 20% down, $2,200/yr taxes,$600/yr DWF insurance, $25/mo HOA, 4.75% interest. That makes your mortgage (PITI) in the neighborhood of $712/mo. Subtract your other assumptions and it still looks like a decent cashflowing property. Cash on cash reruns will be low, but for turnkey, not too shabby.
Investor · Boerne, TX · Member since 2015 · 139 posts · 71 votes
8y
Thanks for the responses. $600/year seems low for rental property insurance covering loss of income. Taxes are what they are, I have found some in the $2,200/yr but most are above $3k.
I will re work some numbers with all of the advice and keep plugging along.
Investor · Boerne, TX · Member since 2015 · 139 posts · 71 votes
8y
Oh, and the numbers I gave were far from turnkey, I just left out the rehab costs for simplicity sake since they do not factor into monthly cash flow calculations. If you know of turnkey SFRs in SA for $110k that will rent for $1,250, please let me know.
Investor · San Antonio, TX · Member since 2012 · 596 posts · 587 votes
8y
@Steven Gillmer I suspect you are limiting your search to a specific area? This may be keeping you from getting the cash flow numbers you are looking for. Maybe broaden your search area. Also, is you Realtor providing off-market properties or just stuff on the MLS?
We consistently help our clients find cash flowing properties with a minimum of $300/month in net cash flow. The deals are definitely out there, even in this seller's market.
Investor · San Antonio, TX · Member since 2013 · 213 posts · 182 votes
8y
Hey Steven Gillmer here is some advice. You can’t play it safe and make a lot of money too. This is just not that market. If you know your market and do the right repairs to the home you can predict where your cost will go in repairs and how likely it is to turnover.
Are you buying off the MLS “turn-key”? Or are you building some equity by doing the rehab?
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
8y
@Steven Gillmer if a higher return is what you want, might I suggest looking at $50-60K properties that are not on the MLS. FSBO and For Rent Signs are a great place to start. Also, keep in mind that CAP Ex is not an expense and neither is a vacancy. Vacancy is a loss of income, but not an expense. Cap Ex is planning for major repairs, but until the repair happens, that is taxable income in your bank account that you can use however you please. Some people call this "cash flow."
Hey Steven Gillmer here is some advice. You can’t play it safe and make a lot of money too. This is just not that market. If you know your market and do the right repairs to the home you can predict where your cost will go in repairs and how likely it is to turnover.
Are you buying off the MLS "turn-key"? Or are you building some equity by doing the rehab?
Jonatan, I am definitely not looking at turn key houses. The problem is that it is difficult to find the time to source the off market deals that will meet my needs so that leaves me reliant upon others for deals. Unfortunately, I have not yet built the network to get these deals, which will just take time.
@Steven Gillmer if a higher return is what you want, might I suggest looking at $50-60K properties that are not on the MLS. FSBO and For Rent Signs are a great place to start. Also, keep in mind that CAP Ex is not an expense and neither is a vacancy. Vacancy is a loss of income, but not an expense. Cap Ex is planning for major repairs, but until the repair happens, that is taxable income in your bank account that you can use however you please. Some people call this "cash flow."
Anthony, I own properties in that range and have found that the return is not all it is cracked up to be, with all the headaches that go along with that priced property. As far as your comments about vacancy and capex, you are right that they are not expenses that WILL happen, but I would find myself in a world of hurt if I did not account for them in my calculations and then they do happen. If it does not happen, it is gravy, but you have to assume it will and be prepared.
@Steven Gillmer I suspect you are limiting your search to a specific area? This may be keeping you from getting the cash flow numbers you are looking for. Maybe broaden your search area. Also, is you Realtor providing off-market properties or just stuff on the MLS?
We consistently help our clients find cash flowing properties with a minimum of $300/month in net cash flow. The deals are definitely out there, even in this seller's market.
Thanks Seth. I think one of my challenges now is that I am not seeing any off market deals, plus, it looks like I may be inflating my costs based on the feedback here. Hopefully, as I continue to network, those off market deals will begin to come my way.
Hello San Antonio investors! I have only been in the market for a few months, but I was super excited about living in a market that would allow me to invest locally. Unfortunately, every deal I analyze ends up in either miniscule or negative cash flow. Here is a sample of a single family home in northeast S.A.:
Purchase price $110,000
Rent $1250/mo
Mortgage $594/mo
Insurance $100/mo
Taxes $267/mo
Repairs (5%) $62.50/mo
Capex (5%) $62.50/mo
Vacancy (Varies, but for this example 7%) $87.50/mo
Property management $104.70/mo
Net ($28.20)/mo
So, obviously there is a way to make money here or nobody would be inviesting. Please let me know your thoughts on my assumptions and how I can find deals that will provide a cash on cash return of at least 10%.
Thanks!
These numbers do not look correct? They seem to be very conservative. They may need to be changed a bit.
Rental Property Investor · Austin, TX · Member since 2015 · 280 posts · 176 votes
8y
@Seth Teel is it possible to net such great cash flow while investing for appreciation in San Antonio? I am in Austin and practically no MF properties cash flow positively. Also, what are some of your favorite areas to invest in in San Antonio? From living in Houston, I have this notion that closer to the city center is best but this may not be the case for San Antonio.
San Antonio, TX · Member since 2016 · 240 posts · 163 votes
8y
Steven Gillmer I agree with you that cashflowing properties are hard to find. I don’t think you are being too conservative. Because everyone has different goals from their investments, you will get varying ideas of what cash flow is. I would be happy to connect with you to share ideas - PM me if interested.
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
8y
@Steven Gillmer I'm not saying that you should not plan for emergencies. What I'm saying is, the money you are saving in cap ex is part of your return, so your numbers are off. Also, a $50-$60K property will give you a better ROI than a $100K property. The headache argument doesn't fly with me because I have had good and bad tenants in both situations.
Real Estate Agent · San Antonio, TX · Member since 2017 · 523 posts · 362 votes
8y
Hey @Steven Gillmer good on you for looking into REI. I was just in Boerne this past weekend for a soccer tournament and was pretty intrigued by the real estate portfolio there. It is definitely a nice place to live. You are very correct in saying that it is hard to find good deals, the market is crazy right now and people are asking for far more than the property is worth most of the time making it very hard to cash flow. Contrary to what others think, I think you are very wise by being conservative with your numbers and applying a "worst case scenario" principle. That way regardless of what happens to the market your property will cash flow, or at least sustain itself and you won't be screwed and bleeding out like most people. I would suggest just be patient and wait for the right deal. Keep looking and making offers but don't bend or change your criteria and expectations because you can't find deals. By doing this you will end up with a bad deal because you compromised on your values/criteria. Keep searching and I'm sure you will find a good deal it just may not come as fast as you would like. Good luck!
Real Estate Agent · San Antonio, TX · Member since 2013 · 153 posts · 132 votes
8y
San Antonio is an area that you don't really need to go by the 1% rule. I find MANY properties that ash flow at least $500 in your pocket and that includes all expenses, including the mortgage and taxes. I won't even touch a property that doesn't give me $500 a month cash flow. I always keep a mortgage on my properties not only for the deduction but when it gets paid down enough, I can cash our re fi and buy more. I am licensed and a wholesaler so if you would like me to add you to my buyers list, let me know. I have worked in Property Management since 1999 so I understand the market and what investors need :)
Rental Property Investor · San Antonio, TX · Member since 2016 · 85 posts · 40 votes
8y
@Steven Gillmer - the reason I asked is that like Seth mentioned - I believe you should look for off-market properties. I'd start by connecting with wholesalers, you can do that here on bp or go to local meet up groups. You can even do your own marketing and get first dibs on the deals that come through.
Investor · San Antonio, TX · Member since 2012 · 596 posts · 587 votes
8y
@Account Closed reach out anytime with questions. We get a lot of off market properties, both pocket listings and wholesale. We'd be happy to work with you and your agent to see if we can help find you a deal.
Jersey City, NJ · Member since 2017 · 124 posts · 13 votes
8y
Sorry but the San Antonio money making real estate boat has sailed and so has to Austin/Dallas one unless :
1. You are in to fixing and flipping
2. Wholesale deals
3. Foreclosures
All the 3 options will require considerable amount of time & money along with risk factors.
Easier bets are get a newer property - out of state - where property taxes are < 1 % , HOA below $50, no special city taxes, good schools and high median income of residents - if you want to obviously buy in class A neighborhoods and be a passive investor and bag a cash flow of $200-$300 per month with a chance of appreciation in next 5-10 years.
Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
8y
@Steven Gillmer I love San Antonio, and I looked at a few properties during my couple of visits there. I think it's a great market with strong market conditions.
My advice is simple: keep looking and keep analyzing. After you analyze 100 properties in SA, you'd know A DEAL IN A MIN.
San Antonio is an area that you don't really need to go by the 1% rule. I find MANY properties that ash flow at least $500 in your pocket and that includes all expenses, including the mortgage and taxes. I won't even touch a property that doesn't give me $500 a month cash flow. I always keep a mortgage on my properties not only for the deduction but when it gets paid down enough, I can cash our re fi and buy more. I am licensed and a wholesaler so if you would like me to add you to my buyers list, let me know. I have worked in Property Management since 1999 so I understand the market and what investors need :)
Arissa
There you go @Steven Gilmer. Check out Arissa's wholesale properties and let us know what you find.