All Forum Posts by: Heather H.

Well I said I would post an update after my property was tenanted and financed. We have a tenant now (as of several weeks ago before the covid craziness hit). $1195/month, which is quite a bit below what I expected, even as a low estimate. I'm not sure what we're going to do about pulling equity out now that the economy is in the situation that it's in, so I thought I would post an update anyway.

When the tenant went to move in, the property manager found that the (brand new) A/C condenser had been stolen. We replaced it immediately, and when it was replaced, the city came out to inspect, and the crap hit the fan. There were numerous issues with the rehab work, and we're now about $9,000 further into the property, just fixing everything that was either wrong or missed with the original work. Meanwhile the tenant hasn't had gas because it was switched off after failing inspection, so we're giving her a free month's rent for the inconvenience. 

I am kicking myself for a number of reasons on this deal, but the shoddy workmanship isn't really one of them that I feel would have been preventable if I was there. It looked good, and someone I trust checked it out for me - I'm out of state, but being there would not have changed anything, as I wouldn't have been able to identify duct work that's not to code, etc. by sight. Both the PM and GC seemed very professional and trustworthy, and the whole process seemed to go extremely well. So I am frustrated that the project manager and GC, both of whom I really liked, did such a poor job. It seems like a combination of ignorance and negligence - there were a few issues that I think they genuinely didn't know about, e.g. they installed a furnace closet in an area where it is not allowed (a bedroom). But there were other issues that were just poor workmanship, e.g. the kitchen sink was installed with just glue to hold it in place, and it fell through. I'm also a bit frustrated with the property manager (who is from a professional firm), because they didn't seem to do a pre-rental inspection. It was vacant for months, and some little things that were missed, which would be part of any pre-rental inspection, were only caught after the tenant moved in. They have been working really hard to coordinate all the work that has been going to to fix everything though, so I appreciate that.

I've done light rehab from out of state before (paint, carpet, landscaping, that sort of thing) with no issue, but this was my first major project. I'm just really disappointed because I thought I had a really good team on the ground. I had been planning on doing as many of these BRRRR projects as possible, but now I just don't know.

It'll still cash flow alright without a mortgage, but I haven't even done the numbers yet based on pulling out equity with the new rental figures. It won't be much if it's even an option at all.

For landlords or property managers in San Antonio, have you had a hard time filling vacancies recently? My SFR has been vacant since October and people are telling me that multiple property management companies are having a hard time filling vacancies. Is anyone else having the same experience? Further detail below:

I have a 3/2 SFR in Highland Park that had renovations finished in October, and it has been sitting vacant ever since. We were asking too much for rent in the fall, then I understand there being a slowdown at Christmas. Since then, we've been dropping the rent and are now $105 below the amount that I thought would be a realistic floor based on comps and on the opinions of a couple real estate agents who have no interest in the deal (comps taking into consideration location, size, and state of renovations of course).

I have a professional property management company that insists they are getting multiple showings per week and there isn't anything specific that potential tenants dislike about it.

This is my first property in SA but I've done BRRRR from out of state before and have had rental SFRs for 9 years. It's kind of disappointing that I managed the difficult part of the BRRRR strategy from out of state - the purchase and rehab - but am getting hung up on the part that should be the easiest.

Hi @Benedict A Hubbert thanks for the shout out and for the neighborhood appreciation info in your post - very informative! I'm actually kind of surprised about a couple of the neighborhoods that did and didn't make the list.

I only have one property in SA so far, and it's in Highland Park (but I've analyzed hundreds of others across the city). I like that area, and it's relatively doable to find properties there in the $110k-$130 price range that will potentially cash flow (depending on a lot of factors of course). I also like the areas around Woodlawn Lake and Los Angeles Heights, but it's harder to find deals around those areas (though not impossible). 

I had been interested in the Pecan Valley/Highland Hills area, but I was off it because I was under the impression it wasn't appreciating much - but I was wrong about that, based on your numbers! So that's my new fav spot!

I had also been interested in the Dignowity area, but it has just gotten too crazy. I've seen a lot of new rehabs sit on the market for months, and I had properties under contract in that neighborhood a couple times with the intention to flip, but after getting contractor bids back, the margins just weren't there - crappy old houses are selling for too much. 

In terms of just cash flow, the neighborhoods far southwest around Lachland AFB seem good. But I'm having a bit of fun speculating, so I prefer areas closer in.

Speaking of speculation, the neighborhoods east of the inner core like Sunny Slopes, and south of downtown like Hot Wells and Mission San Jose are interesting. They're a bit more speculative than I would prefer, but could be the next up and coming neighborhoods (or could fizzle out of course).

Those are just my thoughts - hope they're useful to someone!

@Costin I. I agree that my strategy doesn't provide very high cash on cash, but maximizing CoC isn't everyone's goal, and it isn't the whole story when it comes to ROI in BRRR. In addition to cash flow [over cash invested], BRRR investors earn return on their investment through equity growth in the following ways: 1) increasing the value of your property through rehab, 2) mortgage pay down over time by tenants, 3) appreciation over time (hopefully!). When those returns are factored in, the ROI starts to look a lot better than some of the other asset classes you mentioned. If my goal was to maximize CoC, I would be investing in multi family somewhere like Cleveland (which I did consider), but at this point in my investing journey, I'm more interested in long term growth than short term cash flow. Also, I do invest in other asset classes as you suggested, and so far real estate has been more profitable, and much more fun, than any of them.

@Ben Crosby No kidding, taxes are high in SA! They have been the deciding factor against almost all deals I have analyzed. Great idea to check out the surrounding suburbs that aren't in Bexar.

For anyone who wants more info on the BRRR strategy, including detailed instruction on how to calculate ROI so you don't trick yourself into a bad deal, I highly recommend "The Book on Rental Property Investing" by @Brandon Turner

Hi @Simon Stahl - you're right. The plan isn't to pull out max equity. The plan is to do the final numbers once the place is tenanted, then pull out however much equity will allow me to keep the monthly cash flow at about $200, which should be $80-$100k. There's two reasons I do it this way - firstly to keep the cash flow in the black, and also because I'm cautious of leverage and I don't think it's a good idea to leverage too much in this high market.

Hi @Eddie Medal, thanks for the shout out.

My strategy is to run the numbers very conservatively and go for at least $200/month cash flow after all expenses. One reason of course is because $200/month is nice to have in your pocket, but the main reason is because it can be so easy to under estimate expenses, I want to make sure there is enough of a buffer that I don't end up with negative yield.

I can't really give numbers on this deal yet though, because it's not yet tenanted or financed. We bought it for cash, and we're planning to re(?)-finance it and pull out some equity as soon as we have a lease in place, as per the BRRRR method.

The rehab went well, although it was a major project and did go significantly over budget. The house is a 3/2 in Highland Park and we paid $110,000 for it, in really dismal shape. The initial rehab estimate was a little over $30,000, and it ended up blowing out to over $50,000. However, we kind of expected that sort of thing to happen, so we budgeted for it (in general when I'm doing initial estimates before deciding whether to offer, I'll double the rehab budget estimate). The overages were mainly from adding big ticket items like foundation, and replacing the kitchen cabinets after finding out that they were completely rotted out, which they couldn't have known until the counter tops were removed. The deal was good enough that we should still get some good equity though. We're about $165,000 into it at this point, and I would estimate it to be worth ~$185,000 but might be more. 

It's under property management and they're advertising it for $1445/month, but that might be a bit overly optimistic. When I did my initial estimates, I assumed $1350/month, but made sure that the deal would still work at $1250/month.

I'll post the final numbers after it's tenanted and financed. 

Also, I work with a great realtor who is very investor friendly. PM me if you want her contact info.

Hi Everyone, I'm having a hard time getting an earnest money deposit released. It seems like it should be a common situation, and I'm wondering if anyone else has faced something similar, and what you did (or would suggest doing)? The situation is as follows:

I provided a $1,000 EMD toward the purchase of a property several months ago. It was paid to the title company, as per the normal process.
The purchase was contingent on the sale of a different property by a certain date, and the other property did not close before that date (although it did close soon after). It was also contingent on the buyer (myself) obtaining financing at a certain interest rate, which I was unable to do. I pulled out of the transaction and provided documentation showing that the other property closed at a later date, and I provided a financing approval letter showing that I was approved for a much higher interest rate than the one stipulated in the purchase contract. The sale was also contingent on the property being vacant; the closing was scheduled for less than thirty days in the future, and the seller had not provided notice to the tenants to vacate, so that condition would not have been met (although we didn't get to the original close date to test that). 

It has been months, and the seller will not release the EMD. The Texas Real Estate Commission legal helpline has advised my realtor that even regardless of the other contingencies not being met, that we are eligible for the EMD to be returned because the transaction did not close by the given date. But I don't know how to get the seller to release it.

The title company is sending a demand letter for the seller to sign in order to release the funds, but if he chooses not to, they have advised that the funds will be go to the state within three years.

Since the contract was not fulfilled, I would think that I would be entitled to have the earnest money returned, but somehow it seems that its return is completely at the discretion of the seller. Is that correct? Has anyone faced a similar situation, and what did you do? Thanks!

@Jason Pan your numbers are razor thin. Yields are never as good as they look on paper, so you're very likely to find yourself in negative cash flow territory, even if your rent estimate is correct. I strongly recommend reading @Brandon Turner's book, "The Book on Rental Property Investing" to learn to estimate your rents and expenses properly. It's my favorite real estate book ever, and very practical. The rental property calculator tool here on BP is really good for that too, although I think you can only use it five times or something if you don't have a pro membership. 

Hi @Account Closed, my husband are out of state also. I've had my eye on San Antonio for over a year, and we just closed on our first property there a few weeks ago, which is being rehabbed now. I think it's a great place to invest since it is one of America's fastest growing cities, with high rental demand and fewer weather issues than elsewhere in Texas. My strategy is mainly BRRRR with SFRs, so that's what I'll address here, since I'm not sure of your plan:

Your $100k max is achievable as a purchase price, even from the MLS, but will likely take some work, and the rehab could push you over budget. I assume you're planning to BRRRR or at least buy & hold. In the areas where it is possible to buy and rehab a house for under $100k (e.g. the west side and southwest among others), the neighborhoods aren't as desirable and they haven't been seeing as much appreciation, and the rents are lower, which of course affects your cash flow. That said though, I'm sure there are pockets that would work. For example, the area around Lackland AFB is supposed to be solid with renters, and there seem to be livable houses in the $80-90k range - I haven't invested there, but I have been told it's good (although not trendy, so it isn't one of the "hot" neighborhoods - which could be a good or bad thing in my opinion, depending on how close we are to the top of the market).

One thing I would say is to make sure to run your numbers realistically and conservatively, and be patient. If it takes a year to find the right deal, that's okay - it's annoying but much better than getting stuck with a money drain. If you're buying with cash or can put down a fair amount to lower your LTV, cash flow is definitely achievable with single family. However, I haven't found any SFRs that cash flow comfortably in SA with a down payment of less than 40% or so (not to say they're not there, but none are meeting my criteria anyway). There are more multi-family deals that cash flow well on paper, but most of them at that price point are illegal duplex or triplex conversions, which lenders often won't touch - so if you're financing, watch out for that, and if you're buying with cash, keep in mind that it could severely limit your ability to sell later.

In terms of finding leads, there are wholesalers in the market, and some of them are finding some better deals than you can find on the MLS, but a lot of what they're offering is actually pretty comparable to what's available on the MLS. So I highly recommend Redfin - not only to find deals, but also to get to know the neighborhoods.

That said, all of this is based on my personal experience, which is still pretty limited in SA compared to some other people on this forum.

One thread that I have found especially useful in learning the neighborhoods is the following:
https://www.biggerpockets.com/forums/99/topics/513518-san-antonio-tx-how-to-understand-this-market

Also, if you haven't read @Brandon Turner's "The Book on Rental Property Investing" and @David Greene's "Long-distance Real Estate Investing," I highly recommend both of those - Brandon's is really great in terms of making sure the readers know how to run their numbers realistically, and David's is great for those of us investing out of state. 

Hopefully this has been helpful. Good luck and happy investing!

@Jake Harris How did it go with the railroad this summer, if you don't mind me asking? How's the project going? I saw on the news that Efraim Varga sold his stake to you guys. Any info you can share would be appreciated, thanks!