All Forum Posts by: Joseph Cacciapaglia

Several similar size portfolios have come up in my market lately. The sellers made the mistake of taking offers on some of the best properties, and broke them up. Now the left overs are sitting. If you decide to sell as a portfolio, don't let people start to cherry pick, unless you're willing to wait on the last few. I agree you will make more selling individually, but it may not be worth the time, and the issues it causes for a potential 1031. However, if you're moving your money out of real estate, it might make more sense to just sell them off as they become vacant.

We have a lot of out of state investors buying here in San Antonio, TX. The city just recently approved a licensing law for STR, so there is a rush to buy properties, due to limitations on the number of licenses available in each neighborhood. I know a couple of investors that are doing well so far, as we have a very steady stream of tourists throughout the year.

I would not try to self manage a STR remotely. It is much more a hospitality business, than a true real estate play. If you buy right and hire a good manager, you should still be able to do well remotely.

One thing you should ask your tax professional about, is how much personal use you can have, before you start to lose some of the tax benefits of RE investing.

 There are a number of different spots in San Antonio that do very well. If you're coming from Austin, you might want to check out some of the suburbs, like Converse or Universal City. I know a lot of investors that do well over there. There are also a lot of spots in the city to check out. There are good cash flow deals to be had in zips 78201, 78222, 78227, 78228, and several more. Your risk, cash flow, and appreciation profile will should determine which areas are best for you. Of course you'll have to look at the figures for each neighborhood and subdivision as you get to a more granular level, but hopefully this is a start.

If he is suggesting a balloon payment with the seller financing, be sure that you could comfortably qualify for conventional financing, with a large margin of error if you needed to. One thing I saw a ton of in the last downturn was investors that were stuck with balloons that they couldn't refinance. Many of these people lost properties that they had taken the time to reposition. I think at this point in the cycle, anything less than a 5 year term is pretty risky, unless it's relatively low leverage. This is also true if he's giving you a wrap, and there is a due on sale clause in it.

I'm partial to San Antonio (the real estate market was a big part of why I moved here 2 years ago). There are a lot of economic and demographic reasons to believe San Antonio will outperform a lot of the other major metros, but the combination of population growth and low price point are the biggest factors. For under $200K, there are a ton of single family BRRRR opportunities here, and you could certainly find duplexes in that price range as well.

I understand that it turned out not to be legal, but at the time both they and their counsel, believed it was a legal workaround. That was my point. If you are intentionally circumventing the spirit of the law, you always run that risk. 1031 isn't a work around though; it is the purpose of section 1031.

I see more and more investors moving their money from California to Texas everyday. I think there are plenty of reasons to believe that this trend will continue, especially because it is still much cheaper here. Some of the major cities are starting to get bid up pretty high, but you can still find deals in all of them. The most important thing is to build a strong team. You want to work with companies that are setup to assist out of state investors. You don't want to be arranging your own repairs or trying to collect rents remotely. I've seen a lot of investors do this successfully over the past several years, some of which have never set foot in TX. If it were me though, I'd at least make one trip.

You should always get permits. If a code enforcer happens to get wind of your project, from a nosy neighbor or just driving by and seeing contractors going in and out, you could have to start over. I've actually experienced this. We had an almost complete project, that had been down to the studs. The code enforcer was doing some random inspection in the neighborhood, and stopped and asked one of the workers heading into the house what they were doing. They made open everything up, because it was clear there was new electrical and plumbing. I know this sounds like a slim chance, but when I've told this story to others, I've heard of it happening a lot. Also, I do not trust contractors that are willing to work without permits.

@Bill F. is correct. You need to do a DCF analysis. Using a straight cap rate calculation doesn't reflect the true value. Cap rates are really meant to value stabilized properties.

I've worked in some markets like this, where property management was very hard to come by. Usually, this has been in states that were relatively anti-landlord. Here in SATX, there are a lot of options. I don't see a location on your profile, so I'm not sure if that's what you're running into or not. When you say that some of them don't manage "third party properties", it makes me think that you are actually calling investment companies, not property managers. I think relying on some recommendations from local agents is probably going to be your best bet.